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Multidimensional endogenous gridpoint method: Solving triangular dynamic stochastic optimization problems without root-finding operations

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  • Iskhakov, Fedor

Abstract

This paper defines the class of triangular dynamic stochastic optimization problems with multiple continuous choices which can be solved by the multidimensional generalization of the method of endogenous gridpoints without costly root-finding operations. The typical member of this class is a model of multiple asset dynamics, with potential applications in wealth, health and human capital accumulation, portfolio problems, multisector growth models, etc.

Suggested Citation

  • Iskhakov, Fedor, 2015. "Multidimensional endogenous gridpoint method: Solving triangular dynamic stochastic optimization problems without root-finding operations," Economics Letters, Elsevier, vol. 135(C), pages 72-76.
  • Handle: RePEc:eee:ecolet:v:135:y:2015:i:c:p:72-76
    DOI: 10.1016/j.econlet.2015.07.033
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    References listed on IDEAS

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    1. Alexander Ludwig & Matthias Schön, 2013. "Endogenous Grids in Higher Dimensions: Delaunay Interpolation and Hybrid Methods," Working Paper Series in Economics 65, University of Cologne, Department of Economics, revised 11 Jun 2014.
    2. Kenneth L. Judd, 1998. "Numerical Methods in Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262100711.
    3. Deaton, Angus, 1991. "Saving and Liquidity Constraints," Econometrica, Econometric Society, vol. 59(5), pages 1221-1248, September.
    4. Giulio Fella, 2014. "A generalized endogenous grid method for non-smooth and non-concave problems," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 17(2), pages 329-344, April.
    5. White, Matthew N., 2015. "The method of endogenous gridpoints in theory and practice," Journal of Economic Dynamics and Control, Elsevier, vol. 60(C), pages 26-41.
    6. Barillas, Francisco & Fernandez-Villaverde, Jesus, 2007. "A generalization of the endogenous grid method," Journal of Economic Dynamics and Control, Elsevier, vol. 31(8), pages 2698-2712, August.
    7. Tauchen, George, 1986. "Finite state markov-chain approximations to univariate and vector autoregressions," Economics Letters, Elsevier, vol. 20(2), pages 177-181.
    8. Fedor Iskhakov & Thomas Høgholm Jørgensen & John Rust & Bertel Schjerning, 2015. "Estimating Discrete-Continuous Choice Models: The Endogenous Grid Method with Taste Shocks," Discussion Papers 15-19, University of Copenhagen. Department of Economics.
    9. Jørgensen, Thomas H., 2013. "Structural estimation of continuous choice models: Evaluating the EGM and MPEC," Economics Letters, Elsevier, vol. 119(3), pages 287-290.
    10. Carroll, Christopher D., 2006. "The method of endogenous gridpoints for solving dynamic stochastic optimization problems," Economics Letters, Elsevier, vol. 91(3), pages 312-320, June.
    11. Susumu Imai & Michael P. Keane, 2004. "Intertemporal Labor Supply and Human Capital Accumulation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(2), pages 601-641, May.
    12. Hintermaier, Thomas & Koeniger, Winfried, 2010. "The method of endogenous gridpoints with occasionally binding constraints among endogenous variables," Journal of Economic Dynamics and Control, Elsevier, vol. 34(10), pages 2074-2088, October.
    13. Ken-ichi Inada, 1963. "On a Two-Sector Model of Economic Growth: Comments and a Generalization," Review of Economic Studies, Oxford University Press, vol. 30(2), pages 119-127.
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    Cited by:

    1. White, Matthew N., 2015. "The method of endogenous gridpoints in theory and practice," Journal of Economic Dynamics and Control, Elsevier, vol. 60(C), pages 26-41.
    2. Fedor Iskhakov & Thomas Høgholm Jørgensen & John Rust & Bertel Schjerning, 2015. "Estimating Discrete-Continuous Choice Models: The Endogenous Grid Method with Taste Shocks," Discussion Papers 15-19, University of Copenhagen. Department of Economics.
    3. repec:kap:compec:v:51:y:2018:i:3:d:10.1007_s10614-016-9611-2 is not listed on IDEAS

    More about this item

    Keywords

    Endogenous grid method; Multidimensional continuous choice; Dynamic structural models;

    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General

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