Theoretical formulations of dynamic heterogeneous-agent economies typically include a distribution as an aggregate state variable. This paper introduces a method for computing equilibrium of these models by including a distribution directly as a state variable if it is finite-dimensional or a...

We study the effects of changes in uncertainty about future fiscal policy on aggregate economic activity. Fiscal deficits and public debt have risen sharply in the wake of the financial crisis. While these developments make fiscal consolidation inevitable, there is considerable uncertainty about...

We study a regime-switching recurrent bubble model with endogenous growth. The economy experiences both bubbly and bubbleless regimes recurrently. Infinitely lived households expect future bubbles, which crowds out investment and reduces economic growth. Because realized bubbles crowd in...