Solving General Equilibrium Models with Incomplete Markets and Many Assets

Martin D. D. Evans (Georgetown University) and Viktoria Hnatkovska (Georgetown University) ()
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Martin D. D. Evans (Georgetown University) and Viktoria Hnatkovska (Georgetown University): Department of Economics, Georgetown University, http://www9.georgetown.edu/faculty/evansm1/
Authors registered in the RePEc Author Service: Martin Evans () and Viktoria V. Hnatkovska ()

Working Papers from Georgetown University, Department of Economics

Abstract: This paper presents a new numerical method for solving general equilibrium models with many assets. The method can be applied to models where there are heterogeneous agents, time-varying investment opportunity sets, and incomplete markets. It also can be used to study models where the equilibrium dynamics are non-stationary. We illustrate how the method is used by solving a one— and two-sector versions of a two—country general equilibrium model with production. We check the accuracy of our method by comparing the numerical solution to the one-sector model against its known analytic properties. We then apply the method to the two-sector model where no analytic solution is available. Classification-JEL Codes: C68; D52; G11.

Keywords: Portfolio Choice; Perturbation Methods; Incomplete Markets; Asset Prices. (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cfn, nep-cmp, nep-dge, nep-fin and nep-fmk
Date: 2005-05-18
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Working Paper: Solving General Equilibrium Models with Incomplete Markets and Many Assets (2005)
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