NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

How to Solve Dynamic Stochastic Models Computing Expectations Just Once

Kenneth L. Judd, Lilia Maliar, Serguei Maliar

NBER Working Paper No. 17418
Issued in September 2011
NBER Program(s):Economic Fluctuations and Growth, Technical Working Papers

We introduce a technique called "precomputation of integrals" that makes it possible to compute conditional expectations in dynamic stochastic models in the initial stage of the solution procedure. This technique can be applied to any set of equations that contains conditional expectations, in particular, to the Bellman and Euler equations. After the integrals are precomputed, we can solve stochastic models as if they were deterministic. We illustrate the benefits of precomputation of integrals using one- and multi-agent numerical examples.

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Document Object Identifier (DOI): 10.3386/w17418

Published: Kenneth L. Judd & Lilia Maliar & Serguei Maliar & Inna Tsener, 2017. "How to solve dynamic stochastic models computing expectations just once," Quantitative Economics, vol 8(3), pages 851-893.

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