Analytical Derivatives for Markov Switching Models
Computational Economics
Evaluating derivatives: principles and techniques of algorithmic differentiation
Evaluating derivatives: principles and techniques of algorithmic differentiation
Numerical Recipes in C++: the art of scientific computing
Numerical Recipes in C++: the art of scientific computing
Linear Optimal Control Systems
Linear Optimal Control Systems
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This paper sets out the analytic solution for the calculation of exact derivatives in linear rational expectations models with reference to the optimal simple rule problem. We argue that there are substantial computational advantages of using analytic derivatives and compare the likely computational costs of using approximate and exact derivatives when calculating optimal coefficients for simple feedback rules. A specific algorithm for finite time optimization is also outlined, which will reduce the computational time required and is simple to implement. We discuss modifications to allow for stochastic models.