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Handbook of Computational Economics by Kenneth L. Judd, Karl Schmedders

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Chapter 7

Numerical Methods for Large-Scale Dynamic Economic Models

Lilia Maliar and Serguei Maliar,    T24, Hoover Institution, Stanford, CA, USA,    maliarl@stanford.edu

Abstract

We survey numerical methods that are tractable in dynamic economic models with a finite, large number of continuous state variables. (Examples of such models are new Keynesian models, life-cycle models, heterogeneous-agents models, asset-pricing models, multisector models, multicountry models, and climate change models.) First, we describe the ingredients that help us to reduce the cost of global solution methods. These are efficient nonproduct techniques for interpolating and approximating functions (Smolyak, stochastic simulation, and -distinguishable set grids), accurate ...

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