Solving heterogenous-agent models with parameterized cross-sectional distributions
| Authors |
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| Publication date | 2008 |
| Journal | Journal of Economic Dynamics & Control |
| Volume | Issue number | 32 | 3 |
| Pages (from-to) | 875-908 |
| Number of pages | 34 |
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| Abstract |
A new algorithm is developed to solve models with heterogeneous agents and aggregate uncertainty. Projection methods are the main building blocks of the algorithm and - in contrast to the most popular solution procedure - simulations only play a very minor role. The paper also develops a new simulation procedure that not only avoids cross-sectional sampling variation but is 10 (66) times faster than simulating an economy with 10,000 (100,000) agents. Because it avoids cross-sectional sampling variation, it can generate an accurate representation of the whole cross-sectional distribution. Finally, the paper outlines a set of accuracy tests.
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| Document type | Article |
| Published at | https://doi.org/10.1016/j.jedc.2007.03.007 |
| Downloads |
Final peer-reviewed manuscript (post-print)
(Accepted author manuscript)
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