Approximating High-Dimensional Dynamic Models : Sieve Value Function Iteration

@inproceedings{Arcidiacono2012ApproximatingHD,
  title={Approximating High-Dimensional Dynamic Models : Sieve Value Function Iteration},
  author={Peter Arcidiacono and Federico A. Bugni},
  year={2012}
}
Many dynamic problems in economics are characterized by large state spaces which make both computing and estimating the model infeasible. We introduce a method for approximating the value function of high-dimensional dynamic models based on sieves and establish results for the: (a) consistency, (b) rates of convergence, and (c) bounds on the error of approximation. We embed this method for approximating the solution to the dynamic problem within an estimation routine and prove that it provides… CONTINUE READING