Newton's Method for Optimal Control Involving Nonlinear
Econometric Models
O. Patrick Kreidl
Newton's method for optimal control is a well-established nonlinear
programming algorithm for addressing optimization problems involving a
discrete-time dynamic system. We consider problems where the system is
described by a nonlinear, simultaneous, econometric model and the
objective is to minimize a quadratic cost function over a finite-time
horizon. We outline the sequence of computations required within each
iteration of the method, including the historic solution to the
linear-quadratic tracking problem, and provide general comments
regarding algorithm convergence.