Inequality Constraints in Recursive Economies

RENDAHL, Pontus

Inequality Constraints in Recursive Economies

dc.contributor.author	RENDAHL, Pontus
dc.date.accessioned	2006-03-13T09:41:23Z
dc.date.available	2006-03-13T09:41:23Z
dc.date.issued	2006
dc.description.abstract	Dynamic models with inequality constraints pose a challenging prob- lem for two major reasons: Dynamic Programming techniques often necessitate a non established differentiability of the value function, while Euler equation based techniques have problematic or unknown convergence properties. This paper aims to resolve these two concerns: An \envelope theorem" is presented that establishes the differentiability of any element in the convergent sequence of approximate value functions when inequality constraints may bind. As a corollary, convergence of an iterative procedure on the Euler equation, usually referred to as time iteration, is ascertained. This procedure turns out to be very convenient from a computational perspective; dynamic economic problems with inequality constraints can be solved reliably and extremely e±ciently by exploiting the theoretical insights provided by the paper.	en
dc.format.extent	367334 bytes
dc.format.mimetype	application/pdf
dc.identifier.issn	1725-6704
dc.identifier.uri	https://hdl.handle.net/1814/4203
dc.language.iso	en	en
dc.neeo.contributor	RENDAHL\|Pontus\|aut\|
dc.publisher	European University Institute
dc.relation.ispartofseries	EUI ECO	en
dc.relation.ispartofseries	2006/6	en
dc.rights	info:eu-repo/semantics/openAccess
dc.subject	Inequality constraints	en
dc.subject	Envelope theorem	en
dc.subject	Recursive methods	en
dc.subject	Time iteration	en
dc.title	Inequality Constraints in Recursive Economies	en
dc.type	Working Paper	en
dspace.entity.type	Publication
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person.identifier.other	29544
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