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Simulations for models with heterogeneous agents, incomplete markets, real assets and aggregate uncertainty

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  • Damian Pierri

    (Universidad Carlos III Madrid)

Abstract

This paper presents conditions to guarantee the convergence of simulations to a stochastic steady state, characterized by an invariant probability distribution, in an endowment economy with a finite number of heterogeneous agents, 1 period real assets offered in zero net supply, aggregate uncertainty, incomplete markets and uncountable shocks. The results are robust to the presence of multiple discontinuous equilibria and are numerically implementable. We work on a Markov environment with an enlarged state space to characterize ergodic equilibria and differentiate them with respect to time-independent and stationary ones. We show, by imposing a mild restriction on the discontinuity set, that every measurable time-independent selection approximates the stochastic steady state of the model. The results in this paper are constructive and based on assumptions imposed on the primitives of the model. Thus, they can help to design calibration and estimation methods for heterogeneous agent models based on unconditional moments.

Suggested Citation

  • Damian Pierri, 2025. "Simulations for models with heterogeneous agents, incomplete markets, real assets and aggregate uncertainty," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 20(1), pages 197-236, January.
    • Handle: RePEc:spr:jeicoo:v:20:y:2025:i:1:d:10.1007_s11403-024-00415-1
    DOI: 10.1007/s11403-024-00415-1
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    More about this item

    Keywords

    Non-optimal economies; Markov equilibrium; Heterogeneous agents; Simulations;
    All these keywords.

    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models

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