A general endogenous grid method for multi-dimensional models with non-convexities and constraints
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- 作者：Jeppe Druedahl ; jeppe.druedahl@econ.ku.dk ; ; Thomas Hø ; gholm Jø ; rgensen thomas.h.jorgensen@econ.ku.dk
- 关键词：C13 ; C63 ; D91
- 刊名：Journal of Economic Dynamics and Control
- 出版年：2017
- 出版时间：January 2017
- 年：2017
- 卷：74
- 期：Complete
- 页码：87-107
- 全文大小：1960 K
- 卷排序：74
文摘
The endogenous grid method (EGM) significantly speeds up the solution of stochastic dynamic programming problems by simplifying or completely eliminating root-finding. We propose a general and parsimonious EGM extended to handle (1) multiple continuous states and choices, (2) multiple occasionally binding constraints, and (3) non-convexities such as discrete choices. Our method enjoys the speed gains of the original one-dimensional EGM, while avoiding expensive interpolation on multi-dimensional irregular endogenous grids. We explicitly define a broad class of models for which our solution method is applicable, and illustrate its speed and accuracy using a consumption–saving model with both liquid assets and illiquid pension assets and a discrete retirement choice.