Applying the Explicit Aggregation Algorithm to Heterogeneous Macro Models

Takeki Sunakawa

Computational Economics, 2020, vol. 55, issue 3, No 5, 845-874

Abstract: Abstract This paper applies the explicit aggregation (Xpa) algorithm developed by den Haan and Rendahl (J Econ Dyn Control 34:69–78, 2010) to the heterogeneous-firm models of Khan and Thomas (J Monet Econ 50:331–360, 2003; Econometrica 76:395–436, 2008) and the heterogeneous-household models of Krueger et al. (in: Taylor, Uhlig (eds) Handbook of macroeconomics, vol 2. Elsevier, Amsterdam, pp 843–921, 2016). We find the Xpa algorithm is an order of magnitude faster for solving these models than the standard Krusell–Smith (KS) algorithm because it does not need to simulate the distribution of individual capital and productivity when updating the aggregate forecasting rules. However, the simulation results in the Xpa and KS algorithms in terms of both the micro- and macro-level moments are almost identical, even in levels, because of bias correction. The Xpa algorithm also exhibits accuracy comparable with the KS algorithm.

Keywords: Projection methods; Heterogeneous agents; Explicit aggregation (search for similar items in EconPapers)
JEL-codes: C63 D52 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://link.springer.com/10.1007/s10614-019-09914-x Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
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:kap:compec:v:55:y:2020:i:3:d:10.1007_s10614-019-09914-x

Ordering information: This journal article can be ordered from
http://www.springer. ... ry/journal/10614/PS2

DOI: 10.1007/s10614-019-09914-x

Access Statistics for this article

Computational Economics is currently edited by Hans Amman

More articles in Computational Economics from Springer, Society for Computational Economics Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().