Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5098999 | Journal of Economic Dynamics and Control | 2010 | 8 Pages |
Abstract
This paper describes a method to solve models with a continuum of agents, incomplete markets and aggregate uncertainty. I use backward induction on a finite grid of points in the aggregate state space. The aggregate state includes a small number of statistics (moments) of the cross-sectional distribution of capital. For any given set of moments, agents use a specific cross-sectional distribution, called “proxy distribution”, to compute the equilibrium. Information from the steady state distribution as well as from simulations can be used to chose a suitable proxy distribution.
Related Topics
Physical Sciences and Engineering
Mathematics
Control and Optimization
Authors
Michael Reiter,