(1) Department of Economics, University of Hamburg, Von Melle Park 5, D-20146 Hamburg, Germany
Abstract:
We present a nonlinear solution method of saddlepoint dynamics in discrete time optimization problems. It is based on the backward attractivity of the stable manifold and is very easy to implement. After an introduction to the general method we present two applications. First, we consider the deterministic neoclassical growth model and demonstrate accuracy and stability of the method. Second, we solve a basic real business cycle model.revised version received July 2, 2003