Heterogeneous-agent neoclassical model (HANC) studied by Krusell and Smith (1998) has savings through capital. This model has a remarkable feature of approximate aggregation: the mean of wealth distribution can be accurately predicted with the mean of past wealth distribution. However, if...

We survey numerical methods that are tractable in dynamic economic models with a finite, large number of continuous state variables. (Examples of such models are new Keynesian models, life-cycle models, heterogeneous-agents models, asset-pricing models, multisector models, multicountry models,...

We propose a novel methodology for evaluating the accuracy of numerical solutions to dynamic economic models. Specifically, we construct a lower bound on the size of approximation errors. A small lower bound on errors is a necessary condition for accuracy: If a lower error bound is unacceptably...