Dynamic Programming on a Quantum Annealer: Solving the RBC Model

Friday September 23, 2022 • 1:00 PM

Jesús Fernández-Villaverde, Professor of Economics at the University of Pennsylvania, presented his research on dynamic programming on a quantum annealer.

Modern dynamic economic models do not have closed-form solutions and are usually solved numerically on a computer. Unfortunately, these models suffer from an acute “curse of dimensionality”: the number of floating points operations required to solve them grows exponentially on the number of dimensions of the model. Most economic models of interest have many dimensions, often in the thousands. Thus, economists have been forced to either solve only an approximation to the model, rely on problematic simplifications, or spend much effort on massive parallelization.

Quantum computing offers the possibility of achieving solutions to our models of interest much faster than existing methods. We illustrate this potential by introducing a novel approach for solving dynamic programming problems on a quantum annealer, which is a specialized device that performs combinatorial optimization. Quantum annealers attempt to solve an NP-hard problem, start in a quantum superposition of all states, and generate candidate global solutions in milliseconds, irrespective of problem size.

Although quantum annealers are not yet a mature technology, we demonstrate that the current vintage of devices is already capable of achieving an order-of-magnitude speed-up in solving the real business cycle model, a workhorse model in modern macroeconomics.

For more information, contact:

Chelsea Donahue, Rethinc. Labs Assistant Director
Chelsea_Donahue@kenan-flagler.unc.edu

 

Jesús Fernández-Villaverde
Professor of Economics at the University of Pennsylvania
Director of the Penn Initiative for the Study of Markets 

Fernandez-Villaverde is also a visiting Professor at the University of Oxford, a visiting scholar at the Bank of Spain, fellow at Collegium Institute, a non-resident fellow at the Civitas Institute at the University of Texas Austin, and a member of the National Bureau of Economic Research and the Center for Economic Policy Research. He is a fellow of the Econometric Society.

In the past, he has held academic appointments at Harvard University, Princeton University, Yale University, Columbia University, Duke University, and New York University. He has been  a visiting scholar at the Federal Reserve Banks of Chicago, New York, Philadelphia, St. Louis, Minneapolis, Cleveland, and Atlanta, the European Central Bank. Fernandez-Villaverde has been a research professor at FEDEA (Spain), a National Fellow of the Hoover Institution at Stanford University, visiting scholar at the Becker-Friedman Institute of the University of Chicago, visiting scholar at INET at the University of Cambridge, distinguished visiting professor at the University of Melbourne (Australia), advisor to the Hoover Institution at Stanford University’s Regulation and Rule of Law Initiative and the director of the Penn Institute for Economic Research.

Fernandez-Villaverde is currently the editor of the International Economic Review. He has published over 50 peer-reviewed papers, including American Economic Review, Econometrica, and Review of Economic Studies.

At Penn, Fernández-Villaverde also serves as the Director of the Penn Initiative for the Study of Markets and co-director of the Business, Economic, and Financial History Project. His research focuses on macroeconomics, econometrics, and economic history. Among other topics, he is interested in the role of monetary and fiscal policy, the sources of economic growth, the importance of the rule of law, and the foundations of market economies.