Optimal Policies with Heterogeneous Agents: Truncation and Transitions

Xavier Ragot and François Legrand
Additional contact information
François Legrand: ESC [Rennes] - ESC Rennes School of Business

Post-Print from HAL

Abstract: We compare two approaches in their ability to solve for optimal Ramsey policies in heterogeneous-agent models, considering the optimal provision of a public good. First, the "transition" approach makes the problem tractable by assuming a constant path for the planner's instruments. Second, the "truncation" approach uses a Lagrangian technique, solving the Ramsey problem of a finite state space model that approximates the full model. The truncation approach is shown to compute quantitatively accurate estimates of the actual values of the planner's instruments, whereas a time-inconsistency issue is found to affect the transition approach.

Keywords: Heterogeneous agents optimal Ramsey program transition approach truncation approach aggregate shock D31 D52 E21; Heterogeneous agents; optimal Ramsey program; transition approach; truncation approach; aggregate shock D31; D52; E21 (search for similar items in EconPapers)
Date: 2023-12-31
New Economics Papers: this item is included in nep-dge
Note: View the original document on HAL open archive server: https://hal.science/hal-04384031
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published in Journal of Economic Dynamics and Control, 2023, 156, ⟨10.1016/j.jedc.2023.104737⟩

Downloads: (external link)
https://hal.science/hal-04384031/document (application/pdf)

Related works:
Journal Article: Optimal policies with heterogeneous agents: Truncation and transitions (2023)
Working Paper: Optimal Policies with Heterogeneous Agents: Truncation and Transitions (2023)
Working Paper: Optimal Policies with Heterogeneous Agents: Truncation and Transitions (2023)
Working Paper: Optimal Policies with Heterogeneous Agents: Truncation and Transitions (2023)
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:hal:journl:hal-04384031

DOI: 10.1016/j.jedc.2023.104737

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().