Computing Equilibria of Stochastic Heterogeneous Agent Models Using Decision Rule Histories
Abstract: This paper introduces a general method for computing equilibria with heterogeneous agents and aggregate shocks that is particularly suitable for 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. Applying the computational method to a Mirrlees RBC economy with known analytical solution recovers the solution perfectly well. This test provides considerable confidence on the accuracy of the method.
File(s): File format is application/pdf https://www.chicagofed.org/~/media/publications/working-papers/2020/wp2020-05-pdf.pdf
Provider: Federal Reserve Bank of Chicago
Part of Series: Working Paper Series
Publication Date: 2020-02-01
Number: WP 2020-05