Judd, K., L. Maliar, S. Maliar, and R. Valero
Journal of Economic Dynamics and Control – 44.C (2014), 92-123
Keywords: Smolyak method; sparse grid; adaptive domain; projection; anisotropic grid; collocation; high-dimensional problem
Abstract: First, we propose a more efficient implementation of the Smolyak method for interpolation, namely, we show how to avoid costly evaluations of repeated basis functions in the conventional Smolyak formula. Second, we extend the Smolyak method to include anisotropic constructions that allow us to target higher quality of approximation in some dimensions than in others. Third, we show how to effectively adapt the Smolyak hypercube to a solution domain of a given economic model. Finally, we argue that in large-scale economic applications, a solution algorithm based on Smolyak interpolation has substantially lower expense when it uses derivative-free fixed-point iteration instead of standard time iteration. In the context of one- and multi-agent growth models, we find that the proposed modifications to the conventional Smolyak method lead to substantial increases in accuracy and speed.