Abstract
As explained in chapter 1 intertemporal CGE models such as ORANI-INT have the potential to be powerful tools for economic analysis. However, because of their size and complexity detailed intertemporal CGE models will be of practical use to policy-makers only if accurate solutions can be obtained at reasonable cost. In a survey of CGE modelling, Manne (1985) observed that for the purposes of computational tractability, the dimensions of intertemporal CGE models are typically reduced by adopting two assumptions; first, that “capital stocks are homogeneous (not specific to sectors or to regions), and that there are only a few types of capital stock variables” and second, that there are always interior solutions. The purpose of this chapter is to describe how a hybrid of the Euler and Newton-Raphson methods can be used to solve ORANI-INT without resorting to such dimensionality reduction schemes.
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© 2000 Springer-Verlag Berlin Heidelberg
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Malakellis, M. (2000). Solution Method. In: Integrated Macro-Micro-Modelling Under Rational Expectations. Contributions to Economics. Physica, Heidelberg. https://doi.org/10.1007/978-3-642-57660-7_4
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DOI: https://doi.org/10.1007/978-3-642-57660-7_4
Publisher Name: Physica, Heidelberg
Print ISBN: 978-3-7908-1274-9
Online ISBN: 978-3-642-57660-7
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