Article ID: | iaor20133929 |
Volume: | 206 |
Issue: | 1 |
Start Page Number: | 367 |
End Page Number: | 383 |
Publication Date: | Jul 2013 |
Journal: | Annals of Operations Research |
Authors: | Schommer Susan |
Keywords: | augmented Lagrangian, market efficiency |
This article implements an Augmented Lagrangian algorithm to compute equilibria in a general equilibrium model with incomplete markets and default. It is one of the first attempts to solve such a model on a large scale. Convergence is found for various economic parameters. We illustrate the effectiveness of this approach for simulating general equilibrium economies with a default.