Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/229555
Authors: 
Kaas, Leo
Year of Publication: 
2020
Series/Report no.: 
CESifo Working Paper No. 8737
Abstract: 
Equilibrium models with heterogeneous agents and aggregate uncertainty are difficult to analyze since policy functions and market prices depend on the cross-sectional distribution over agents’ state variables which is generally a high-dimensional object. This paper develops and applies a general model framework in which this problem does not arise. If sufficiently many agents enter the economy in every aggregate state of the world, policy functions and prices depend only on the exogenous aggregate state but are independent of the distribution over idiosyncratic states. The first part of this paper proves existence results for such block-recursive equilibria and derives an ergodic property which is useful for their computation. The second part applies this equilibrium concept to models of firm dynamics with competitive or frictional input markets and to incomplete-market economies with endogenous asset market participation.
Subjects: 
block-recursive equilibrium
dynamic general equilibrium
heterogeneous agents
JEL: 
C62
D50
E32
Document Type: 
Working Paper

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