Approximate Dynamic Programming with Postdecision States as a Solution Method For Dynamic Economic

50 Pages Posted: 18 Dec 2013 Last revised: 12 Dec 2020

See all articles by Isaiah Hull

Isaiah Hull

Sveriges Riksbank - Research Division

Date Written: September 1, 2013

Abstract

I introduce and evaluate a new stochastic simulation method for dynamic economic models. It is based on recent work in the operations research and engineering literatures (Van Roy et. al, 1997; Powell, 2007; Bertsekas, 2011). The baseline method involves rewriting the household’s dynamic program in terms of post-decision states. This makes it possible to choose controls optimally without computing an expectation. I add a subroutine to the original algorithm that updates the values of states not visited frequently on the simulation path; and adopt a stochastic stepsize that efficiently weights information. Finally, I modify the algorithm to exploit GPU computing.

Keywords: Numerical Solutions, Approximations, Heterogeneous Agents, Nonlinear Numerical Solutions, Dynamic Programming

JEL Classification: C60, C61, C63, D52

Suggested Citation

Hull, Isaiah, Approximate Dynamic Programming with Postdecision States as a Solution Method For Dynamic Economic (September 1, 2013). Journal of Economic Dynamics and Control, Vol. 55, 57-70, 2015, Available at SSRN: https://ssrn.com/abstract=2350679 or http://dx.doi.org/10.2139/ssrn.2350679

Isaiah Hull (Contact Author)

Sveriges Riksbank - Research Division ( email )

S-103 37 Stockholm
Sweden

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