Chapter

Numerical Methods for Solving First-Order Conditions in Dynamic Optimization Problems

GREGORY C. CHOW

in Dynamic Economics

Published in print April 1997 | ISBN: 9780195101928
Published online October 2011 | e-ISBN: 9780199855032 | DOI: http://dx.doi.org/10.1093/acprof:oso/9780195101928.003.0009
Numerical Methods for Solving First-Order Conditions in Dynamic Optimization Problems

Show Summary Details

Preview

While there have already been a large number of efforts to explain the numerical solutions to dynamic optimization problems that are based mainly on dynamic programming, in this chapter the author attempts to veer away from using the value function and the Bellman equation that can be derived from the former, and to draw more attention to the first-order conditions for determining the optimum allocations based on the method of Lagrange multipliers. The author asserts that utilizing the Lagrange method is one of the most efficient procedures in several different applications since, with the exception of the Lagrange function, resources are wasted so that information regarding the value function may be acquired and stored. The author illustrates numerical methods in finding the solutions to first-order conditions in both continuous time and discrete time.

Keywords: continuous time; discrete time; first-order condition; value function; numerical methods

Chapter.  7421 words. 

Subjects: Financial Markets

Full text: subscription required

How to subscribe Recommend to my Librarian

Buy this work at Oxford University Press »

Users without a subscription are not able to see the full content. Please, subscribe or login to access all content.