A Generalized Time Iteration Method for Solving Dynamic Optimization Problems with Occasionally Binding Constraints

Ayşe Kabukçuoğlu Dur and Enrique Martínez García ()

No 396, Globalization Institute Working Papers from Federal Reserve Bank of Dallas

Abstract: We study a generalized version of Coleman (1990)’s time iteration method (GTI) for solving dynamic optimization problems. Our benchmark framework is an irreversible investment model with labor-leisure choice. The GTI algorithm is simple to implement and provides advantages in terms of speed relative to Howard (1960)’s improvement algorithm. A second application on a heterogeneous-agents incomplete-markets model further explores the performance of GTI.

Keywords: General equilibrium models; Occasionally binding constraints; Computational methods; Time iteration; Policy function iteration; Endogenous grid (search for similar items in EconPapers)
JEL-codes: C6 C61 C63 C68 (search for similar items in EconPapers)
Pages: 28
Date: 2020-08-21
New Economics Papers: this item is included in nep-cmp, nep-dge and nep-ore
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Journal Article: A Generalized Time Iteration Method for Solving Dynamic Optimization Problems with Occasionally Binding Constraints (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:feddgw:88641

DOI: 10.24149/gwp396

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