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Dynamic Programming in Economics on a Quantum Annealer

Author

Listed:
  • Jesús Fernández-Villaverde
  • Isaiah J. Hull

Abstract

We introduce novel algorithms for solving dynamic programming problems in economics on a quantum annealer, a specialized quantum computer used for combinatorial optimization. Quantum annealers begin in a superposition of all states and generate candidate global solutions in milliseconds, regardless of problem size. In contrast to existing methods, those developed in this paper 1) recover value and policy functions, 2) avoid fundamental scaling bottlenecks, and 3) are already implementable for small (but non-trivial) problems on current hardware. We demonstrate the method by solving the real business cycle model on a quantum annealer.

Suggested Citation

  • Jesús Fernández-Villaverde & Isaiah J. Hull, 2023. "Dynamic Programming in Economics on a Quantum Annealer," NBER Working Papers 31326, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:31326
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    Cited by:

    1. Sofia Priazhkina & Samuel Palmer & Pablo Martín-Ramiro & Román Orús & Samuel Mugel & Vladimir Skavysh, 2024. "Digital Payments in Firm Networks: Theory of Adoption and Quantum Algorithm," Staff Working Papers 24-17, Bank of Canada.
    2. Raphael Auer & Angela Dupont & Leonardo Gambacorta & Joon Suk Park & Koji Takahashi & Andras Valko, 2024. "Quantum computing and the financial system: opportunities and risks," BIS Papers, Bank for International Settlements, number 149.

    More about this item

    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

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