3/n FIRST: Why do I discount speed gains?
If we believe economics is a science & that our research should be taken seriously to design policies that can cause 100s of billions or trillions of $$ in costs or savings, the speed of an algorithm is largely irrelevant.
The #1 priority is ACCURACY.
If we believe economics is a science & that our research should be taken seriously to design policies that can cause 100s of billions or trillions of $$ in costs or savings, the speed of an algorithm is largely irrelevant.
The #1 priority is ACCURACY.
Comments
Do we think macro research is less consequential? The global financial cost of 2008 Global Crisis is estimated to be ~$2 trillion.
So, an algo that solves K-S in 10 secs vs. 10 minutes means nothing - unless it’s accurate.
This brings us to Accuracy for Large Shocks... -->
Background:
In HA models, linearization-based methods start with Reiter (JEDC, 2009). It is nonlinear in individual states but imposes linearity in aggr states. It solves Khan & Thomas (ECMA, 2008) model about 100x faster than Krusell-Smith method.
These methods promise to be much faster than even Reiter’s method.