The picture quality of conventional memory vector quantization techniques i
s limited by their supercodebooks. This paper presents a new dynamic finite
-state vector quantization (DFSVQ) algorithm which provides better quality
than the best quality that the supercodebook can offer. The new DFSVQ explo
its the global interblock correlation of image blocks instead of local corr
elation in conventional DFSVQs, For an input block, we search the closest b
lock from the previously encoded data using side-match technique. The close
st block is then used as the prediction of the input block, or used to gene
rate a dynamic codebook, The input block is encoded by the closest block, d
ynamic codebook or supercodebook. Searching for the closest block from the
previously encoded data is equivalent to expand the codevector space; thus
the picture quality achieved is not limited by the supercodebook, Experimen
tal results reveal that the new DFSVQ reduces bit rate significantly and pr
ovides better visual quality, as compared to the basic VQ and other DFSVQs.