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The Market Resources Method for Solving Dynamic Optimization Problems

Author

Listed:
  • Ayse Kabukcuoglu

    () (Koc University)

  • Enrique Martínez-García

    () (Federal Reserve Bank of Dallas, Southern Methodist University)

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.

Suggested Citation

  • Ayse Kabukcuoglu & Enrique Martínez-García, 2016. "The Market Resources Method for Solving Dynamic Optimization Problems," Koç University-TUSIAD Economic Research Forum Working Papers 1607, Koc University-TUSIAD Economic Research Forum.
  • Handle: RePEc:koc:wpaper:1607
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    DSGE models; Computational methods; Policy function iteration; Endogenous grid.;

    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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