Simulations in Models with Heterogeneous Agents, Incomplete Markets and Aggregate Uncertainty

Damian Pierri

No 259, Working Papers from Red Nacional de Investigadores en Economía (RedNIE)

Abstract: This paper present conditions to guarantee the convergence of simulations to a stochastic steady state, characterized by an invariant probability distribution, in an endowment economy with a finite number of heterogeneous agents, aggregate uncertainty and uncountable shocks. The results are robust to the presence of multiple discontinuous equilibria and do not require ad-hoc convexification techniques, like "sunspots". Thus, our results are numerically implementable. We work on a Markov environment with an enlarged state space, applied to an incomplete markets model, to characterize ergodic equilibria and differentiate them with respect to time-independent, and stationary ones. We show that, by imposing a mild restriction on the discontinuity set, every measurable time-independent selection can be used to approximate the stochastic steady state of the model. Considering the common practice of clustering agents according to, for instance, deciles of the wealth and assuming uncountable income shocks, the results in this paper can help to design calibration and estimation methods for heterogeneous agent models based on unconditional moments.

Keywords: non-optimal economies; Markov equilibrium; heterogeneous agents; simulations (search for similar items in EconPapers)
JEL-codes: C63 C68 D52 D58 (search for similar items in EconPapers)
Pages: 81 pages
Date: 2023-07
New Economics Papers: this item is included in nep-cmp and nep-dge
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://rednie.eco.unc.edu.ar/files/DT/259.pdf (application/pdf)

Related works:
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:aoz:wpaper:259

Access Statistics for this paper

More papers in Working Papers from Red Nacional de Investigadores en Economía (RedNIE) Contact information at EDIRC.
Bibliographic data for series maintained by Laura Inés D Amato ().