Download This PaperA Generalized Time Iteration Method for Solving Dynamic Optimization Problems with Occasionally Binding Constraints
28 Pages Posted: 28 Aug 2020 Last revised: 11 Jan 2022
Date Written: August, 2020
Abstract
We study a generalized version of Coleman (1990)’s time iteration method (GTI) for solving dynamic optimization problems. Our benchmark framework is an irreversible investment model with labor-leisure choice. The GTI algorithm is simple to implement and provides advantages in terms of speed relative to Howard (1960)’s improvement algorithm. A second application on a heterogeneous-agents incomplete-markets model further explores the performance of GTI.
JEL Classification: C6, C61, C63, C68
Suggested Citation: Suggested Citation
Kabukcuoglu, Ayse and Martinez-Garcia, Enrique, A Generalized Time Iteration Method for Solving Dynamic Optimization Problems with Occasionally Binding Constraints (August, 2020). Globalization Institute Working Paper No. 396, Available at SSRN: https://ssrn.com/abstract=3682356 or http://dx.doi.org/10.24149/gwp396
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