Questions tagged [representative-agent]

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Clarity about positive and normative representative household

I'd like to understand if I understood theory about representative agent (positive and normative): firstly it is necessary to ensure the existence of a representative household an it depends on the ...
  • 41
2 votes
0 answers

Liquidity puzzle in the representative household model

In a cash in advance representative household model, the nominal interest rate may be determined by $$\frac{1}{1 + i_t}= βE_t\left(\frac{M_t}{M_{t+1}}\right)$$ where $\beta$ is the discount rate. I'...
1 vote
1 answer

DSGE model with agents that develop their skills

Are there DSGE models with agents with different skill levels (and according wage differences) who can develop or lose their skills and with employees with dynamic/changing skill levels and skill ...
  • 395
3 votes
1 answer

Euler's Theorem

Can anyone give me connection and intuition behind each of the following euler's equation- Euler's equation in production function represents that total factor payment equals degree of homogeneity ...
1 vote
1 answer

Perpetual Youth Model

I am reading the famous paper of Blanchard,1985. There are some fundamental stuff that I did not really get. 1) Why they call it "perpetual youth"? 2) On page 225, he mentions the cohort size. So, ...
3 votes
1 answer

Use Lag Operator to find Lifetime Budget Constraint

The budget constraint is $c_t + \tau_t + s_{t+1} =w_t(1-l_t) +(1+r_t)s_t$ And assume $\underset{t \longrightarrow \infty}{lim} \ \displaystyle{\frac{s_t}{\Pi_{i=1}^{t-1} (1+r_i)}} = 0$ Lag ...
  • 316
5 votes
1 answer

How, with complete markets, do we have a representative agent?

I've read several texts stating that with a complete market assumption, there's always a representative agent lurking. How is it that by assuming complete markets, we're able to prove the existence of ...