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We develop numerically stable and accurate stochastic simulation approaches for solving dynamic economic models. First, instead of standard least-squares approximation methods, we examine a variety of alternatives, including leastsquares methods using singular value decomposition and Tikhonov regularization, least-absolute deviations methods, and principal… (More)

- Lilia Maliar, Serguei Maliar, Fernando Valli
- 2009

This paper studies the properties of the solution to the heterogeneous agents model in Den Haan et al. [2009. Computational suite of models with heterogeneous agents: incomplete markets and aggregate uncertainty. Journal of Economic Dynamics and Control, this issue]. To solve for the individual policy rules, we use an Euler-equation method iterating on a… (More)

This paper presents a computable general equilibrium model of endogenous (stochastic) growth and cycles that can account for two key features of the aggregate data: balanced growth in the long run and business cycles in the short run. The model is built on Schumpeter’s idea that economic development is the consequence of the periodic arrival of innovations.… (More)

We introduce a numerical algorithm for solving dynamic economic models that merges stochastic simulation and projection approaches: we use simulation to approximate the ergodic measure of the solution, we cover the support of the constructed ergodic measure with a fixed grid, and we use projection techniques to accurately solve the model on that grid. The… (More)

In this paper, we describe how to solve Model A (finite number of countries complete markets) of the JEDC project by using a simulation-based Parameterized Expectations Algorithm (PEA). JEL classification : C6; C63; C68; C88

This paper studies a complete-market version of the neoclassical growth model, where agents face idiosyncratic shocks to earnings. We show that if agents possess identical preferences of either the CRRA or the addilog type, then the heterogeneous-agent economy behaves as if there was a representative consumer who faces three kinds of shocks, to preferences,… (More)

We compare the performance of perturbation, projection, and stochastic simulation algorithms for solving the multi-country RBC model described in Den Haan et al. (this issue). The main challenge of solving this model comes from its large number of continuous-valued state variables, ranging between four and 20 in the specifications we consider. The… (More)

Does a heterogeneous agents version of a neoclassical model with labor}leisure choice replicate the distributions of consumption and working hours observed in the crosssectional data? Does incorporating heterogeneity enhance the aggregate performance of the representative agent model? We address these questions in a complete market model economy with two… (More)

- Diego Comin, Danial Lashkari, Dirk Krueger, Robert Z. Lawrence, Serguei Maliar, Kiminori Matsuyama
- 2015

We present a multi-sector growth model that accommodates long-run demand and supply drivers of structural change. The model generates nonhomothetic Engel curves at all levels of development and is consistent with the decline in agriculture, the hump-shaped evolution of manufacturing and the rise of services over time. The economy converges to a constant… (More)

We develop a cluster-grid algorithm (CGA) that solves dynamic economic models on their ergodic sets and is tractable in problems with high dimensionality (hundreds of state variables) on a desktop computer. The key new feature is the use of methods from cluster analysis to approximate an ergodic set. CGA guesses a solution, simulates the model, partitions… (More)