Solving discrete time heterogeneous agent models with aggregate risk and many idiosyncratic states by perturbation
This paper describes a method for solving heterogeneous agent models with aggregate risk and many idiosyncratic states formulated in discrete time. It extends the method proposed by Reiter (2009) and complements recent work by Ahn, Kaplan, Moll, Winberry, and Wolf (2017) on how to solve such models in continuous time. We suggest first solving for the stationary equilibrium of the model without aggregate risk. We then write the functionals that describe the dynamic equilibrium as sparse expansions around their stationary equilibrium counterparts. Finally, we use the perturbation method of Schmitt‐Grohé and Uribe (2004) to approximate the aggregate dynamics of the model.
Year of publication: |
2020
|
---|---|
Authors: | Bayer, Christian ; Luetticke, Ralph |
Published in: |
Quantitative Economics. - The Econometric Society, ISSN 1759-7323, ZDB-ID 2569569-1. - Vol. 11.2020, 4, p. 1253-1288
|
Publisher: |
The Econometric Society |
Saved in:
Online Resource
Saved in favorites
Similar items by person
-
Bayer, Christian, (2019)
-
An endogenous gridpoint method for distributional dynamics
Bayer, Christian, (2024)
-
Shocks, Frictions, and Inequality in US Business Cycles
Bayer, Christian, (2020)
- More ...