A simple but powerful simulated certainty equivalent approximation method for dynamic stochastic problems

We introduce a novel simulated certainty equivalent approximation (SCEQ) method for solving dynamic stochastic problems. Our examples show that SCEQ can quickly solve high-dimensional finite- or infinite-horizon, stationary or non- stationary dynamic stochastic problems with hundreds of state variables, a wide state space, and occasionally binding constraints. With the SCEQ method, a desk- top computer will suffice for large problems, but it can also use parallel tools ef- ficiently. The SCEQ method is simple, stable, and can utilize any solver, making it suitable for solving complex economic problems that cannot be solved by other algorithms.