The Method of Endogenous Gridpoints with Occasionally Binding Constraints among Endogenous Variables
Journal
Journal of Economic Dynamics and Control
ISSN
0165-1889
ISSN-Digital
1879-1743
Type
journal article
Date Issued
2010-10
Author(s)
Abstract
We show how the method of endogenous gridpoints can be extended to solve models with occasionally binding constraints among endogenous variables very efficiently. We present the method for a consumer problem with occasionally binding collateral constraints and non-separable utility in durable and non-durable consumption. This problem allows for a joint analysis of durable and non-durable consumption in models with uninsurable income risk which is important to understand patterns of consumption, saving and collateralized debt. We illustrate the algorithm and its efficiency by calibrating the model to US data.
Language
English
Keywords
Endogenous Gridpoints
Occasionally Binding Constraints
Endogenous Variables
HSG Classification
contribution to scientific community
HSG Profile Area
SEPS - Economic Policy
Refereed
Yes
Publisher
Elsevier
Publisher place
Amsterdam
Volume
34
Number
10
Start page
2074
End page
2088
Pages
15
Subject(s)
Eprints ID
235059