Structural Reinforcement Learning for Heterogeneous Agent Macroeconomics

Yucheng Yang, Chiyuan Wang, Andreas Schaab and Benjamin Moll
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Yucheng Yang: University of Zurich; Swiss Finance Institute
Chiyuan Wang: Peking University
Andreas Schaab: University of California, Berkeley
Benjamin Moll: London School of Economics & Political Science (LSE)

No 25-109, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: We present a new approach to formulating and solving heterogeneous agent models with aggregate risk. We replace the cross-sectional distribution with low-dimensional prices as state variables and let agents learn equilibrium price dynamics directly from simulated paths. To do so, we introduce a structural reinforcement learning (SRL) method which treats prices via simulation while exploiting agents’ structural knowledge of their own individual dynamics. Our SRL method yields a general and highly efficient global solution method for heterogeneous agent models that sidesteps the Master equation and handles models traditional methods struggle with, like those with nontrivial market-clearing conditions. We illustrate the approach in the Krusell-Smith model, the Huggett model with aggregate shocks, and a HANK model with a forward-looking Phillips curve, all of which we solve globally within minutes.

Pages: 51 pages
Date: 2025-12
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp25109

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