Solving the incomplete markets model with aggregate uncertainty using parameterized cross-sectional distributions

Yann Algan (1) , Olivier Allais (2) , Wouter J den Haan (3)

1 Sciences Po - Sciences Po
2 ALISS - Alimentation et sciences sociales
3 Department of Economics

This note describes how the incomplete markets model with aggregate uncertainty in Den Haan et al. [Comparison of solutions to the incomplete markets model with aggregate uncertainty. Journal of Economic Dynamics and Control, this issue] is solved using standard quadrature and projection methods. This is made possible by linking the aggregate state variables to a parameterized density that describes the cross-sectional distribution. A simulation procedure is used to find the best shape of the density within the class of approximating densities considered. This note compares several simulation procedures in which there is—as in the model—no cross-sectional sampling variation.

Mots clés: PROJECTION METHODS; Numerical Solutions; Projection Methods; Simulations

Mots clés: NUMERICAL SOLUTIONS; SIMULATIONS

Domaines: Economies et finances

Yann Algan, Olivier Allais, Wouter J den Haan. Solving the incomplete markets model with aggregate uncertainty using parameterized cross-sectional distributions. Journal of Economic Dynamics and Control, 2010, 34 (1), pp.59 - 68. ⟨10.1016/j.jedc.2009.03.010⟩. ⟨hal-02662044⟩