Solving Dynamic Models With Aggregate Shocks And Heterogeneous Agents
AbstractI develop an algorithm for solving dynamic models in which individualdecision rules and the cross-sectional distribution of agents characteristics influence each other. To illustrate the algorithm, Isolve an endowment economy with incomplete markets, a continuum ofheterogeneous agents, and aggregate shocks. The key innovation of thealgorithm is to parameterize the (cross-sectional) density with aflexible functional form, which makes it possible to avoid simulationtechniques. The paper shows how to check for accuracy and establisheslinks between the properties of the incomplete-markets economy andthe aspects involved in obtaining a numerical solution.
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Bibliographic InfoArticle provided by Cambridge University Press in its journal Macroeconomic Dynamics.
Volume (Year): 1 (1997)
Issue (Month): 02 (June)
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