Solving the incomplete markets model with aggregate uncertainty by backward induction

Michael Reiter

doi:10.1016/j.jedc.2008.11.009

Solving the incomplete markets model with aggregate uncertainty by backward induction

Michael Reiter

Economics

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

Abstract

This paper describes a method to solve models with a continuum of agents, incomplete markets and aggregate uncertainty. I use backward induction on a finite grid of points in the aggregate state space. The aggregate state includes a small number of statistics (moments) of the cross-sectional distribution of capital. For any given set of moments, agents use a specific cross-sectional distribution, called "proxy distribution", to compute the equilibrium. Information from the steady state distribution as well as from simulations can be used to chose a suitable proxy distribution.

Original language	English (US)
Pages (from-to)	28-35
Number of pages	8
Journal	Journal of Economic Dynamics and Control
Volume	34
Issue number	1
DOIs	https://doi.org/10.1016/j.jedc.2008.11.009
State	Published - Jan 2010

Keywords

Backward induction
Heterogeneous agents

ASJC Scopus subject areas

Economics and Econometrics
Control and Optimization
Applied Mathematics

Access to Document

10.1016/j.jedc.2008.11.009

Cite this

@article{994cea741afc4963967661da5d4d0f94,

title = "Solving the incomplete markets model with aggregate uncertainty by backward induction",

abstract = "This paper describes a method to solve models with a continuum of agents, incomplete markets and aggregate uncertainty. I use backward induction on a finite grid of points in the aggregate state space. The aggregate state includes a small number of statistics (moments) of the cross-sectional distribution of capital. For any given set of moments, agents use a specific cross-sectional distribution, called {"}proxy distribution{"}, to compute the equilibrium. Information from the steady state distribution as well as from simulations can be used to chose a suitable proxy distribution.",

keywords = "Backward induction, Heterogeneous agents",

author = "Michael Reiter",

year = "2010",

month = jan,

doi = "10.1016/j.jedc.2008.11.009",

language = "English (US)",

volume = "34",

pages = "28--35",

journal = "Journal of Economic Dynamics and Control",

issn = "0165-1889",

publisher = "Elsevier",

number = "1",

}

TY - JOUR

T1 - Solving the incomplete markets model with aggregate uncertainty by backward induction

AU - Reiter, Michael

PY - 2010/1

Y1 - 2010/1

N2 - This paper describes a method to solve models with a continuum of agents, incomplete markets and aggregate uncertainty. I use backward induction on a finite grid of points in the aggregate state space. The aggregate state includes a small number of statistics (moments) of the cross-sectional distribution of capital. For any given set of moments, agents use a specific cross-sectional distribution, called "proxy distribution", to compute the equilibrium. Information from the steady state distribution as well as from simulations can be used to chose a suitable proxy distribution.

AB - This paper describes a method to solve models with a continuum of agents, incomplete markets and aggregate uncertainty. I use backward induction on a finite grid of points in the aggregate state space. The aggregate state includes a small number of statistics (moments) of the cross-sectional distribution of capital. For any given set of moments, agents use a specific cross-sectional distribution, called "proxy distribution", to compute the equilibrium. Information from the steady state distribution as well as from simulations can be used to chose a suitable proxy distribution.

KW - Backward induction

KW - Heterogeneous agents

UR - http://www.scopus.com/inward/record.url?scp=70350211085&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=70350211085&partnerID=8YFLogxK

U2 - 10.1016/j.jedc.2008.11.009

DO - 10.1016/j.jedc.2008.11.009

M3 - Article

AN - SCOPUS:70350211085

SN - 0165-1889

VL - 34

SP - 28

EP - 35

JO - Journal of Economic Dynamics and Control

JF - Journal of Economic Dynamics and Control

IS - 1

ER -

Solving the incomplete markets model with aggregate uncertainty by backward induction

Abstract

Keywords

ASJC Scopus subject areas

Access to Document

Other files and links

Fingerprint

Cite this