Solving heterogeneous-agent models by projection and perturbation

Michael Reiter

Journal of Economic Dynamics and Control, 2009, vol. 33, issue 3, 649-665

Abstract: The paper proposes a numerical solution method for general equilibrium models with a continuum of heterogeneous agents that combines elements of projection and of perturbation methods. The basic idea is to solve first for the stationary solution of the model, without aggregate shocks but with fully specified idiosyncratic shocks. Afterwards one computes a first-order perturbation of the solution in the aggregate shocks. This approach allows to include a high-dimensional representation of the cross-sectional distribution in the state vector. The method is applied to a model of household saving with uninsurable income risk and liquidity constraints. Techniques are discussed to reduce the dimension of the state space such that higher order perturbations are feasible.

Keywords: Heterogeneous; agents; Projection; methods; Perturbation; methods; Invariant; distribution (search for similar items in EconPapers)
Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (184)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0165-1889(08)00152-8
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Solving heterogeneous-agent models by projection and perturbation (2006)
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:eee:dyncon:v:33:y:2009:i:3:p:649-665

Access Statistics for this article

Journal of Economic Dynamics and Control is currently edited by J. Bullard, C. Chiarella, H. Dawid, C. H. Hommes, P. Klein and C. Otrok

More articles in Journal of Economic Dynamics and Control from Elsevier
Bibliographic data for series maintained by Catherine Liu ().