Under adaptive learning, recursive algorithms are proposed to represent how agents update their beliefs over time. For applied purposes these algorithms require initial estimates of agents perceived law of motion. Obtaining appropriate initial estimates can become prohibitive within the usual...

We construct an optimizing-agent model of a closed economy which is simple enough that we can use it to make exact utility calculations. There is a stabilization problem because there are one-period nominal contracts for wages, or prices, or both and shocks that are unknown at the time when...

Linear Methods are often used to compute approximate solutions to dynamic models, as these models often cannot be solved analytically. Linear methods are very popular, as they can easily be implemented. Also, they provide a useful starting point for understanding more elaborate numerical...

This paper evaluates the accuracy of a set of techniques that approximate the solution of continuous-time DSGE models. Using the neoclassical growth model I compare linear-quadratic, perturbation and projection methods. All techniques are applied to the HJB equation and the optimality conditions...

A divide and conquer algorithm for exploiting policy function monotonicity is proposed and analyzed. To solve a discrete problem with n states and n choices, the algorithm requires at most n log2(n) 5n objective function evaluations. In contrast, existing methods for non-concave problems require...

Value function iteration is one of the standard tools for the solution of the Ramsey model. We compare six different ways of value function iteration with regard to speed and precision. We find that value function iteration with cubic spline interpolation between grid points dominates the other...

A divide and conquer algorithm for exploiting policy function monotonicity is proposed and analyzed. To solve a discrete problem with n states and n choices, the algorithm requires at most nlog2(n)+5n objective function evaluations. In contrast, existing methods for nonconcave problems require...

The "histogram method" (Young, 2010), while the standard approach for analyzing distributional dynamics in heterogeneous agent models, is linear in optimal policies. We introduce a novel method that captures nonlinearities of distributional dynamics. This method solves the distributional...

Structural estimation of macroeconomic models and new HANK-type models with extremely high dimensionality require fast and robust methods to efficiently deal with occasionally binding constraints (OBCs). This paper proposes a novel algorithm that solves for the perfect foresight path of...