TY - JOUR
AU - Judd,Kenneth L.
AU - Maliar,Lilia
AU - Maliar,Serguei
TI - Merging Simulation and Projection Approaches to Solve High-Dimensional Problems
JF - National Bureau of Economic Research Working Paper Series
VL - No. 18501
PY - 2012
Y2 - November 2012
DO - 10.3386/w18501
UR - http://www.nber.org/papers/w18501
L1 - http://www.nber.org/papers/w18501.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: JUDD@HOOVER.STANFORD.EDU
Lilia Maliar
Office T-24 Hoover Institution
Stanford University
CA 94305-6010, USA
Tel: 6507253416
Fax: 6507231687
E-Mail: maliarl@stanford.edu
Serguei Maliar
Office T-24 Hoover Institution
Stanford University
CA 94305-6010, USA
Tel: 6507253416
Fax: 6507231687
E-Mail: maliars@stanford.edu
AB - We introduce an algorithm for solving dynamic economic models that merges stochastic simulation and projection approaches: we use simulation to approximate the ergodic measure of the solution, we construct a fixed grid covering the support of the constructed ergodic measure, and we use projection techniques to accurately solve the model on that grid. The grid construction is the key novel piece of our analysis: we select an ε-distinguishable subset of simulated points that covers the support of the ergodic measure roughly uniformly. The proposed algorithm is tractable in problems with high dimensionality (hundreds of state variables) on a desktop computer. As an illustration, we solve one- and multicountry neoclassical growth models and a large-scale new Keynesian model with a zero lower bound on nominal interest rates.
ER -