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Computing Equilibria in Dynamic Models with Occasionally Binding Constraints

Author

Listed:
  • Michael Grill

    (Mannheim University)

  • Johannes Brumm

    (Mannheim University)

Abstract

We embed it into a time iteration algorithm to compute recursive equilibria in an infinite horizon endowment economy where heterogeneous agents trade in various assets subject to collateral constraints and short sale constraints. We show that adaptive simplicial interpolation computes equilibria accurately in terms of Euler equation errors and outperforms equidistant grid schemes by far.

Suggested Citation

  • Michael Grill & Johannes Brumm, 2010. "Computing Equilibria in Dynamic Models with Occasionally Binding Constraints," 2010 Meeting Papers 695, Society for Economic Dynamics.
    • Handle: RePEc:red:sed010:695
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    References listed on IDEAS

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    Cited by:

    1. Alexander Ludwig & Matthias Schön, 2018. "Endogenous Grids in Higher Dimensions: Delaunay Interpolation and Hybrid Methods," Computational Economics, Springer;Society for Computational Economics, vol. 51(3), pages 463-492, March.
    2. Klaus Adam & Michael Grill, 2017. "Optimal Sovereign Default," American Economic Journal: Macroeconomics, American Economic Association, vol. 9(1), pages 128-164, January.
    3. Menno, Dominik & Oliviero, Tommaso, 2020. "Financial intermediation, house prices, and the welfare effects of the U.S. Great Recession," European Economic Review, Elsevier, vol. 129(C).
    4. Gary S. Anderson, 2018. "Reliably Computing Nonlinear Dynamic Stochastic Model Solutions: An Algorithm with Error Formulas," Finance and Economics Discussion Series 2018-070, Board of Governors of the Federal Reserve System (U.S.).
    5. Dominik Menno & Tommaso Oliviero, 2013. "Financial Intermediation, House Prices, and the Distributive Effects of the U.S. Great Recession," Economics Working Papers ECO2013/05, European University Institute.
    6. Trimborn, Timo, 2013. "Solution of continuous-time dynamic models with inequality constraints," Economics Letters, Elsevier, vol. 119(3), pages 299-301.
    7. Michael Grill & Klaus Adam, 2012. "Optimal Sovereign Debt Default," 2012 Meeting Papers 882, Society for Economic Dynamics.
    8. Gabriele Camera & Yili Chien, 2014. "Understanding the Distributional Impact of Long‐Run Inflation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 46(6), pages 1137-1170, September.
    9. repec:mea:meawpa:13274 is not listed on IDEAS
    10. Michael Grill & Karl Schmedders & Felix Kubler & Johannes Brumm, 2012. "Margin Requirements and Asset Prices," 2012 Meeting Papers 533, Society for Economic Dynamics.

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