Useful results for the simulation of non-optimal economies with heterogeneous agents

Damian Pierri

UC3M Working papers. Economics from Universidad Carlos III de Madrid. Departamento de Economía

Abstract: This paper deals with infinite horizon non-optimal economies with aggregate uncertainty and a finite number of heterogeneous agents. It derives sufficient conditions for the existence of a recursive structure,an ergodic, a stationary, and a non-stationary equilibria. It also gives an answer to the following question: is it possible to derive a general framework which guarantees that numerical simulations truly reflect the behavior of endogenous variables in the model? We provide sufficient conditions to give an affirmative answer to this question for endowment economies with incomplete markets and uncountable exogenous shocks. These conditions guarantee the ergodicity of the process and hold for a particular selection mechanism. For economies with finitely many shocks or for an arbitrary selection in economies with uncountable shocks, it is only possible to show that a computable, time independent and recursive representation generates a stationary Markov process. The results in this paper suggest that often a well defined stochastic steady state in heterogenous agent models is sensitive to the initial conditions of the economy; a fact which imply that heterogeneity may have irreversible long-lasting effects.

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)
Date: 2021-09-07
New Economics Papers: this item is included in nep-cmp, nep-dge, nep-isf and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Working Paper: Useful Results for the Simulation of Non-Optimal Economies with Heterogeneous Agents (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:cte:werepe:33246

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