Overlapping Generation Models with Heterogeneous Agents and Aggregate Uncertainty in Macroeconomic Modelling
DOI:
https://doi.org/10.15678/ZNUEK.2015.0941.0506Keywords:
DSGE models, overlapping generations, heterogeneous agents, business cycle, computational algorithmsAbstract
The paper introduces the methodology of the overlapping generations models with heterogeneous agents and aggregate uncertainty - macroeconomic, stochastic general equilibrium models that account for consumer heterogeneity mainly with respect to age and wealth. Taking as an example my own model, which additionally allows for labour market status and skill heterogeneity, I show how consumer consumption and investment decision rules are derived. I also provide a detailed discussion of the most popular computational algorithms used to deal with those models. The model is then used to examine welfare gains from eliminating business cycle fluctuations on the labour market in Poland for different groups of consumers.Downloads
References
Acedański J. (2007), Metody szacowania kosztów wahań koniunkturalnych, "Zeszyty Naukowe Akademii Ekonomicznej w Katowicach. Studia Ekonomiczne", 46.
Acedański J. (2014), Pension Reforms and Welfare Gains from Eliminating Business Cycle in Poland (in:) J. Talasova, J. Stoklasa, T. Talasek (eds), Proceedings of 32nd International Conference Mathematical Methods in Economics, Palacky University, Olomouc.
Acedański J. (2015), Youth Unemployment and Welfare Gains from Eliminating Business Cycle - The Case of Poland, manuscript. DOI: https://doi.org/10.1016/j.econmod.2016.05.012
Aiyagari S. R. (1994), Uninsured Idiosyncratic Risk and Aggregate Saving, "Quarterly Journal of Economics", 109(3), http://dx.doi.org/10.2307/2118417. DOI: https://doi.org/10.2307/2118417
Blanchard O. (2009), The State of Macro, "Annual Review of Economics", 1(1), http://dx.doi.org/10.1146/annurev.economics.050708.142952. DOI: https://doi.org/10.1146/annurev.economics.050708.142952
Brzoza-Brzezina M., Kolasa M., Koloch G., Makarski K., Rubaszek M. (2013), Monetary Policy in Non-representative Agent Economy: A Survey, "Journal of Economic Surveys", 27(4), http://dx.doi.org/10.1111/j.1467-6419.2011.00710.x. DOI: https://doi.org/10.1111/j.1467-6419.2011.00710.x
Chang Y., Kim S. B., Schorfheide F. (2013), Labor-market Heterogeneity, Aggregation and Policy (In)variance of DSGE Model Parameters, "Journal of the European Economic Association", 11(S1), http://dx.doi.org/10.1111/j.1542-4774.2012.01098.x. DOI: https://doi.org/10.1111/j.1542-4774.2012.01098.x
Del Negro M., Schorfheide F. (2013), DSGE Model-based Forecasting (in:) G. Elliott, A. Timmermann (eds), Handbook of Economic Forecasting, vol. 2, Elsevier, Amsterdam. DOI: https://doi.org/10.2139/ssrn.2018451
Den Haan W. J., Judd K. L., Juillard M. (2010), Computational Suite of Models with Heterogeneous Agents: Incomplete Markets and Aggregate Uncertainty, "Journal of Economic Dynamics and Control", 34(1), http://dx.doi.org/10.1016/j.jedc.2009.07.001. DOI: https://doi.org/10.1016/j.jedc.2009.07.001
Den Haan W. J. (2010), Comparison of Solutions to the Incomplete Markets Model with Aggregate Uncertainty, "Journal of Economic Dynamics and Control", 34(1), http://dx.doi.org/10.1016/j.jedc.2008.12.010. DOI: https://doi.org/10.1016/j.jedc.2008.12.010
Grabek G., Kłos B., Koloch G. (2010), SOE PL 2009 - Model DSGE małej otwartej gospodarki estymowany na polskich danych, "Materiały i Studia", no. 251, NBP, Warszawa.
