EconPapers    
Economics at your fingertips  
 

A General Endogenous Grid Method for Multi-Dimensional Models with Non-Convexities and Constraints

Jeppe Druedahl and Thomas Jørgensen ()
Additional contact information
Jeppe Druedahl: Department of Economics, University of Copenhagen

No 16-09, Discussion Papers from University of Copenhagen. Department of Economics

Abstract: The endogenous grid method (EGM) significantly speeds up the solution of stochastic dynamic programming problems by simplifying or completely eliminating rootfinding. We propose a general and parsimonious EGM extended to handle 1) multiple continuous states and choices, 2) multiple occasionally binding constraints, and 3) non-convexities such as discrete choices. Our method enjoys the speed gains of the original one-dimensional EGM, while avoiding expensive interpolation on multi-dimensional irregular endogenous grids. We explicitly define a broad class of models for which our solution method is applicable, and illustrate its speed and accuracy using a consumption-saving model with both liquid assets and illiquid pension assets and a discrete retirement choice.

Keywords: Endogenous grid method; post-decision states; stochastic dynamic programming; continuous and discrete choices; occasionally binding constraints (search for similar items in EconPapers)
JEL-codes: C13 C63 D91 (search for similar items in EconPapers)
Pages: 61 pages
Date: 2016-09-05
New Economics Papers: this item is included in nep-cmp, nep-dge and nep-ore
References: Add references at CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.econ.ku.dk/english/research/publications/wp/dp_2016/1609.pdf (application/pdf)

Related works:
Journal Article: A general endogenous grid method for multi-dimensional models with non-convexities and constraints (2017) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kud:kuiedp:1609

Access Statistics for this paper

More papers in Discussion Papers from University of Copenhagen. Department of Economics Oester Farimagsgade 5, Building 26, DK-1353 Copenhagen K., Denmark. Contact information at EDIRC.
Bibliographic data for series maintained by Thomas Hoffmann ().

 
Page updated 2022-01-15
Handle: RePEc:kud:kuiedp:1609