Quantitative Economics
Journal Of The Econometric Society
Edited by: Stéphane Bonhomme • Print ISSN: 1759-7323 • Online ISSN: 1759-7331
Quantitative Economics: Mar, 2017, Volume 8, Issue 1
A nonlinear certainty equivalent approximation method for dynamic stochastic problems
Yongyang Cai, Kenneth Judd, Jevgenijs Steinbuks
This paper introduces a nonlinear certainty‐equivalent approximation method for dynamic stochastic problems. We first introduce a novel, stable, and efficient method for computing the decision rules in deterministic dynamic economic problems. We use the results as nonlinear and global certainty‐equivalent approximations for solutions to stochastic problems, and compare their accuracy to the common linear and local certainty‐equivalent methods. Our examples demonstrate that this method can be applied to solve high‐dimensional problems with up to 400 state variables with acceptable accuracy. This method can also be applied to solve problems with inequality constraints. These features make the nonlinear certainty‐equivalent approximation method suitable for solving complex economic problems, where other algorithms, such as log‐linearization, fail to produce a valid global approximation or are far less tractable.
New Keynesian DSGE model competitive equilibrium parallel computing sparse grid approximation real business cycle model C61 C63 C68 E31 E52
Supplemental Material
Supplement to "A nonlinear certainty equivalent approximation method for dynamic stochastic problems"
Supplement to "A nonlinear certainty equivalent approximation method for dynamic stochastic problems"
Supplement to "A nonlinear certainty equivalent approximation method for dynamic stochastic problems"
Journal News
March 5, 2024
Announcing the New Journal Editors
The terms of the Editors of the Econometric Society's three journals end June 30, 2025. We are pleased to announce the incoming Editors and to thank the outgoing Editors for their excellent and continuing service.
Econometrica: Since 2019, Guido Imbens has served as the 14th Editor of Econometrica. On July 1, 2025, Marina Halac will become the Editor.
Quantitative Economics: Stéphane Bonhomme has been the Editor of Quantitative Economics since 2021. His successor will be Bernard Salanié.
Theoretical Economics: The Editor of Theoretical Economics since 2021 has been Simon Board. Taking over for him in July 2025 will be Federico Echenique.
Guido, Stéphane, and Simon have been outstanding Editors. We are grateful to them for the work they have done and will continue to do, and we look forward to further congratulating them next year. We believe Marina, Bernard, and Federico will be outstanding successors and we thank them in advance for their service.
Finally, we are grateful to Larry Samuelson for chairing all three search committees, and we thank the search committee members for their hard and fruitful work:
Econometrica: Christian Dustmann, Lars Hansen, Alessandro Lizzeri, George Mailath, Ariel Pakes, Helene Rey, and Elie Tamer.
QE: Kate Ho, Michael Keane, Felix Kubler, Whitney Newey, and Frank Schorfheide.
TE: Jeff Ely, Johannes Horner, Gilat Levy, Meg Meyer, and Ran Spiegler.
