Overlapping Generation Models with Heterogeneous Agents and Aggregate Uncertainty in Macroeconomic Modelling

Abstract

The paper introduces the methodology of the overlapping generations models with heterogeneous agents and aggregate uncertainty -macroeconomic, stochastic general equilibrium models that account for consumer heterogeneity mainly with respect to age and wealth. Taking as an example my own model, which additionally allows for labour market status and skill heterogeneity, I show how consumer consumption and investment decision rules are derived. I also provide a detailed discussion of the most popular computational algorithms used to deal with those models. The model is then used to examine welfare gains from eliminating business cycle fluctuations on the labour market in Poland for different groups of consumers.