Multi-Dimensional Transitional Dynamics: A Simple Numerical Procedure

Growth models often give rise to saddle-point stable dynamic sys-tems with multi-dimensional stable manifolds. It is argued that stan-dard solution procedures used to numerically approximate the tran-sition process are generally inadequate when the (stable) eigenvalues differ substantially in magnitude. Therefore, the relaxation procedure is proposed as a powerful method for simulating the transition process in dynamic macroeconomic models. We argue that this procedure is in general well-suited and highly efficient. The procedure can be easily applied to dynamic systems which exhibit the above mentioned struc-tural characteristics. This is demonstrated by simulating the transition process of the well-known Jones (1995) model. JEL classification: C61; C63; O4