Solving Nonstationary Infinite Horizon Dynamic Optimization Problems1

Monotonicity of optimal solutions to finite horizon dynamic optimization problems is used to prove the existence of a forecast horizon, i.e., a long enough planning horizon that ensures that a first-period optimal action for the infinite horizon and the finite horizon problem agree, regardless of problem parameter changes in the tail. The existence of extremal monotone optimal solutions motivates a stopping rule that is ensured to detect the minimal forecast horizon to be used in a rolling horizon procedure to exactly solve the problem