Block-recursive equilibria in heterogeneous-agent models

Leo Kaas

Journal of Economic Theory, 2023, vol. 212, issue C

Abstract: Equilibrium models with heterogeneous agents and aggregate uncertainty are difficult to analyze since policy functions and market prices usually depend on the cross-sectional distribution over agents' state variables which is a high-dimensional object. This paper considers a general model framework in which this curse of dimensionality does not arise because equilibrium prices are determined by market entry conditions and are independent of the cross-sectional distribution (block-recursive equilibrium). The paper first establishes existence and ergodic theorems which are useful for the theoretical analysis and numerical implementation of block-recursive equilibria. Then these results are applied to models of firm dynamics with competitive or frictional input markets and to incomplete-market economies with endogenous asset market participation.

Keywords: Block-recursive equilibrium; Dynamic general equilibrium; Heterogeneous agents (search for similar items in EconPapers)
JEL-codes: C62 D50 E32 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0022053123000856
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Block-Recursive Equilibria in Heterogenous-Agent Models (2020)
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:jetheo:v:212:y:2023:i:c:s0022053123000856

DOI: 10.1016/j.jet.2023.105689

Access Statistics for this article

Journal of Economic Theory is currently edited by A. Lizzeri and K. Shell

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