Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/253577 
Year of Publication: 
2020
Citation: 
[Journal:] Quantitative Economics [ISSN:] 1759-7331 [Volume:] 11 [Issue:] 4 [Publisher:] The Econometric Society [Place:] New Haven, CT [Year:] 2020 [Pages:] 1253-1288
Publisher: 
The Econometric Society, New Haven, CT
Abstract: 
This paper describes a method for solving heterogeneous agent models with aggregate risk and many idiosyncratic states formulated in discrete time. It extends the method proposed by Reiter (2009) and complements recent work by Ahn, Kaplan, Moll, Winberry, and Wolf (2017) on how to solve such models in continuous time. We suggest first solving for the stationary equilibrium of the model without aggregate risk. We then write the functionals that describe the dynamic equilibrium as sparse expansions around their stationary equilibrium counterparts. Finally, we use the perturbation method of Schmitt-Grohé and Uribe (2004) to approximate the aggregate dynamics of the model.
Subjects: 
Numerical methods
heterogeneous agent models
linearization
in-complete markets
JEL: 
C63
E32
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-nc Logo
Document Type: 
Article

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