Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/103433
Authors: 
Ludwig, Alexander
Schön, Matthias
Year of Publication: 
2014
Series/Report no.: 
SAFE Working Paper Series 72
Abstract: 
This paper investigates extensions of the method of endogenous gridpoints (ENDGM) introduced by Carroll (2006) to higher dimensions with more than one continuous endogenous state variable. We compare three different categories of algorithms: (i) the conventional method with exogenous grids (EXOGM), (ii) the pure method of endogenous gridpoints (ENDGM) and (iii) a hybrid method (HYBGM). ENDGM comes along with Delaunay interpolation on irregular grids. Comparison of methods is done by evaluating speed and accuracy. We find that HYBGM and ENDGM both dominate EXOGM. In an infinite horizon model, ENDGM also always dominates HYBGM. In a finite horizon model, the choice between HYBGM and ENDGM depends on the number of gridpoints in each dimension. With less than 150 gridpoints in each dimension ENDGM is faster than HYBGM, and vice versa. For a standard choice of 25 to 50 gridpoints in each dimension, ENDGM is 1.4 to 1.7 times faster than HYBGM in the finite horizon version and 2.4 to 2.5 times faster in the infinite horizon version of the model.
Subjects: 
Dynamic Models
Numerical Solution
Endogenous gridpoints Method
Delaunay Interpolation
JEL: 
C63
E21
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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