ARTICLE | Journal of Economic Dynamics and Control | Vol.141, 2023

Abstract

Broer et al. (2021) provide an "information criterion" and show the possibility of non-existence of the well-studied equilibrium of a workhorse heterogeneous agent model with aggregate uncertainty and incomplete markets, as exemplified in Krusell and Smith (1998) and as routinely solved thereafter. This discussion highly advocates the first-order importance of checking this information criterion against the commonly assumed equilibrium definition for a class of heterogeneous agent models. Though, I note that while the endogenous learning is critical, the proposed information criterion may be extended to capture the optimality of information structures across agents. A few other extensions are discussed to delve deeper into the conclusions and the general implications of this paper.