This chapter is concerned with numerical simulation of dynamic economic models. We focus on some basic algorithms and assess their accuracy and stability properties. This analysis is useful for an optimal implementation and testing of these procedures, as well as to evaluate their performance....

We introduce the market resources method (MRM) for solving dynamic optimization problems. MRM extends Carroll’s (2006) endogenous grid point method (EGM) for problems with more than one control variable using policy function iteration. The MRM algorithm is simple to implement and provides...

We use the technique of information relaxation to develop a duality-driven iterative approach to obtaining and improving confidence interval estimates for the true value of finite-horizon stochasticdynamic programming problems. We show that the sequence of dual value estimates yielded from the...

We present a fast and accurate computational method for solving and estimating a class of dynamic programming models with discrete and continuous choice variables. The solution method we develop for structural estimation extends the en- dogenous grid-point method (EGM) to discrete-continuous...

Recent experience with interest rates hitting the effective lower bound and agents facing binding borrowing constraints has emphasised the importance of understanding the behaviour of an economy in which some variables may be restricted at times. The extended path algorithm is a commonly used...