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Type | Conference or Workshop Paper |
Scope | Discipline-based scholarship |
Published in Proceedings | Yes |
Title | Self-justified equilibria: Existence and computation |
Organization Unit | |
Authors |
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Presentation Type | paper |
Item Subtype | Original Work |
Refereed | Yes |
Status | Published in final form |
Language |
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Page Range | 1 - 22 |
Event Title | Society for Economic Dynamics (SED) |
Event Type | conference |
Event Location | Mexico City |
Event Start Date | June 28 - 2018 |
Event End Date | June 30 - 2018 |
Place of Publication | Zürich |
Publisher | s.n. |
Abstract Text | In this paper we introduce "self-justified" equilibrium as a solution concept in stochastic general equilibrium models with a large number of heterogeneous agents. In each period agents trade in assets to maximize the sum of current utility and forecasted future utility. Current prices ensure that markets clear and agents forecast the probability distribution of future prices and consumption on the basis of current endogenous variables and the current exogenous shock. The forecasts are self-justfied in the sense that agents use forecasting functions that are optimal within a given class of functions and that can be viewed as optimally trading o˙ the accuracy of the forecast and its complexity. We show that self-justified equilibria always exist and we develop a computational method to approximate them numerically. By restricting the complexity of agents' forecasts we can solve models with a very large number of heterogeneous agents. Errors can be directly interpreted. |
Official URL | https://sed2018.itam.mx/program |
Other Identification Number | merlin-id:16466 |
PDF File | Download from ZORA |
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