This preview shows pages 1–3. Sign up to view the full content.
This preview has intentionally blurred sections. Sign up to view the full version.
View Full Document
Unformatted text preview: Problem Set 9 Econ 702, Spring 2004 April 8, 2004 Keep in mind that so far we looked at the following models of heteroge nous agents economies and in the first four questions, we will look at the stationary equilibria of these economies. 1. Heterogenous agents economy with no trade: Archipelago with a con tinuum of islands where fishermen cannot swim. 2. Economy with heterogenous agents and trade: Huggett Economy. 3. Economy with heterogenous agents and production: Aiyagari Economy. Problem 1 (Fishermen Economy) Solution: Given B F , B a and B e are fixed, The agent decision rule, g ( e,a ) must be in the asset space so that g ( e,a ) A ( e,a ) ( E A ). Since B a A , we know that g(e,a) is either in B a or not in B a . Then 1 g ( e,a ) B a = 1 or 0. is a transition matrix for Markov chain, so that ee is measurable. Then e B e ee is measurable as well. e B e ee multiplied by 1 or 0 is measurable as well. Then Q ( ., B is measurable. Problem 2 (Heterogenous Agents Economy with Trade) Solution: A stationary recursive competitive equilibrium in the loan economy is { q * ,g ( s,a ; q * ) ,V ( s,a ; q * ) ,x * ( q * ) ,Q ( s,a,B ; q * ) } such that, 1 1. (Agents optimize) Given q * , { g ( s,a ; q * ) ,V ( s,a ; q * ) } solve the agents problem. 2. (Consistency) Q ( s,a,B ; q * ) is a transition function associated with ss and g ( s,a ; q * ), Q ( s,a,B ; q * ) = 1 [ g ( s,a ; q * ) B a ] X s B s ss (1) 3. (Stationarity) x * is the unique stationary distribution associated with Q ( s,a,B ; q * ), x * ( B ) = Z ( S...
View
Full
Document
This note was uploaded on 11/12/2010 for the course ECON 8108 taught by Professor Staff during the Spring '08 term at Minnesota.
 Spring '08
 Staff

Click to edit the document details