A Recursive Method for Solving a Climate–Economy Model: Value Function Iterations with Logarithmic Approximations
In Chang Hwang ()
Computational Economics, 2017, vol. 50, issue 1, 95-110
Abstract A recursive method for solving an integrated assessment model of climate and the economy is developed in this paper. The method approximates a value function with a logarithmic basis function and searches for solutions on a set satisfying optimality conditions. These features make the method suitable for a nonlinear model with many state variables and various constraints. The method produces exact solutions to a simple economic growth model and is useful for solving more demanding models such as the well-known DICE model (dynamic integrated model of climate and the economy).
Keywords: Recursive method; Value function iteration; Dynamic programming; Climate–economy model (search for similar items in EconPapers)
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