We consider a class of infinite‐horizon dynamic Markov economic models in which the parameters of utility function, production function, and transition equations change over time. In such models, the optimal value and decision functions are time‐inhomogeneous: they depend not only on state...

We develop numerically stable and accurate stochastic simulation approaches for solving dynamic economic models. First, instead of standard least-squares approximation methods, we examine a variety of alternatives, including least- squares methods using singular value decomposition and Tikhonov...