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Numerical Simulation of Nonoptimal Dynamic Equilibrium Models

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  • Zhigang Feng

    ()
    (Department of Economics, University of Miami)

  • Jianjun Miao

    ()
    (Department of Economics, Boston University)

  • Adrian Peralta-Alva

    ()
    (Research Division, Federal Reserve Bank of Saint Louis)

  • Manual Santos

    ()
    (Department of Economics, University of Miami)

Abstract

In this paper we present a recursive method for the computation of dynamic competitive equilibria in models with heterogeneous agents and market frictions. This method is based upon a convergent operator over an expanded set of state variables. The fixed point of this operator defines the set of all Markovian equilibria. We study approximation properties of the operator as well as the convergence of the moments of simulated sample paths. We apply our numerical algorithm to two growth models, an overlapping generations economy with money, and an asset pricing model with financial frictions.

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File URL: http://www.bus.miami.edu/_assets/files/faculty-and-research/academic-departments/eco/eco-working-papers/wp2009-12-numerical-apsfeb28-09.pdf
File Function: First version, 2009
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Bibliographic Info

Paper provided by University of Miami, Department of Economics in its series Working Papers with number 0912.

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Length: 49 pages
Date of creation: 28 Feb 2009
Date of revision:
Publication status: Forthcoming: Under Review
Handle: RePEc:mia:wpaper:0912

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Keywords: Heterogeneous agents; taxes; externalities; financial frictions; competitive equilibrium; computation; simulation;

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Citations

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Cited by:
  1. Adrian Peralta - Alva & Manuel S. Santos, 2009. "Problems in the Numerical Simulation of Models with Heterogeneous Agents and Economic Distortions," Working Papers 2010-14, University of Miami, Department of Economics.
  2. Yi Wen & Huabin Wu, 2011. "Dynamics of externalities: a second-order perspective," Review, Federal Reserve Bank of St. Louis, issue May, pages 187-206.
  3. Crettez, Bertrand & Morhaim, Lisa, 2012. "Existence of competitive equilibrium in a non-optimal one-sector economy without conditions on the distorted marginal product of capital," Mathematical Social Sciences, Elsevier, vol. 63(3), pages 197-206.
  4. Felix Kubler & Johannes Brumm, 2013. "Applying Negishi's method to stochastic models with overlapping generations," 2013 Meeting Papers 1352, Society for Economic Dynamics.
  5. Manuel S. Santos & Adrian Peralta-Alva, 2012. "Analysis of Numerical Errors," Working Papers 2012-6, University of Miami, Department of Economics.
  6. Balbus, Łukasz & Reffett, Kevin & Woźny, Łukasz, 2012. "Stationary Markovian equilibrium in altruistic stochastic OLG models with limited commitment," Journal of Mathematical Economics, Elsevier, vol. 48(2), pages 115-132.
  7. Jaime McGovern & Olivier Morand & Kevin Reffett, 2013. "Computing minimal state space recursive equilibrium in OLG models with stochastic production," Economic Theory, Springer, vol. 54(3), pages 623-674, November.
  8. Thomas Mertens, 2012. "Solving General Incomplete Market Models with Substantial Heterogeneity," 2012 Meeting Papers 1173, Society for Economic Dynamics.
  9. Zhigang Feng, 2013. "Tackling indeterminacy in overlapping generations models," Computational Statistics, Springer, vol. 77(3), pages 445-457, June.
  10. Winfried Koeniger & Thomas Hintermaier, 2012. "Collateral constraints and macroeconomic volatility," 2012 Meeting Papers 390, Society for Economic Dynamics.
  11. Balbus, Łukasz & Reffett, Kevin & Woźny, Łukasz, 2013. "A constructive geometrical approach to the uniqueness of Markov stationary equilibrium in stochastic games of intergenerational altruism," Journal of Economic Dynamics and Control, Elsevier, vol. 37(5), pages 1019-1039.

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