Affiliation:
1. Department of Agricultural, Environmental, and Development Economics, The Ohio State University
2. Hoover Institution, Stanford University
Abstract
We introduce a novel simulated certainty equivalent approximation (SCEQ) method for solving dynamic stochastic problems. Our examples show that SCEQ can quickly solve high‐dimensional finite‐ or infinite‐horizon, stationary or nonstationary dynamic stochastic problems with hundreds of state variables, a wide state space, and occasionally binding constraints. With the SCEQ method, a desktop computer will suffice for large problems, but it can also use parallel tools efficiently. The SCEQ method is simple, stable, and can utilize any solver, making it suitable for solving complex economic problems that cannot be solved by other algorithms.
Funder
U.S. Department of Agriculture
National Science Foundation
National Institute of Food and Agriculture
Subject
Economics and Econometrics
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