Using the Sequence‐Space Jacobian to Solve and Estimate Heterogeneous‐Agent Models

Adrien Auclert, Bence Bardóczy, Matthew Rognlie and Ludwig Straub

Econometrica, 2021, vol. 89, issue 5, 2375-2408

Abstract: We propose a general and highly efficient method for solving and estimating general equilibrium heterogeneous‐agent models with aggregate shocks in discrete time. Our approach relies on the rapid computation of sequence‐space Jacobians—the derivatives of perfect‐foresight equilibrium mappings between aggregate sequences around the steady state. Our main contribution is a fast algorithm for calculating Jacobians for a large class of heterogeneous‐agent problems. We combine this algorithm with a systematic approach to composing and inverting Jacobians to solve for general equilibrium impulse responses. We obtain a rapid procedure for likelihood‐based estimation and computation of nonlinear perfect‐foresight transitions. We apply our methods to three canonical heterogeneous‐agent models: a neoclassical model, a New Keynesian model with one asset, and a New Keynesian model with two assets.

Date: 2021
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Citations: View citations in EconPapers (48)

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https://doi.org/10.3982/ECTA17434

Related works:
Working Paper: Using the Sequence-Space Jacobian to Solve and Estimate Heterogeneous-Agent Models (2019)
Working Paper: Using the Sequence-Space Jacobian to Solve and Estimate Heterogeneous-Agent Models (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:wly:emetrp:v:89:y:2021:i:5:p:2375-2408

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