The problem of computing equilibria for general equilibrium models with incomplete real asset markets, or GEI models for the sake of brevity, is reconsidered. It is shown here that the rank-dropping behavior of the asset return matrix could be dealt with in rather a simple fashion: We first...

We propose a method to compute equilibria in dynamic models with several continuous state variables and occasionally binding constraints. These constraints induce non-differentiabilities in policy functions. We develop an interpolation technique that addresses this problem directly: It locates...

We show how to enhance the performance of a Smolyak method for solving dynamic economic models. First, we propose a more efficient implementation of the Smolyak method for interpolation, namely, we show how to avoid costly evaluations of repeated basis functions in the conventional Smolyak...

This paper presents a vintage capital model assuming putty–clay investment and perfect foresight. The model is written in discrete time and is simulated by using a second order relaxation algorithm. By computing the eigenvalues of the dynamic system, we have checked the conditions of existence...

This paper builds a benchmark framework to study optimal land use, encompassing land use activities and environmental degradation. We focus on the spatial externalities of land use as drivers of spatial patterns: land is immobile by nature, but local actions affect the whole space since...

I study how boundedly rational agents can learn a "good" solution to an infinite horizon optimal consumption problem under uncertainty and liquidity constraints. Using an empirically plausible theory of learning I propose a class of adaptive learning algorithms that agents might use to choose a...

“Constant proportion portfolio insurance” is a popular technique among portfolio insurance strategies: the risky part of a portfolio is reallocated with respect to market conditions, via a fixed parameter (the multiple), guaranteeing a predetermined floor. We propose here to use a...

An investor concerned with the downside risk of a black swan only needs a small portfolio to reap the benefits from diversification. This matches actual portfolio sizes, but does contrast with received wisdom from mean–variance analysis and intuition regarding fat tailed distributed returns....

This paper examines endogenous excess reserve holdings in the banking sector of an otherwise standard DSGE environment. Excess reserves act as an extensive margin of bank lending that is inactive in traditional limited participation models where banks hold minimal reserves by assumption. The...

This paper quantitatively characterizes optimal tax systems in a model of overlapping generations, when transitional cohorts are explicitly taken into account. We use the recent study of Conesa et al. (2009) as an example, but extend it by transitional dynamics. We furthermore develop a general...