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SSRN Electronic Journal
Article . 2022 . Peer-reviewed
Data sources: Crossref
EconStor
Research . 2022
Data sources: EconStor
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Estimating Nonlinear Heterogeneous Agents Models with Neural Networks

Authors: KASE, Hanno; MELOSI, Leonardo; ROTTNER, Matthias Christian;

Estimating Nonlinear Heterogeneous Agents Models with Neural Networks

Abstract

Economists typically make simplifying assumptions to make the solution and estimation of their highly complex models feasible. These simplifications include approximating the true nonlinear dynamics of the model, disregarding aggregate uncertainty or assuming that all agents are identical. While relaxing these assumptions is well-known to give rise to complicated curse-of-dimensionality problems, it is often unclear how seriously these simplifications distort the dynamics and predictions of the model. We leverage the recent advancements in machine learning to develop a solution and estimation method based on neural networks that does not require these strong assumptions. We apply our method to a nonlinear Heterogeneous Agents New Keynesian (HANK) model with a zero lower bound (ZLB) constraint for the nominal interest rate to show that the method is much more efficient than existing global solution methods and that the estimation converges to the true parameter values. Further, this application sheds light on how effectively our method is capable to simultaneously deal with a large number of state variables and parameters, nonlinear dynamics, heterogeneity as well as aggregate uncertainty.

Country
Italy
Keywords

ddc:330, Global solution, Likelihood, HANK model, Bayesian estimation, HANK, neural networks, Heterogeneous agents, global solution, Machine learning, zero lower bound, aggregate uncertainty, Aggregate uncertainty, heterogeneous agents, nonlinearities, Nonlinearity, D31, E52, Neural networks, C11, C45, E32

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    popularity
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    Top 10%
    influence
    This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
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    impulse
    This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.
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selected citations
These citations are derived from selected sources.
This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Citations provided by BIP!
popularity
This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network.
BIP!Popularity provided by BIP!
influence
This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Influence provided by BIP!
impulse
This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.
BIP!Impulse provided by BIP!
11
Top 10%
Average
Top 10%
Green