Solving General Equilibrium Models with Incomplete Markets and Many Assets
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 two 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.
Year of publication: |
2005-05-18
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Institutions: | Georgetown University, Department of Economics |
Subject: | Portfolio Choice | Perturbation Methods | Incomplete Markets | Asset Prices |
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