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We are pleased to invite the CERGE-EI community to the Coffee Break, which will take place in the renovated Jan Kmenta Library on Thursday, April 11, 2024, at 1 pm.

A special tour around the library will take place for those interested.

So if you'd like a cup of coffee and something sweet, bring your mug and join us. We'll have some paper cups available for those who don't have their mug.

We are looking forward to seeing you there!

Prof. Ralph Luetticke

University of Tübingen, Germany

Join online: https://call.lifesizecloud.com/21119207 (Passcode: 6378)

Authors: Ralph Luetticke, Christian Bayer, Maximilian Weiss, Yannik Winkelmann

Abstract: The “histogram method” (Young, 2010) is the standard method for computing distributional dynamics in heterogeneous agent models, but is a linear operator. We develop an alternative method that captures nonlinearities of distribution functions by interpolating probability weights at grid points over optimally chosen (endogenous) points. The method retains the tractability and speed of a discretized histogram as part of the state space, but increases numerical efficiency already in the steady state and yields economically large differences with aggregate risk. We document this by studying a disaster-like capital destruction shock with a third-order solution using perturbation techniques.

JEL Classification: C63, E32
Keywords: Numerical Methods, Heterogeneous Agent Models, Linearization, Incomplete Markets