Working Paper

Computing Aggregate Fluctuations of Economies with Private Information

Abstract: This paper introduces a general method for computing aggregate fluctuations in economies with private information. Instead of the cross-sectional distribution of agents across individual states, the method uses as a state variable a vector of spline coefficients describing a long history of past individual decision rules. The model is then linearized with respect to that vector. Applying the computational method to a Mirrlees RBC economy with known analytical solution recovers the solution perfectly well. This test provides significant confidence on the accuracy of the method.

JEL Classification: C63; D82; E32;

https://doi.org/10.21033/wp-2025-19

Bibliographic Information

Provider: Federal Reserve Bank of Chicago

Part of Series: Working Paper Series

Publication Date: 2025-08

Number: WP 2025-19