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Estimating Nonlinear Heterogeneous Agents Models with Neural Networks

Author

Listed:
  • Kase, Hanno
  • Melosi, Leonardo
  • Rottner, Matthias

Abstract

We leverage recent advancements in machine learning to develop an integrated method to solve globally and estimate models featuring agent heterogeneity, nonlinear constraints, and aggregate uncertainty. Using simulated data, we show that the proposed method accurately estimates the parameters of a nonlinear Heterogeneous Agent New Keynesian (HANK) model with a zero lower bound (ZLB) constraint. We further apply our method to estimate this HANK model using U.S. data. In the estimated model, the interaction between the ZLB constraint and idiosyncratic income risks emerges as a key source of aggregate output volatility.

Suggested Citation

  • Kase, Hanno & Melosi, Leonardo & Rottner, Matthias, 2022. "Estimating Nonlinear Heterogeneous Agents Models with Neural Networks," CEPR Discussion Papers 17391, Centre for Economic Policy Research.
    • Handle: RePEc:cpr:ceprdp:17391
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    Cited by:

    1. is not listed on IDEAS
    2. Sofia Velasco, 2025. "Let the Tree Decide: FABART A Non-Parametric Factor Model," Papers 2506.11551, arXiv.org.
    3. Sarah Bell & Matthieu Chavaz & Boris Hofmann & Daniel Rees & Matthias Rottner, 2026. "Evolving approaches to monetary policy communication in the face of uncertainty: fan charts, scenarios and guidance," BIS Quarterly Review, Bank for International Settlements, March.
    4. Jesús Fernández-Villaverde & Galo Nuño & Jesse Perla, 2024. "Taming the Curse of Dimensionality: Quantitative Economics with Deep Learning," NBER Working Papers 33117, National Bureau of Economic Research, Inc.
    5. Yucheng Yang & Chiyuan Wang & Andreas Schaab & Benjamin Moll, 2025. "Structural Reinforcement Learning for Heterogeneous Agent Macroeconomics," Papers 2512.18892, arXiv.org.
    6. Hanno Kase & Leonardo Melosi & Sebastian Rast & Matthias Rottner, 2026. "The perils of narrowing fiscal spaces," BIS Working Papers 1328, Bank for International Settlements.
    7. Douglas Araujo & Rafael Schmidt & Olivier Sirello & Bruno Tissot & Ricardo Villarreal, 2025. "Governance and implementation of artificial intelligence in central banks," IFC Reports 18, Bank for International Settlements.
    8. Darougheh, Saman & Faccini, Renato & Melosi, Leonardo & Villa, Alessandro T., 2024. "On-the-Job Search and Inflation under the Microscope," The Warwick Economics Research Paper Series (TWERPS) 1536, University of Warwick, Department of Economics.

    More about this item

    Keywords

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    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C45 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Neural Networks and Related Topics
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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