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We introduce a numerical 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 cover the support of the constructed ergodic measure with a fixed grid, and we use projection techniques to accurately solve the model on that grid. The(More)
JEL classification: C63 C68 Keywords: Smolyak method Sparse grid Adaptive domain Projection Anisotropic grid High-dimensional problem a b s t r a c t We show how to enhance the performance of a Smolyak method for solving dynamic economic models. First, we propose a more efficient implementation of the Smolyak method for interpolation, namely, we show how to(More)
JEL classification: C6 C63 D52 Keywords: Dynamic stochastic models Heterogeneous agents Aggregate uncertainty Euler-equation methods Simulations Numerical solutions a b s t r a c t This paper studies the properties of the solution to the heterogeneous agents model in Den Haan et al. [2009. Computational suite of models with heterogeneous agents: incomplete(More)
We develop an envelope condition method (ECM) for dynamic programming problems – a tractable alternative to expensive conventional value function iteration (VFI). ECM has two novel features: First, to reduce the cost of iteration on Bellman equation, ECM constructs policy functions using envelope conditions which are simpler to analyze numerically than(More)
  • Diego Comin Dartmouth, Danial Lashkari, Harvard Martí, Mestieri Northwestern, Robert Barro, Paco Buera +14 others
  • 2015
We present a multi-sector growth model that accommodates long-run demand and supply drivers of structural change. The model generates nonhomothetic Engel curves at all levels of development and is consistent with the decline in agriculture, the hump-shaped evolution of manufacturing and the rise of services over time. The economy converges to a constant(More)
We propose a novel methodology for evaluating the accuracy of numerical solutions to dynamic economic models. Speci…cally, we construct a lower bound on the size of approximation errors. A small lower bound on errors is a necessary condition for accuracy: If a lower error bound is unacceptably large, then the actual approximation errors are even larger, and(More)
This paper extends the indivisible-labor model by Hansen [J. to include multiple consumers who differ in initial wealth and whose labor productivities are subject to idiosyncratic shocks. In the presence of idiosyncratic uncertainty, the optimal allocations for the individual employment probabilities are at corners: agents work with probability one (zero)(More)
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