This project develops a solution technique for economic dynamic models. A solution procedure of this type makes it possible to simulate models on a computer. Dynamic models are ones that evolve through time and, thus, they are most appropriate for economic policy analysis. Simulating a dynamic model on the computer makes it possible to analyze the properties of the model, and to test if it is a good description of the real economy. Ultimately, computer simulations can determine the effect of a particular change in economic policy, and they can provide guidance in policy-making. In this project a technique for finding numerical solutions is developed and applied to several models. Recently, finding numerical solution procedures for dynamic economic models has become an important issue. The main challenges to these procedures are computational tractability and accuracy. Computational tractability means that the algorithms allow for fast computation, so that it is feasible to simulate interesting models without having to spend too much time and money on the computer. Also, since all of these methods only approximate the true solution, it is necessary to make sure that the solution is computed with a reasonable degree of accuracy. For a class of important models, the method developed in this project is likely to improve on the existing methods both in terms of computational speed and in terms of accuracy.
