The Method of Endogenous Gridpoints for Solving Dynamic Stochastic Optimization Problems

By Christopher D. Carroll. 2006

596 citations recorded by the source corpus.

This paper introduces a method for solving numerical dynamic stochastic optimization problems that avoids rootfinding operations. The idea is applicable to many microeconomic and macroeconomic problems, including life cycle, buffer-stock, and stochastic growth problems. Software is provided.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/c4b88f591948bf2c152e939307fbbd8663beff3c

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In Economics and Econometrics

Citations in the corpus

The Power of Forward Guidance Revisited (2016, unknown): “We solve the household's problem by iterating on the Euler equation backwards through time using the endogenous gridpoint method of Carroll (2006) to compute the policy rules for each period of the transition.”
How Much Consumption Insurance beyond Self-Insurance? (2010, unknown): “22 We exclude social security tax from the Gouveia-Strauss tax function because it is not subtracted from the net earnings definition of BPP. 23 The model is solved using the method of endogenous grid points developed by Carroll (2006) with 100 exponentially spaced grid points for assets.”
Transmission of Monetary Policy with Heterogeneity in Household Portfolios (2018, methodology): “I solve for the households’ policy functions by applying an endogenous grid point method as originally developed in Carroll (2006) and extended by Hintermaier and Koeniger (2010), iterating over the first-order conditions.”
Credit Crises, Precautionary Savings, and the Liquidity Trap (2011, background): “(1) 6The presence of the unemployment benefit ensures that the natural borrowing limit is strictly positive.”
Inequality and the Lifecycle (2011, methodology): “F.3 Numerical solution The model is solved by backward induction using the method of endogenous grid points (Carroll (2006)), extended to allow for a labor supply decision.”
Precautionary Savings, Illiquid Assets, and the Aggregate Consequences of Shocks to Household Income Risk (2019, methodology): “19 In solving for the household’s policy functions, we apply an endogenous gridpoint method as originally developed in Carroll (2006) and extended by Hintermaier and Koeniger (2010), iterating over the first-order conditions. We start with a guess for the adjustment probabilities and use (14) to upd”
Consumer Spending during Unemployment: Positive and Normative Implications (2019, unknown): “We solve the household problem recursively using the method of endogenous gridpoints suggested in Carroll (2006). This generates optimal consumption paths and search e ort for a given set of parameters.”
Monetary Policy and the Redistribution Channel (2017, unknown): “I use the method of endogenous gridpoints (Carroll 2006) to solve for consumer policy functions.”
Solving the incomplete markets model with aggregate uncertainty by backward induction (2010, methodology): “Then we use the endogenous grid point method of Carroll (2006) to compute the value function as a function of cash-on-hand, after the employment shock has realized and income has accrued.”
Regulating Capital Flows to Emerging Markets: An Externality View (2018, unknown): “We introduce a numerical algorithm based on the endogenous gridpoints method of Carroll (2006) and its extension to occasionally binding constraints by Jeanne and Korinek (2010b). We calibrate the model to replicate the dynamics of the Thai financial crisis of 1997/98.”