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

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Abstract

A new algorithm is developed to solve models with heterogeneous agents and aggregate uncertainty that avoids some disadvantages of the prevailing algorithm that strongly relies on simulation techniques and is easier to implement than existing algorithms. A key aspect of the algorithm is a new procedure that parameterizes the cross-sectional distribution, which makes it possible to avoid Monte Carlo integration. The paper also develops a new simulation procedure that not only avoids cross-sectional sampling variation but is also more than ten times faster than the standard procedure of simulating an economy with a large but finite number of agents. This procedure can help to improve the efficiency of the most popular algorithm in which simulation procedures play a key role.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6062.

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Date of creation: Jan 2007
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Handle: RePEc:cpr:ceprdp:6062

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Article
- Algan, Yann & Allais, Olivier & Den Haan, Wouter J., 2008. "Solving heterogeneous-agent models with parameterized cross-sectional distributions," Journal of Economic Dynamics and Control, Elsevier, vol. 32(3), pages 875-908, March. [Downloadable!] (restricted)
Paper
- 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!]

Find related papers by JEL classification:
C63 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Computational Techniques
D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets

This paper has been announced in the following NEP Reports:

NEP-ALL-2007-01-28 (All new papers)
NEP-CMP-2007-01-28 (Computational Economics)
NEP-DGE-2007-01-28 (Dynamic General Equilibrium)

References listed on IDEAS
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Other versions:
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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.)

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)
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!]
- 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!]
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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