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Unformatted text preview: Federal Reserve Bank of Minneapolis Research Department Staff Report 231 May 1997 Computation of Equilibria in Heterogeneous Agent Models* Jos-Vctor Ros-Rull Federal Reserve Bank of Minneapolis and University of Pennsylvania ABSTRACT This paper essentially puts together procedures that are used in the computation of equilibria in models with a very large number of heterogeneous agents. It is not a complete description of all procedures used in the literature. It describes procedures that deal with infinitely lived agent versions of the growth model with and without aggregate uncertainty, overlapping generations models, and dynamic political economy models. *This paper includes most of the material on computing equilibria in models with heterogeneous agents from lectures given at the European University Institute, the University of California at Los Angeles, and the University of Pennsylvania. The comments of many colleagues and students have been very useful. The author thanks the National Science Foundation for grant SBR-9309514. The views expressed herein are those of the author and not necessarily those of the Federal Reserve Bank of Minneapolis or the Federal Reserve System. $" & # " # % " &' +, $" & & $" ' - # %" & & " , # # . /' - , " '' " %) " " " . 0' - # % , # " . $" $" & " " ' - ) $" * # , " , ' $" * # %" " " % "' * " % % %& # " " ' ( & &* ( % % " $" * ( & "% " ' ( & %" &' * ( & ' " * % " & % # & " # * & " %# * " & " " & " " % " &' ( & & % " ' (# " & # "% " 1"* 2 ""3' " % " " &4 1 3 13 & * % ## * " % #* & # # " ' + * " & " # * (5 "* 6 & & , 7' 8 % ' # "% " #" & # "% 9 # 1:3; " & " " ' ( ) & * % * 2# " & % # ' < " % &* %" & ' = #* # * 6 &' # ,> $" 13 "%? 6 @ & #' * "" & % % # " " 4 1 3 6 , 13 @ 1 3 % 1/3 '' 103 1A3 6 @ & ( , 5 % % & " # % 6 1 3' 8 * "% " " " & 1 & "> " 3' * ( %? &2" "#' ' % %? 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