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Solving heterogeneous-agent models with parameterized cross-sectional distributions

Mis à jour le 11 novembre 2016 Publié

Référence

Algan Yann, Allais Olivier, Den Haan Wouter J. In: Journal of Economic Dynamics and Control, Volume 32, Issue 3, March 2008, Pages 875–908.


Résumé

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.