We introduce a numerical algorithm for solving dynamic economic models that merges stochastic simulation and projection approaches: we use simulation to approximate the ergodic measure of the solution, we cover the support of the constructed ergodic measure with a fixed grid, and we use...

We introduce a numerical algorithm for solving dynamic economic models that merges stochastic simulation and projection approaches: we use simulation to approximate the ergodic measure of the solution, we cover the support of the constructed ergodic measure with a fixed grid, and we use...

We propose a novel methodology for evaluating the accuracy of numerical solutions to dynamic economic models. Specifically, we construct a lower bound on the size of approximation errors. A small lower bound on errors is a necessary condition for accuracy: If a lower error bound is unacceptably...