Solving heterogeneous-agent models with parameterized cross-sectional distributions

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Solving heterogeneous-agent models with parameterized cross-sectional distributions

Author Info

Algan, Yann
Allais, Olivier
Den Haan, Wouter J.

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Abstract

A new algorithm is developed to solve models with heterogeneous agents and aggregate uncertainty. Projection methods are the main building blocks of the algorithm and - in contrast to the most popular solution procedure - simulations only play a very minor role. The paper also develops a new simulation procedure that not only avoids cross-sectional sampling variation but is 10 (66) times faster than simulating an economy with 10,000 (100,000) agents. Because it avoids cross-sectional sampling variation, it can generate an accurate representation of the whole cross-sectional distribution. Finally, the paper outlines a set of accuracy tests.

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Publisher Info
Article provided by Elsevier in its journal Journal of Economic Dynamics and Control.

Volume (Year): 32 (2008)
Issue (Month): 3 (March)
Pages: 875-908
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Handle: RePEc:eee:dyncon:v:32:y:2008:i:3:p:875-908

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Paper
- Algan, Yann & Allais, Olivier & Den Haan, Wouter, 2007. "Solving Heterogeneous-Agent Models with Parameterized Cross-Sectional Distributions," CEPR Discussion Papers 6062, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
- Yann Algan & Olivier Allais & Wouter J. Den Haan, 2006. "Solving heterogeneous-agent models with parameterized cross-sectional distributions," PSE Working Papers 2006-46, PSE (Ecole normale supérieure). [Downloadable!]

