Chapter 4

Heterogeneous Agents in the Macroeconomy: Reduced-Heterogeneity Representations

Xavier Ragot    SciencesPo, CNRS, and OFCE, France,


This chapter surveys heterogeneous agent models with rational expectations that deliver a finite number of heterogeneous agents as an equilibrium outcomes. Instead of having a distribution with infinite support to follow, this class of models endogenously generates a finite number of agents as an equilibrium outcome. As a consequence, many of the additional tools and techniques developed in the DSGE literature with a representative agent can easily be imported in this class of models, allowing these models to be brought to the data with advanced econometric techniques. ...

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