Computing Equilibria in Dynamic Models with Occasionally Binding Constraints

Michael Grill and Johannes Brumm
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Michael Grill: Mannheim University
Johannes Brumm: Mannheim University

No 695, 2010 Meeting Papers from Society for Economic Dynamics

Abstract: We embed it into a time iteration algorithm to compute recursive equilibria in an infinite horizon endowment economy where heterogeneous agents trade in various assets subject to collateral constraints and short sale constraints. We show that adaptive simplicial interpolation computes equilibria accurately in terms of Euler equation errors and outperforms equidistant grid schemes by far.

Date: 2010
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