"HETEROGENEITY, AGGREGATE UNCERTAINTY AND THE
SHORT-TERM INTEREST RATE"
In this paper, I solve heterogenous agents models using
the parameterized expectations algorithm (PEA) and the policy
function iterations algorithm (PFI). The problem in solving these
models is that the wealth distribution belongs to the set of state
variables. I solve this problem by approximating
the distribution with a limited set of moments or percentiles.