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

Per Krusell & Anthony A. Smith & Jr., 1998. "Income and Wealth Heterogeneity in the Macroeconomy," Journal of Political Economy, University of Chicago Press, vol. 106(5), pages 867-896, October. [Downloadable!] (restricted)
Other versions:
- Per Krusell & Anthony A. Smith, Jr., . "Income and Wealth Heterogeneity in the Macroeconomy," GSIA Working Papers 1997-37, Carnegie Mellon University, Tepper School of Business.
- Krusell, P & Smith Jr, A-A, 1995. "Income and Wealth Heterogeneity in the Macroeconomic," RCER Working Papers 399, University of Rochester - Center for Economic Research (RCER).
Bruce Preston & Mauro Roca, 2007. "Incomplete Markets, Heterogeneity and Macroeconomic Dynamics," NBER Working Papers 13260, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Miao, Jianjun, 2006. "Competitive equilibria of economies with a continuum of consumers and aggregate shocks," Journal of Economic Theory, Elsevier, vol. 128(1), pages 274-298, May. [Downloadable!] (restricted)
Other versions:
- Jianjun Miao, 2003. "Competitive Equilibria of Economies with a Continuum of Consumers and Aggregate Shocks," Macroeconomics 0310001, EconWPA. [Downloadable!]
Den Haan, Wouter J., 1997. "Solving Dynamic Models With Aggregate Shocks And Heterogeneous Agents," Macroeconomic Dynamics, Cambridge University Press, vol. 1(02), pages 355-386, June. [Downloadable!]
Christiano, Lawrence J. & Fisher, Jonas D. M., 2000. "Algorithms for solving dynamic models with occasionally binding constraints," Journal of Economic Dynamics and Control, Elsevier, vol. 24(8), pages 1179-1232, July. [Downloadable!] (restricted)
Other versions:
- Lawrence J. Christiano & Jonas D. M. Fisher, 1994. "Algorithms for solving dynamic models with occasionally binding constraints," Staff Report 171, Federal Reserve Bank of Minneapolis. [Downloadable!]
- Lawrence J. Christiano & Jonas D.M. Fisher, 1997. "Algorithms for Solving Dynamic Models with Occasionally Binding Constraints," NBER Technical Working Papers 0218, National Bureau of Economic Research, Inc.
- Lawrence J. Christiano & Jonas D.M. Fisher, 1997. "Algorithms for solving dynamic models with occasionally binding constraints," Working Paper Series, Macroeconomic Issues WP-97-15, Federal Reserve Bank of Chicago.
- Lawrence J. Christiano & Jonas D.M. Fisher, 1997. "Algorithms for solving dynamic models with occasionally binding constraints," Working Paper 9711, Federal Reserve Bank of Cleveland. [Downloadable!]
- Lawrence J. Christiano & Jonas D.M. Fisher, 1994. "Algorithms for solving dynamic models with occasionally binding constraints," Working Paper Series, Macroeconomic Issues 94-6, Federal Reserve Bank of Chicago.
den Haan, Wouter J & Marcet, Albert, 1990. "Solving the Stochastic Growth Model by Parameterizing Expectations," Journal of Business & Economic Statistics, American Statistical Association, vol. 8(1), pages 31-34, January.
Other versions:
- Wouter Denhaan & Albert Marcet, 1990. "FORTRAN code for Simulation Parameterized Expecations Algorithm," QM&RBC Codes 57, Quantitative Macroeconomics & Real Business Cycles. [Downloadable!]
Judd, Kenneth L., 1992. "Projection methods for solving aggregate growth models," Journal of Economic Theory, Elsevier, vol. 58(2), pages 410-452, December. [Downloadable!] (restricted)
Other versions:
- Judd, K.L., 1992. "Projection Methods for Saving Aggregate Growth Models," Papers e-92-7, Stanford - Hoover Institution.
repec:cup:macdyn:v:1:y:1997:i:2:p:355-86 is not listed on IDEAS
Michael Reiter, 2006. "Solving Heterogeneous-Agent Models by Projection and Perturbation," Economics Working Papers 972, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
Krueger, Dirk & Kubler, Felix, 2004. "Computing equilibrium in OLG models with stochastic production," Journal of Economic Dynamics and Control, Elsevier, vol. 28(7), pages 1411-1436, April. [Downloadable!] (restricted)
Eric R Young, 2005. "Approximate Aggregation," Computing in Economics and Finance 2005 141, Society for Computational Economics. [Downloadable!]
Other versions:
- Eric Young, 2002. "Code for "Approximate Aggregation"," QM&RBC Codes 149, Quantitative Macroeconomics & Real Business Cycles, revised Apr 2005. [Downloadable!]
Marcelo L. Veracierto, 2002. "Plant-Level Irreversible Investment and Equilibrium Business Cycles," American Economic Review, American Economic Association, vol. 92(1), pages 181-197, March. [Downloadable!]
Other versions:
- Marcelo Veracierto, 1998. "Plant level irreversible investment and equilibrium business cycles," Working Paper Series WP-98-1, Federal Reserve Bank of Chicago. [Downloadable!]
- Marcelo Veracierto, 1997. "Plant level irreversible investment and equilibrium business cycles," Discussion Paper / Institute for Empirical Macroeconomics 115, Federal Reserve Bank of Minneapolis. [Downloadable!]
Jose-Victor Rios-Rull, 1997. "Computation of equilibria in heterogeneous agent models," Staff Report 231, Federal Reserve Bank of Minneapolis. [Downloadable!]

Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

Francisco Covas & Wouter J. den Haan, 2006. "The Role of Debt and Equity Finance over the Business Cycle," Working Papers 06-45, Bank of Canada. [Downloadable!]
Other versions:
- Francisco Covas & Wouter Denhaan, 2006. "The role of debt and equity finance over the business cycle," 2006 Meeting Papers 407, Society for Economic Dynamics. [Downloadable!]
- Covas, Francisco & Den Haan, Wouter, 2007. "The Role of Debt and Equity Finance over the Business Cycle," CEPR Discussion Papers 6145, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
Michael Reiter, 2006. "Solving Heterogeneous-Agent Models by Projection and Perturbation," Economics Working Papers 972, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]

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