Working Paper: NBER ID: w17418
Authors: Kenneth L. Judd; Lilia Maliar; Serguei Maliar
Abstract: We introduce a technique called "precomputation of integrals" that makes it possible to compute conditional expectations in dynamic stochastic models in the initial stage of the solution procedure. This technique can be applied to any set of equations that contains conditional expectations, in particular, to the Bellman and Euler equations. After the integrals are precomputed, we can solve stochastic models as if they were deterministic. We illustrate the benefits of precomputation of integrals using one- and multi-agent numerical examples.
Keywords: dynamic stochastic models; computational economics; precomputation of integrals
JEL Codes: C63
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Precomputation of integrals (C69) | Computation of conditional expectations (C51) |
| Computation of conditional expectations (C51) | Solving stochastic models as if they were deterministic (C61) |
| Precomputation of integrals (C69) | Solving stochastic models as if they were deterministic (C61) |
| Precomputation of integrals (C69) | Efficiency gains in computational costs (D61) |
| Computation of conditional expectations (C51) | Efficiency gains in computational costs (D61) |