Solving DSGE portfolio choice models with dispersed private information
Cédric Tille () and
Eric van Wincoop ()
Journal of Economic Dynamics and Control, 2014, vol. 40, issue C, 1-24
Noisy rational expectations models, in which agents have dispersed private information and extract information from an endogenous asset price, are widely used in finance. However, these linear partial equilibrium models do not fit well in modern macroeconomics that is based on non-linear dynamic general equilibrium models. We develop a method for solving a DSGE model with portfolio choice and dispersed private information. We combine and extend existing local approximation methods applied to public information DSGE settings with methods for solving noisy rational expectations models in finance with dispersed private information.
Keywords: Local approximation method; Dispersed information; Private information; Noisy rational expectations model; Dynamic general equilibrium model (search for similar items in EconPapers)
JEL-codes: C60 F30 F41 G11 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:40:y:2014:i:c:p:1-24
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