We propose a general simulation-based procedure for estimating the quality of approximate policies in heterogeneous-agent equilibrium models, which allows verification that such approximate solutions describe a near-rational equilibrium. Our procedure endows agents with superior knowledge of the...

We propose a simulation-based procedure for evaluating approximation accuracy of numerical solutions of general equilibrium models with heterogeneous agents. We measure the approximation accuracy by the magnitude of the welfare loss suffered by agents from following sub-optimal policies. Our...

We propose a general simulation-based procedure for estimating the quality of approximate policies in heterogeneous-agent equilibrium models, which allows verification that such approximate solutions describe a near-rational equilibrium. Our procedure endows agents with superior knowledge of the...

We propose a general simulation-based procedure for estimating the quality of approximate policies in heterogeneous-agent equilibrium models, which allows verification that such approximate solutions describe a near-rational equilibrium. Our procedure endows agents with superior knowledge of the...

We propose a general simulation-based procedure for estimating quality of approximate policies in heterogeneous-agent equilibrium models, which allows to verify that such approximate solutions describe a near-rational equilibrium. Our procedure endows agents with superior knowledge of the future...

We document a new stylized fact regarding the term-structure of futures volatility. We show that the relationship between the volatility of futures prices and the slope of the term structure of prices is non-monotone and has a \V-shape". This aspect of the data cannot be generated by basic...

Milton Friedman argued that irrational traders will consistently lose money, won't survive and, therefore, cannot influence long run equilibrium asset prices. Since his work, survival and price influence have been assumed to be the same. Often partial equilibrium analysis has been relied upon to...

We present a theory in which limited risk sharing of idiosyncratic labor income risk plays a key role in determining the dynamics of interest rates. Our production-based model relates the crosssectional distribution of labor income risk to observable aggregate labor market variables. Our model...

Ljungqvist and Sargent (2017) (LS) show that unemployment fluctuations can be understood in terms of a quantity they call the "fundamental surplus." However, their analysis ignores risk premia, a force that Hall (2017) shows is important in understanding unemployment fluctuations. We show how...

We provide firm-level evidence that Federal Open Market Committee announcements have real effects by changing expectations of firm profitability. We use an existing decomposition of a monetary policy shock into a central bank information component (CBI) and a conventional monetary component...