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The method of endogenous gridpoints with occasionally binding constraints among endogenous variables

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  • Hintermaier, Thomas
  • Koeniger, Winfried

Abstract

We show how the method of endogenous gridpoints can be extended to solve models with occasionally binding constraints among endogenous variables very efficiently. We present the method for a consumer problem with occasionally binding collateral constraints and non-separable utility in durable and non-durable consumption. This problem allows for a joint analysis of durable and non-durable consumption in models with uninsurable income risk which is important to understand patterns of consumption, saving and collateralized debt. We illustrate the algorithm and its efficiency by calibrating the model to US data.

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Bibliographic Info

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

Volume (Year): 34 (2010)
Issue (Month): 10 (October)
Pages: 2074-2088

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Handle: RePEc:eee:dyncon:v:34:y:2010:i:10:p:2074-2088

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Web page: http://www.elsevier.com/locate/jedc

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Keywords: Endogenous gridpoints method Occasionally binding constraints Collateralized debt Durables;

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References

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Citations

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Cited by:
  1. Lütticke, Ralph & Bayer, Christian & Pham, Lien & Tjaden, Volker, 2013. "Household Income Risk, Nominal Frictions, and Incomplete Markets," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79868, Verein für Socialpolitik / German Economic Association.
  2. Winfried Koeniger & Thomas Hintermaier, 2012. "Collateral constraints and macroeconomic volatility," 2012 Meeting Papers 390, Society for Economic Dynamics.
  3. Giulio Fella, 2014. "A generalized endogenous grid method for non-smooth and non-concave problems," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 17(2), pages 329-344, April.
  4. Trimborn, Timo, 2013. "Solution of continuous-time dynamic models with inequality constraints," Economics Letters, Elsevier, vol. 119(3), pages 299-301.
  5. Giulio Fella, 2011. "A generalized endogenous grid method for non-concave problems," 2011 Meeting Papers 1232, Society for Economic Dynamics.
  6. Guido Lorenzoni & Veronica Guerrieri, 2011. "Credit Crises, Precautionary Savings and the Liquidity Trap," 2011 Meeting Papers 1414, Society for Economic Dynamics.
  7. Daniel Harenberg & Alexander Ludwig, 2014. "Social Security and the Interactions Between Aggregate and Idiosyncratic Risk," CER-ETH Economics working paper series 14/193, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
  8. Thomas Hintermaier & Winfried Koeniger, 2009. "Debt Portfolios," Working Papers 646, Queen Mary, University of London, School of Economics and Finance.
  9. Ludwig, Alexander & Schön, Matthias, 2013. "Endogenous Grids in Higher Dimensions: Delaunay Interpolation and Hybrid Methods," MEA discussion paper series 13274, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
  10. Christoph Görtz & Afrasiab Mirza, 2014. "On the Applicability of Global Approximation Methods for Models with Jump Discontinuities in Policy Functions," CESifo Working Paper Series 4837, CESifo Group Munich.
  11. Brumm, Johannes & Grill, Michael, 2014. "Computing equilibria in dynamic models with occasionally binding constraints," Journal of Economic Dynamics and Control, Elsevier, vol. 38(C), pages 142-160.

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