I investigate whether the popular Krusell and Smith algorithm used to solve heterogeneousagent economies with aggregate uncertainty and incomplete markets is likely to be subject to multiple self-fulfilling equilibria. In a benchmark economy, the parameters representing the equilibrium aggregate...

This paper formally compares the fit of various versions of the incomplete markets model with aggregate uncertainty, relying on a simple Bayesian empirical framework. The models differ in the degree of households' heterogeneity, with a focus on the role of preferences. For every specification,...