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Solving General Equilibrium Models with Incomplete Markets and Many Assets

Martin Evans () and Viktoria Hnatkovska ()

No 318, NBER Technical Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper presents a new numerical method for solving general equilibrium models with many assets. The method can be applied to models where there are heterogeneous agents, time-varying investment opportunity sets, and incomplete markets. It also can be used to study models where the equilibrium dynamics are non-stationary. We illustrate how the method is used by solving a one-- and two-sector versions of a two--country general equilibrium model with production. We check the accuracy of our method by comparing the numerical solution to the one-sector model against its known analytic properties. We then apply the method to the two-sector model where no analytic solution is available.

JEL-codes: C68 D52 G11 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec and nep-fin
Date: 2005-10
Note: TWP
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