Comparison of Solutions to the Incomplete Markets Model with Aggregate Uncertainty

Wouter Den Haan
Authors registered in the RePEc Author Service: Wouter Denhaan ()

No 7019, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper compares numerical solutions to the model of Krusell and Smith (1998) generated by different numerical algorithms. The algorithms have very similar implications for the correlations between different variables. Larger differences are observed for (i) the unconditional means and standard deviations of individual variables, (ii) the behavior of individual agents during particularly bad times, (iii) the volatility of the per capita capital stock, and (iv) the behavior of the higher-order moments of the cross-sectional distribution. For example, the two algorithms that differ the most from each other generate individual consumption series that have an average (maximum) difference of 1.6% (11.4%). Several outcomes of this comparison project should be useful in using these and other algorithms in future work.

Keywords: Approximations; Numerical solutions (search for similar items in EconPapers)
JEL-codes: C63 (search for similar items in EconPapers)
Date: 2008-10
New Economics Papers: this item is included in nep-cmp
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Citations: View citations in EconPapers (2)

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Journal Article: Comparison of solutions to the incomplete markets model with aggregate uncertainty (2010)
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