Merging simulation and projection approaches to solve high-dimensional problems

Kenneth Judd, Lilia Maliar and Serguei Maliar

Working Papers. Serie AD from Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie)

Abstract: We introduce an algorithm for solving dynamic economic models that merges stochastic simulation and projection approaches: we use simulation to approximate the ergodic measure of the solution, we construct a fixed grid covering the support of the constructed ergodic measure, and we use projection techniques to accurately solve the model on that grid. The grid construction is the key novel piece of our analysis: we select an e-distinguishable subset of simulated points that covers the support of the ergodic measure roughly uniformly. The proposed algorithm is tractable in problems with high dimensionality (hundreds of state variables) on a desktop computer. As an illustration, we solve one- and multicountry neoclassical growth models and a large-scale new Keynesian model with a zero lower bound on nominal interest rates.

Keywords: ergodic set; e-distinguishable set; clusters; discrepancy; large-scale; new Keynesian; ZLB; stochastic simulation. (search for similar items in EconPapers)
JEL-codes: C61 C63 C68 E31 E52 (search for similar items in EconPapers)
Pages: 77 pages
Date: 2012-11
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (44)

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http://www.ivie.es/downloads/docs/wpasad/wpasad-2012-20.pdf Fisrt version / Primera version, 2012 (application/pdf)

Related works:
Working Paper: Merging Simulation and Projection Approaches to Solve High-Dimensional Problems (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:ivi:wpasad:2012-20

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