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Solving the incomplete markets model with aggregate uncertainty using the Krusell-Smith algorithm and non-stochastic simulations

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Listed author(s):
  • Young, Eric R.

Abstract

This article describes the approach to computing the version of the stochastic growth model with idiosyncratic and aggregate risk that relies on collapsing the aggregate state space down to a small number of moments used to forecast future prices. One innovation relative to most of the literature is the use of a non-stochastic simulation routine.

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File URL: http://www.sciencedirect.com/science/article/pii/S0165-1889(09)00131-6
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Article provided by Elsevier in its journal Journal of Economic Dynamics and Control.

Volume (Year): 34 (2010)
Issue (Month): 1 (January)
Pages: 36-41

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Handle: RePEc:eee:dyncon:v:34:y:2010:i:1:p:36-41
Contact details of provider: Web page: http://www.elsevier.com/locate/jedc

Keywords: Idiosyncratic risk Business cycles Numerical methods;

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  1. 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.
  2. Krusell, Per & Smith, Anthony A., 1997. "Income And Wealth Heterogeneity, Portfolio Choice, And Equilibrium Asset Returns," Macroeconomic Dynamics, Cambridge University Press, vol. 1(02), pages 387-422, June.
  3. S. Rao Aiyagari, 1994. "Uninsured Idiosyncratic Risk and Aggregate Saving," The Quarterly Journal of Economics, Oxford University Press, vol. 109(3), pages 659-684.
  4. Carroll, Christopher D., 2006. "The method of endogenous gridpoints for solving dynamic stochastic optimization problems," Economics Letters, Elsevier, vol. 91(3), pages 312-320, June.
  5. Albert Marcet & David A. Marshall, 1994. "Solving nonlinear rational expectations models by parameterized expectations: convergence to stationary solutions," Discussion Paper / Institute for Empirical Macroeconomics 91, Federal Reserve Bank of Minneapolis.
  6. Eric R Young, 2005. "Approximate Aggregation," Computing in Economics and Finance 2005 141, Society for Computational Economics.
  7. 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.
  8. 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.
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