387hw8 - Economics 387 Banking and Financial Intermediation...

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Economics 387. Banking and Financial Intermediation. Spring 2002. Department of Economics, University of Texas Instructor: Dean Corbae, BRB 3.118, (o) 512-475-8530 email: [email protected], web: www.eco.utexas.edu/~corbae Homework #8 - Due 5/1/02-Computing Decision Rules via Value Function Iteration and Invariant Wealth Distributions This assignment is intended to introduce you to computing heterogeneous agent models. In class we focussed on an example from Imrohoroglu (1992, JEDC) where the author tries to answer the quantitative question °What are the welfare costs of in ° ation with uninsurable income shocks?". In particular we showed how to compute decision rules and ergodic distributions over money holdings for those employed and unemployed households with a zero money growth rate with idiosyncratic uncertainty but no aggregate uncertainty. The computer programs to accomplish this exercise were supplied on my website in eco387v ± and eco387ss.
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