A criterion for time aggregation in intertemporal dynamic models (Q1330900)

The computation of intertemporal optimization economic models necessarily requires time aggregation assumptions. The authors suggest one criterion for choosing unequally spaced dates, based on the undiscounted value of the capital stock. Using a parametrized version of the one-sector Ramsey- Koopmans-Cass model of optimal growth, it is shown that considerable gains in numerical accuracy are achieved when this discretization of the decision horizon is used instead of equally spaced dates. A possible way to use the results for multidimensional problems is suggested.