An Interior-Point Algorithm for Computing Equilibria in Economies with Incomplete Asset Markets
Articles
Overview
published in
publication date
- March 2008
start page
- 677
end page
- 694
issue
- 3
volume
- 32
Digital Object Identifier (DOI)
International Standard Serial Number (ISSN)
- 0165-1889
Electronic International Standard Serial Number (EISSN)
- 1879-1743
abstract
- Computing equilibria in general equilibria models with incomplete asset (GEI) markets is technically difficult. The standard numerical methods for computing these equilibria are based on homotopy methods. Despite recent advances in computational economics, much more can be done to enlarge the catalog of techniques for computing GEI equilibria. This paper presents an interior-point algorithm that exploits the special structure of GEI markets. It is proved that, under mild conditions, the algorithm converges globally at a quadratic rate, rendering it particularly effective in solving large-scale GEI economies. To illustrate its performance, relevant examples of GEI markets are solved.