Doctoral course by Christian Zimmermann, University of Connecticut, at the Paris School of Economics, November 10-28, 2008


The objective of this short is to acquaint students with heterogenous agent dynamic general equilibrium models so that they can understand seminars or papers using them, in particular modelling choices that need to be made and challenges in the computation of equilibria. It will thus cover some fundamentals and show several examples. In particular, students will have the opportunity to see some of the codes used to solve such models. This also lays the foundation of independent research using such models.


The course is structured here as 10 lessons of 1h15 each. Depending on the exact scheduling and progress made in class, some lessons may end up being grouped or relocated. In other words, this is a prelimiary programme.

Lesson 1: Preliminaries
Presentations. The contribution of real business cycle models to macroeconomics.

Lesson 2: Moving beyond cycles
Limits of the representative agent. Rios-Rull (1994).

Lesson 3: Incomplete markets (theory)
Debreu markets. Arrow markets. Arrow-Debreu.

Lesson 4: Incomplete markets (applied theory)
Aiyagari (1994). Huggett (1993).

Lesson 5: The concept of equilibrium with incomplete markets

Lesson 6: Application: unemployment insurance
Hansen-Imrohoroglu (1992). The importance of welfare criteria: Pallage-Zimmermann (2001).

Lesson 7: Solving a heterogeneous agent model
Hansen-Imrohoroglu (1992) with Matlab.

Lesson 8: Life-cycle economies
Rios-Rull (1996).

Lesson 9: Heterogeneous agents with aggregate shocks
Krusell-Smith (1998). Solving it in Fortran

Lesson 10: Heterogeneous agents with aggregate shocks
Other solution methods: Farmer (2002), Den Haan (1996). Zimmermann (2009).