labor market rigidities,
heterogeneous agent models,
portfolio choice models.
"Méthodes de simulation des modèles stochastiques d'équilibre général (in french)" (with Michel Juillard), Economie et Prévision (Numéro Spécial), pp.115-126, Vol.2-3, 2008.
paper presents numerical methods, which are commonly used today to
solve dynamic stochastic general equilibrium models. Once we have
introduced a canonical model of dynamic optimization which is in the
heart of these problems, we review the methods of value function
iteration, projection, parameterized expectation approach (PEA) and the
perturbation method. The linearization, which is very popular in this
literature, is presented as a special case of the perturbation method.
"Nonlinearities in a DSGE Model with Search and Matching."
studies have shown that there are strong asymmetries in the growth of
various labor market time series. Especially unemployment, employment,
and vacancies have different dynamics during recessions and expansions
of the economy. In order to generate the asymmetries, I investigate the
role played by real rigidities in the labor market. The benchmark model
used here resembles those described in Andolfatto (American Economic Review 1996) and Merz (Journal of Monetary Economics
1995). In this paper, I solve the model using first and second order
perturbations in levels and projection methods with ordinary
polynomials. This allows me to quantify the role of nonlinearities
implied by the search and matching framework. The accuracy of the
solution is verified by using parameterizations for the United States
and the EURO area.
"Solving Dynamic Models with Heterogeneous Agents and Aggregate Uncertainty with Dynare or Dynare++ (with Wouter den Haan)"
paper shows how models with heterogeneous agents and aggregate
uncertainty can be solved using Dynare or Dynare++ software that
implements a perturbation approach. Using the explicit aggregation
algorithm (XPA) to obtain aggregate laws of motion is possible by
combining a Dynare program with a very simple Matlab program. We
calculate and compare 1st and 2nd-order numerical solutions using both
algorithms. These numerical procedures are also compared with the
algorithm that solves the individual policy rules with a projection
instead of a perturbation procedure. Finally, we discuss a procedure
that efficiently chooses which cross-sectional moments to include as
aggregate state variables when nonlinearities are important and the mean
is not a sufficient statistic.
Here are the simplified codes for this project:
These codes require
to be installed on your computer.
"Can Lower Order Perturbation Methods accurately describe Wealth Dynamics?"
paper reveals the sensitivity of the solution method described in the
previous chapter to the specification and parameterization of the
We find that the recent contributions that deal
with perturbation methods in heterogeneous agent models ignore this
aspect of sensitivity which can be detected in the behaviour of the
tails. This leads us to conclude that more work is needed on the choice
of borrowing constraints. We also briefly discuss the economic policy
implications that the dynamics observed in the tails may have for
instance in implementing fiscal and social policies that target the
lower part of the wealth and income distributions.
"How does firm-level volatility affect household consumption?"
paper studies the propagation mechanism of time-varying volatility from
the production sector to the household sector in the presence of
asymmetric adjustment costs. The model is an extension of the standard
neoclassical growth model, in which we introduce heterogeneity on the
production side, similarly to Bloom (Econometrica 2009). We use
this framework to analyze the role of financial markets in householdsâ€™
effort to smooth out consumption in the presence of second moment
shocks. In order to isolate this effect, we assume the presence of
households that do not have access to risky assets.
In this model,
the distribution of capital is a high-dimensional state variable, which
complicates the solution for the decision rules. The paper applies an
iterative hybrid algorithm which combines third-order perturbation
methods with the parameterized expectations approach, and approximates
the stationary distribution through simulations.
"Limited participation and International Risk-Sharing (with Nicolas Coeurdacier and Hélène Rey)."
"consumption real exchange rate anomaly" is one of the most subborn
puzzle in open economy macroeconomics.We make substantial progress by
introducing limited participation in an otherwise standard model. In
particular, one of our methodological contribution is to show how we can
solve for the characteristics and the dynamics of optimal portfolios in
such a setup.
Work in progress
"Solving Dynamic Models using Hybrid Methods"
Last revised on 23 April 2014.