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Computation of Equilibria in OLG Models with Many Heterogeneous Households

  • Sebastian Rausch


  • Thomas Rutherford

This paper develops a decomposition algorithm by which a market economy with many households may be solved through the computation of equilibria for a sequence of representative agent economies. The paper examines local and global convergence properties of the sequential recalibration (SR) algorithm. SR is then demonstrated to efficiently solve Auerbach- Kotlikoff OLG models with a large number of heterogeneous households. We approximate equilibria in OLG models by solving a sequence of related Ramsey optimal growth problems. This approach can provide improvements in both efficiency and robustness as compared with simultaneous solution methods.

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Article provided by Society for Computational Economics in its journal Computational Economics.

Volume (Year): 36 (2010)
Issue (Month): 2 (August)
Pages: 171-189

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Handle: RePEc:kap:compec:v:36:y:2010:i:2:p:171-189
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