Aggregating Heterogeneous-Agent Models with Permanent Income Shocks

Karl Harmenberg

No 13-2020, Working Papers from Copenhagen Business School, Department of Economics

Abstract: I introduce a method for simulating aggregate dynamics of heterogeneous-agent models where log permanent income follows a random walk. The idea is to simulate the model using a counterfactual permanent-income-neutral measure which incorporates the effect that permanent income shocks have on macroeconomic aggregates. With the permanent-income-neutral measure, one does not need to keep track of the permanent-income distribution. The permanent-income-neutral measure is both useful for the analytical characterization of aggregate consumption-savings behavior and for simulating numerical models. Furthermore, it is trivial to implement with a few lines of code.

Keywords: Permanent income; Consumption; Simulation (search for similar items in EconPapers)
JEL-codes: C63 E21 E27 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2020-09-21
New Economics Papers: this item is included in nep-cmp, nep-dge and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10398/1f58f54e-b8a2-4795-b445-b121a43e7dd7 Full text (application/pdf)
Full text not avaiable

Related works:
Journal Article: Aggregating heterogeneous-agent models with permanent income shocks (2021)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hhs:cbsnow:2020_013

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Working Papers from Copenhagen Business School, Department of Economics Copenhagen Business School, Department of Economics, Porcelaenshaven 16 A. 1.floor, DK-2000 Frederiksberg, Denmark. Contact information at EDIRC.
Bibliographic data for series maintained by CBS Library Research Registration Team ().