NBER

Sergio Villalvazo

Department of Economics
University of Pennsylvania
The Ronald O. Perelman Center
for Political Science and Economics
133 South 36th Street
Philadelphia, PA 19104

E-Mail: EmailAddress: hidden: you can email any NBER-related person as first underscore last at nber dot org
Institutional Affiliation: University of Pennsylvania

NBER Working Papers and Publications

September 2019FiPIt: A Simple, Fast Global Method for Solving Models with Two Endogenous States & Occasionally Binding Constraints
with Enrique G. Mendoza: w26310
We propose a simple and fast fixed-point iteration algorithm FiPIt to obtain the global, non-linear solution of macro models with two endogenous state variables and occasionally binding constraints. This method uses fixed-point iteration on Euler equations to avoid solving two simultaneous nonlinear equations (as with the time iteration method) or creating modified state variables requiring irregular interpolation (as with the endogenous grids method). In the small-open-economy RBC and Sudden Stops models provided as examples, FiPIt is used on the bonds and capital Euler equations to solve for the bonds decision rule and the capital pricing function. In a standard Matlab platform, FiPIt solves both models much faster than time iteration and various hybrid methods. The choice of functions t...

Published: Enrique G. Mendoza & Sergio Villalvazo, 2020. "FiPIt: A simple, fast global method for solving models with two endogenous states & occasionally binding constraints," Review of Economic Dynamics, .

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