Aggregating Heterogeneous-Agent Models with Permanent Income Shocks

Karl Harmenberg*

*Corresponding author af dette arbejde

Publikation: Bidrag til tidsskriftTidsskriftartikelForskningpeer review

Abstrakt

I introduce a method for simulating aggregate dynamics of heterogeneous-agent models where log permanent income follows a random walk. The idea is to simulate the model using a counterfactual permanent-income-neutral measure which incorporates the effect that permanent income shocks have on macroeconomic aggregates. With the permanent-income-neutral measure, one does not need to keep track of the permanent-income distribution. The permanent-income-neutral measure is both useful for the analytical characterization of aggregate consumption-savings behavior and for simulating numerical models. Furthermore, it is trivial to implement with a few lines of code.
OriginalsprogEngelsk
Artikelnummer104185
TidsskriftJournal of Economic Dynamics and Control
Vol/bind129
Antal sider27
ISSN0165-1889
DOI
StatusUdgivet - aug. 2021

Bibliografisk note

Published online: 24. June 2021

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