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The method of endogenous gridpoints for solving dynamic stochastic optimization problems

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  • Carroll, Christopher D.

Abstract

This paper introduces a method for solving numerical dynamic stochastic optimization problems that avoids rootfinding operations. The idea is applicable to many microeconomic and macroeconomic problems, including life cycle, buffer-stock, and stochastic growth problems. Software is provided.

Suggested Citation

  • Carroll, Christopher D., 2005. "The method of endogenous gridpoints for solving dynamic stochastic optimization problems," CFS Working Paper Series 2005/18, Center for Financial Studies (CFS).
    • Handle: RePEc:zbw:cfswop:200518
    as

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    File URL: https://www.econstor.eu/bitstream/10419/25458/1/515323896.PDF
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    References listed on IDEAS

    as
    1. Christopher D. Carroll, 2004. "Theoretical Foundations of Buffer Stock Saving," Economics Working Paper Archive 517, The Johns Hopkins University,Department of Economics.
    2. Kenneth L. Judd, 1998. "Numerical Methods in Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262100711, April.
    3. Deaton, Angus, 1991. "Saving and Liquidity Constraints," Econometrica, Econometric Society, vol. 59(5), pages 1221-1248, September.
    4. den Haan, Wouter J & Marcet, Albert, 1990. "Solving the Stochastic Growth Model by Parameterizing Expectations," Journal of Business & Economic Statistics, American Statistical Association, vol. 8(1), pages 31-34, January.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Dynamic optimization; precautionary saving; stochastic growth model; endogenous gridpoints; liquidity constraints;
    All these keywords.

    JEL classification:

    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • D9 - Microeconomics - - Micro-Based Behavioral Economics
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment

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