TY - JOUR
AU - Judd,Kenneth L.
AU - Maliar,Lilia
AU - Maliar,Serguei
TI - How to Solve Dynamic Stochastic Models Computing Expectations Just Once
JF - National Bureau of Economic Research Working Paper Series
VL - No. 17418
PY - 2011
Y2 - September 2011
DO - 10.3386/w17418
UR - http://www.nber.org/papers/w17418
L1 - http://www.nber.org/papers/w17418.pdf
N1 - Author contact info:
Kenneth L. Judd
Hoover Institution
Stanford University
Stanford, CA 94305-6010
Tel: 650/723-5866
Fax: 650/723-1687
E-Mail: kennethjudd@mac.com
Lilia Maliar
Department of Economics
Stanford University
Stanford CA 94305-6072
E-Mail: maliarl@stanford.edu
Serguei Maliar
Santa Clara University
Economics Department
500 El Camino Real
Santa Clara, CA 95053
E-Mail: smaliar@scu.edu
AB - 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.
ER -