Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5099004 | Journal of Economic Dynamics and Control | 2010 | 10 Pages |
Abstract
We propose a method to solve models with heterogeneous agents and aggregate uncertainty. The law of motion describing aggregate behavior is obtained by explicitly aggregating the individual policy rule. The algorithm is simpler and faster than existing algorithms that rely on parameterization of the cross-sectional distribution and/or a computationally intensive simulation step. Explicit aggregation establishes a link between the individual policy rule and the set of necessary aggregate state variables, an insight that can be helpful in determining what state variables to include in other algorithms as well.
Related Topics
Physical Sciences and Engineering
Mathematics
Control and Optimization
Authors
Wouter J. Den Haan, Pontus Rendahl,