Solving SDGE Models: A New Algorithm for the Sylvester Equation

Authors:
Ondřej Kameník
Affiliations:
Monetary and Statistics Department, The Czech National Bank, Prague 1, Czech Republic 115 03
Venue:
Computational Economics
Year:
2005

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Abstract

This paper presents a new numerical algorithm for solving the Sylvester equation involved in higher-order perturbation methods developed for solving stochastic dynamic general equilibrium models. The new algorithm surpasses other methods used so far (including the very popular doubling algorithm) in terms of computational time, memory consumption, and numerical stability.