Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/167567
Authors: 
Ahn, SeHyoun
Kaplan, Greg
Moll, Benjamin
Winberry, Thomas
Wolf, Christian
Year of Publication: 
2017
Series/Report no.: 
CESifo Working Paper 6581
Abstract: 
We develop an efficient and easy-to-use computational method for solving a wide class of general equilibrium heterogeneous agent models with aggregate shocks, together with an open source suite of codes that implement our algorithms in an easy-to-use toolbox. Our method extends standard linearization techniques and is designed to work in cases when inequality matters for the dynamics of macroeconomic aggregates. We present two applications that analyze a two-asset incomplete markets model parameterized to match the distribution of income, wealth, and marginal propensities to consume. First, we show that our model is consistent with two key features of aggregate consumption dynamics that are difficult to match with representative agent models: (i) the sensitivity of aggregate consumption to predictable changes in aggregate income and (ii) the relative smoothness of aggregate consumption. Second, we extend the model to feature capital-skill complementarity and show how factor-specific productivity shocks shape dynamics of income and consumption inequality.
JEL: 
A00
C00
E00
Document Type: 
Working Paper

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