Hairault J.-O., Langot F., Osotimehin S. (2010), Matching Frictions, Unemployment Dynamics and the Cost of Business Cycles, "Review of Economic Dynamics", 13(4), http://dx.doi.org/10.1016/j.red.2010.05.001. DOI: https://doi.org/10.1016/j.red.2010.05.001
Heer B., Maussner A. (2009), Dynamic General Equilibrium Modeling. Computational Methods and Applications, 2nd ed., Springer, Berlin-Heidelberg.
Huggett M. (1993), The Risk-free Rate in Heterogeneous-agent Incomplete-insurance Economies, "Journal of Economic Dynamics and Control", 17(5-6), http://dx.doi.org/10.1016/0165-1889(93)90024-m. DOI: https://doi.org/10.1016/0165-1889(93)90024-M
Kolasa M., Rubaszek M., Skrzypczyński P. (2012), Putting the New Keynesian DGSE Model to the Real-time Forecasting Test, "Journal of Money, Credit and Banking", 44(7), http://dx.doi.org/10.1111/j.1538-4616.2012.00533.x. DOI: https://doi.org/10.1111/j.1538-4616.2012.00533.x
Krusell P., Smith A. A. (1998), Income and Wealth Heterogeneity in the Macroeconomy, "Journal of Political Economy", 106(5), http://dx.doi.org/10.1086/250034. DOI: https://doi.org/10.1086/250034
Krusell P., Smith A. A. (2006), Quantitative Macroeconomic Models with Heterogeneous Agents (in:) R. Blundell, W. Newey, T. Pearson (eds), Advances in Economic and Econometrics: Theory and Applications, Ninth World Congress, Cambridge University Press, Cambridge.
Lucas R. E. (1976), Econometric Policy Evaluation: A Critique, "Carnegie-‑Rochester Conference Series on Public Policy", 1, http://dx.doi.org/10.1016/s0167-2231(76)80003-6. DOI: https://doi.org/10.1016/S0167-2231(76)80005-X
Lucas R. E. (1987), Models of Business Cycles, Basil Blackwell, Oxford.
Maliar L., Maliar S., Valli F. (2010), Solving the Incomplete Markets Model with Aggregate Uncertainty Using the Krusell-Smith Algorithm, "Journal of Economic Dynamics and Control", 34(1), http://dx.doi.org/10.1016/j.jedc.2009.03.009. DOI: https://doi.org/10.1016/j.jedc.2009.03.009
Mankiw G. N. (2006), Macroeconomists as Scientist and Engineer, "Journal of Economic Perspectives", 20(4), http://dx.doi.org/10.1257/jep.20.4.29. DOI: https://doi.org/10.1257/jep.20.4.29
Post Walrasian Macroeconomics. Beyond the Dynamic Stochastic General Equilibrium Model (2006), ed. D. Colander, Cambridge University Press, Cambridge.
Raport na temat pełnego uczestnictwa Rzeczypospolitej Polskiej w trzecim etapie Unii Gospodarczej i Walutowej (2009), NBP, Warszawa.
Reiter M. (2012), On the Welfare Costs of Unemployment Fluctuations, manuscript.
Rubaszek M. (2012), Mortgage Down-payment and Welfare in a Life-cycle Model, "Bank i Kredyt", 43(4).
Storesletten K., Telmer C. I., Yaron A. (2001), The Welfare Cost of Business Cycles Revisited: Finite Lives and Cyclical Variation in Idiosyncratic Risk, "European Economic Review", 45(7), http://dx.doi.org/10.1016/s0014-2921(00)00101-x. DOI: https://doi.org/10.1016/S0014-2921(00)00101-X
Storesletten K., Telmer C. I., Yaron A. (2007), Asset Pricing with Idiosyncratic Risk and Overlapping Generations, "Review of Economic Dynamics", 10(4), http://dx.doi.org/10.1016/j.red.2007.02.004. DOI: https://doi.org/10.1016/j.red.2007.02.004
Wróbel-Rotter R. (2013), Estymowane modele równowagi ogólnej i wektorowa autoregresja: model hybrydowy, "Bank i Kredyt", 44(5). DOI: https://doi.org/10.59139/ps.2013.03.5
Downloads
Published
Issue
Section
License
Copyright (c) 2015 Cracow Review of Economics and Management
This work is licensed under a Creative Commons Attribution 4.0 International License.
