Doctoral course by Christian Zimmermann, University of Connecticut, at the Paris School of Economics, November 10-28, 2008
Objective
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.
Programme
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).
References
- Aiyagari, S Rao, 1994.
"Uninsured Idiosyncratic Risk and Aggregate Saving,"
The Quarterly Journal of Economics,
MIT Press, vol. 109(3), pages 659-84, August.
- Juan C. Conesa & Dirk Krueger, 1999.
"Social Security Reform with Heterogeneous Agents,"
Review of Economic Dynamics,
Elsevier for the Society for Economic Dynamics, vol. 2(4), pages 757-795, October.
- Den Haan, Wouter J, 1996.
"Heterogeneity, Aggregate Uncertainty, and the Short-Term Interest Rate,"
Journal of Business & Economic Statistics,
American Statistical Association, vol. 14(4), pages 399-411, October.
- Farmer, Roger E A, 2002.
"Business Cycles With Heterogenous Agents,"
CEPR Discussion Papers
3154.
- Hansen, Gary D & Imrohoroglu, Ayse, 1992.
"The Role of Unemployment Insurance in an Economy with Liquidity Constraints and Moral Hazard,"
Journal of Political Economy,
University of Chicago Press, vol. 100(1), pages 118-42, February.
- Hubbard, R Glenn & Skinner, Jonathan & Zeldes, Stephen P, 1995.
"Precautionary Saving and Social Insurance,"
Journal of Political Economy,
University of Chicago Press, vol. 103(2), pages 360-99, April.
- Huggett, Mark, 1993.
"The risk-free rate in heterogeneous-agent incomplete-insurance economies,"
Journal of Economic Dynamics and Control,
Elsevier, vol. 17(5-6), pages 953-969.
- Per Krusell & Jose-Victor Rios-Rull, 1997.
"On the size of U.S. government: political economy in the neoclassical growth model,"
Staff Report
234, Federal Reserve Bank of Minneapolis.
- 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.
- Pallage, Stephane & Zimmermann, Christian, 2001.
"Voting on Unemployment Insurance,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(4), pages 903-23, November.
- Rios-Rull, Jose-Victor, 1994.
"On the quantitative importance of market completeness,"
Journal of Monetary Economics,
Elsevier, vol. 34(3), pages 463-496, December.
- Rios-Rull, Jose-Victor, 1996.
"Life-Cycle Economies and Aggregate Fluctuations,"
Review of Economic Studies,
Blackwell Publishing, vol. 63(3), pages 465-89, July.
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