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A fast and low computational memory algorithm for non-stochastic simulations in heterogeneous agent models

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  • Tan, Eugene

Abstract

Heterogeneous agent models in macroeconomics generally require numerical computation of the cross-sectional distribution of agents. The standard textbook approach is to fully approximate the Markov kernel that iterates the distribution forward in time as a Markov transition matrix, which can be costly in terms of computational time and memory when the state space is large. This note provides an alternative algorithm that is simple, requires much less computational memory, and is substantially faster than the standard algorithm.

Suggested Citation

  • Tan, Eugene, 2020. "A fast and low computational memory algorithm for non-stochastic simulations in heterogeneous agent models," Economics Letters, Elsevier, vol. 193(C).
    • Handle: RePEc:eee:ecolet:v:193:y:2020:i:c:s0165176520301907
    DOI: 10.1016/j.econlet.2020.109285
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    References listed on IDEAS

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    1. S. Rao Aiyagari, 1994. "Uninsured Idiosyncratic Risk and Aggregate Saving," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(3), pages 659-684.
    2. Ljungqvist, Lars & Sargent, Thomas J., 2012. "Recursive Macroeconomic Theory, Third Edition," MIT Press Books, The MIT Press, edition 3, volume 1, number 0262018748, December.
    3. Young, Eric R., 2010. "Solving the incomplete markets model with aggregate uncertainty using the Krusell-Smith algorithm and non-stochastic simulations," Journal of Economic Dynamics and Control, Elsevier, vol. 34(1), pages 36-41, January.
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    Cited by:

    1. Sergio Ocampo & Baxter Robinson, 2024. "Computing Longitudinal Moments for Heterogeneous Agent Models," Computational Economics, Springer;Society for Computational Economics, vol. 64(3), pages 1891-1912, September.
    2. Harmenberg, Karl, 2021. "Aggregating heterogeneous-agent models with permanent income shocks," Journal of Economic Dynamics and Control, Elsevier, vol. 129(C).

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    More about this item

    Keywords

    Numerical methods; Heterogeneous agent models; Non-stochastic simulation;
    All these keywords.

    JEL classification:

    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment

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