We consider linear dynamic models with rational expectations in case of incomplete and asymmetric information as well as agents heterogeneity. This problem requires solving infinite dimensional matrix equations. We propose asymptotic expansion method to reduce this problem to the finite...

In this paper we argue that in realistically calibrated two period general equilibrium models with incomplete markets CAPM-pricing provides a good benchmark for equilibrium prices even when agents are not mean-variance optimizers and returns are not normally distributed. We numerically...

This paper shows how to solve dynamic agency models by extending recursive Lagrangean techniques à laMarcet and Marimon (2011) to problems with hidden actions. The method has many advantages with respect to the promised utilities approach (Abreu et al., 1990): it is a significant improvement in...

In this paper we study the continuous time optimal portfolio selection problem for an investor with a finite horizon who maximizes expected utility of terminal wealth and faces transaction costs in the capital market. It is well known that, depending on a particular structure of transaction...

The main aim of this paper is to introduce the network averaging technique. This technique is introduced because accurately determining the structure of real networks can be difficult and the network averaging technique provides a proxy for real networks. A second aim is to introduce the...

We prove that the undetermined Taylor series coefficients of local approximations to the policy function of arbitrary order in a wide class of discrete time dynamic stochastic general equilibrium (DSGE) models are solvable by standard DSGE perturbation methods under regularity and saddle point...

I construct risk-corrected approximations of the policy functions of DSGEmodels around the stochastic steady state and ergodic mean that are linear in the state variables. The resulting approximations are uniformly more accurate than standard linear approximations and capture the dynamics of...

We prove the existence of unique solutions for all undetermined coefficients of nonlinear perturbations of arbitrary order in a wide class of discrete time DSGE models under standard regularity and saddle stability assumptions for linear approximations. Our result follows from the...