The method of endogenous gridpoints with occasionally binding constraints among endogenous variables

Thomas Hintermaier and Winfried Koeniger

Journal of Economic Dynamics and Control, 2010, vol. 34, issue 10, 2074-2088

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.

Keywords: Endogenous; gridpoints; method; Occasionally; binding; constraints; Collateralized; debt; Durables (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (71)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:34:y:2010:i:10:p:2074-2088

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