The Gauss-Seidel-quasi-Newton method: A hybrid algorithm for solving dynamic economic models [An article from: Journal of Economic Dynamics and Control]

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Description:
The Jacobi matrix required for second-order iterations, such as standard Newton-Raphson procedures, is often too costly to determine for large systems of non-linear equations of a dynamic economic model. In such circumstances, first-order iterative methods are commonly adopted. The problem then, however, is that baseline first-order iterations may not converge. This paper provides a solution to this problem by developing a hybrid method of first- and second-order iterations for solving large-scale dynamic models. The modified algorithm is robust and fast and relative running times increase with the size and complexity of the economic model. As it is easy to implement - only using standard numerical procedures to augment conventional and intuitive first-order iterations - the algorithm is particularly attractive.