Solving heterogeneous-agent models with parameterized cross-sectional distributions

Yann Algan; Olivier Allais; Wouter J. Den Haan

doi:10.1016/j.jedc.2007.03.007

Solving heterogeneous-agent models with parameterized cross-sectional distributions

Yann Algan, Olivier Allais, Wouter J. Den Haan

Research output: Contribution to journal › Article › peer-review

Abstract

A new algorithm is developed to solve models with heterogeneous agents and aggregate uncertainty. Projection methods are the main building blocks of the algorithm and - in contrast to the most popular solution procedure - simulations only play a very minor role. The paper also develops a new simulation procedure that not only avoids cross-sectional sampling variation but is 10 (66) times faster than simulating an economy with 10,000 (100,000) agents. Because it avoids cross-sectional sampling variation, it can generate an accurate representation of the whole cross-sectional distribution. Finally, the paper outlines a set of accuracy tests.

Original language	English
Pages (from-to)	875-908
Number of pages	34
Journal	Journal of Economic Dynamics and Control
Volume	32
Issue number	3
DOIs	https://doi.org/10.1016/j.jedc.2007.03.007
Publication status	Published - 1 Mar 2008
Externally published	Yes

Keywords

Incomplete markets
Numerical solutions
Projection methods
Simulations

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10.1016/j.jedc.2007.03.007

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abstract = "A new algorithm is developed to solve models with heterogeneous agents and aggregate uncertainty. Projection methods are the main building blocks of the algorithm and - in contrast to the most popular solution procedure - simulations only play a very minor role. The paper also develops a new simulation procedure that not only avoids cross-sectional sampling variation but is 10 (66) times faster than simulating an economy with 10,000 (100,000) agents. Because it avoids cross-sectional sampling variation, it can generate an accurate representation of the whole cross-sectional distribution. Finally, the paper outlines a set of accuracy tests.",

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AU - Allais, Olivier

AU - Den Haan, Wouter J.

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AB - A new algorithm is developed to solve models with heterogeneous agents and aggregate uncertainty. Projection methods are the main building blocks of the algorithm and - in contrast to the most popular solution procedure - simulations only play a very minor role. The paper also develops a new simulation procedure that not only avoids cross-sectional sampling variation but is 10 (66) times faster than simulating an economy with 10,000 (100,000) agents. Because it avoids cross-sectional sampling variation, it can generate an accurate representation of the whole cross-sectional distribution. Finally, the paper outlines a set of accuracy tests.

KW - Incomplete markets

KW - Numerical solutions

KW - Projection methods

KW - Simulations

U2 - 10.1016/j.jedc.2007.03.007

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JF - Journal of Economic Dynamics and Control

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ER -

Solving heterogeneous-agent models with parameterized cross-sectional distributions

Abstract

Keywords

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