Worked Examples in Dynamic Optimization: Analytic and ...

Worked Examples in Dynamic optimization : Analytic and numeric MethodsLaurent Cretegny Centre of Policy Studies, Monash University,AustraliaThomas F. Rutherford Department of Economics, University of ColoradoUSAM arch 29, 2004 AbstractEconomists are accustomed to think about economic growth models in con-tinuous time. However, applied models require numerical methods because ofthe absence of tractable analytical solutions. Since these methods operate byessence in discrete time, models involve discrete formulation. We demonstratethe usefulness of two off-the-shelf algorithms to solve these problems : nonlin-ear programming and mixed complementarity. We then show the advantageof the latter for approximating infinite-horizon classification:C69; D58; D91 Keywords: Dynamic optimization ; Mathematical methods; Infinite-horizonmodels Mailing address : Centre of Policy Studies, PO Box 11E, Monash University, Clayton Vic 3800,Australia.

Worked Examples in Dynamic Optimization: Analytic and Numeric Methods Laurent Cretegny⁄ Centre of Policy Studies, Monash University, Australia Thomas F. Rutherfordy Department of Economics, University of Colorado

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