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The market resources method for solving dynamic optimization problems

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Abstract

We introduce the market resources method (MRM) for solving dynamic optimization problems. MRM extends Carroll?s (2006) endogenous grid point method (EGM) for problems with more than one control variable using policy function iteration. The MRM algorithm is simple to implement and provides advantages in terms of speed and accuracy over Howard?s policy improvement algorithm. Codes are available.

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  • Ayse Kabukcuoglu & Enrique Martínez García, 2016. "The market resources method for solving dynamic optimization problems," Globalization Institute Working Papers 274, Federal Reserve Bank of Dallas.
    • Handle: RePEc:fip:feddgw:274
    DOI: 10.24149/gwp274
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    More about this item

    JEL classification:

    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models

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