Solving heterogeneous agent models in discrete time with many idiosyncratic states by perturbation methods
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 et al. (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 recursive 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.

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docs.google.com/spreadsheets/d/15qI0Ad4ZT1UoZmxvXuGqX_5Dy2f1cELTd0gxynVSX-s/edit#gid=0
Date: 14 May 2019, 16:30 (Tuesday, 3rd week, Trinity 2019)
Venue: Manor Road Building, Manor Road OX1 3UQ
Venue Details: Seminar room G
Speaker: Ralph Luetticke (University College London)
Organising department: Department of Economics
Part of: Macroeconomics Seminar
Booking required?: Not required
Audience: Members of the University only
Editor: Melis Clark