Working Paper

Problems in the numerical simulation of models with heterogeneous agents and economic distortions

Abstract: Our work has been concerned with the numerical simulation of dynamic economies with heterogeneous agents and economic distortions. Recent research has drawn attention to inherent difficulties in the computation of competitive equilibria for these economies: A continuous Markovian solution may fail to exist, and some commonly used numerical algorithms may not deliver accurate approximations. We consider a reliable algorithm set forth in Feng et al. (2009), and discuss problems related to the existence and computation of Markovian equilibria, as well as convergence and accuracy properties. We offer new insights into numerical simulation.

Keywords: Econometric models;

Bibliographic Information

Provider: Federal Reserve Bank of St. Louis

Part of Series: Working Papers

Publication Date: 2009

Number: 2009-036