A neoclassical growth model with heterogeneous agents: a RBC methodology

Abstract

The purpose of this dissertation is to determine the point at which the model in the study of Economides et al (2014) accurately predicts some key stylized facts of the UK economy, 1990-2008. At first, we solve the model analytically and we import the parameters thereof in order to obtain the steady state values of the endogenous variables. Then, we linearize the equilibrium conditions around the steady state and we find the impulse response functions of the exogenous shocks. Finally, we obtain the cyclical components of the simulated data of the model as well as the actual data and we compare their second moment properties. In other words, under a rich set of exogenous instruments, we apply the RBC methodology to see how the model behaves comparing to our data.