Perturbation Methods for Heterogeneous Agent Models

The following lecture is a short-course on how to use perturbation methods to solve heterogeneous agent models.

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You can find the codes to implement this on GitHub:

Comparison of Perturbation vs MIT shock solution for Krusell-Smith model (Matlab) https://github.com/ralphluet/KS_Perturbation_vs_MIT

Perturbation solution with our reduction method for Krusell-Smith and HANK models (Matlab) https://github.com/ralphluet/perturbation_codes

Perturbation solution with our reduction method for HANK models (Python) https://github.com/econ-ark/BayerLuetticke

Perturbation solution with our reduction method for estimating HANK models (Julia) https://github.com/BASEforHANK

Income Risk

We use the Survey of Income and Program Participation to estimate a household income process with time-varying variance of persistent income shocks (1980-2012). See Bayer, Luetticke, Pham-Dao, Tjaden (2019) for details.

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Inequality

Our structural model in Bayer, Born, Luetticke (2020) allows us to generate a quarterly time series for US inequality from 1954-2019. The model replicates the annual observations on the US top 10% wealth and income shares from the World Inequality Database, and we can use the Kalman smoother to create a quarterly time series (done with the HANKXPlus model).

Download data.

Tax Progressivity

Annual and quarterly measure of tax progressivity in the US, 1954-2019. In Bayer, Born, Luetticke (2020) we first extend the Mertens and Montiel Olea (2018)-calculations of average (ATR) and average marginal tax rates (AMTR) to the years 2013-2017 and with these calculate tax progressivity as in Ferriere and Navarro (2018) using the average and average marginal tax rate: P = (AMTR - ATR)/(1 - ATR). This provides us with annual observations for the estimation of our HANK model, and we can use the Kalman smoother to create a quarterly time series (done with the HANKXPlus model).

Download quarterly data.

Download annual observations.

Replication code: https://github.com/LuisCald/Tax-Progressivity-Construction

These writings provide an accessible summary to my research.

VoxEU blog post about Germany’s temporary VAT cut in 2020 and its effect on consumption. German version at Oekonomenstimme German blog post. Based one my research paper Bachmann, Born, Goldfayn-Frank, Kocharkov, Luetticke, Weber (2021).

VoxEU blog post summarizing my research on the economic consequences of rising public debt in the US. Based one my research paper Bayer, Born, Luetticke (2021).

VoxEU blog post on the aggregate and distributional consequences of the CARES stimulus package in the US. Based one my research paper Bayer, Born, Luetticke, Mueller (2020).

VoxEU blog post on US business cycles and inequality through the lens of an estimated HANK model. Based one my research paper Bayer, Born, Luetticke (2020).

UCL blog post on the distributional consequences of banking regulation. Based one my research paper Lee, Luetticke, Ravn (2020).

Overview lecture about HANK and monetary policy at an ECB conference (2018). Based one my research papers Bayer, Luetticke, Pham-Dao, Tjaden (2019) and Luetticke (2021).

Bundesbank Monthly Report (2016) on the distributional effects of monetary policy. Based one my research papers Bayer, Luetticke, Pham-Dao, Tjaden (2019) and Luetticke (2021).

Academic Year 2022/23

MSc course on Heterogenous Agent Macroeconomics.

Past Teaching

Macroeconomics and Computational Methods at all levels.

Thesis Supervision

I supervise theses in the area of macroeconomics. To apply for supervision, please email me an up-to-date transcript, a short CV, and a rough description of what you are interested in.

Virtual Macro Seminar

I am a co-organizer of the VMACS seminar series. Check out our website to see the great line up of macro speakers. Follow VMACS on Twitter @virtualmacrosem and watch past seminars on our YouTube channel.