Including budget contraint with more than one type of household

General DSGE Modeling
#1

Dear All,
I am a beginner on DSGE and I appreciate that we have this forum. I have a naive question on when we need to include budget constraints into our mod file. For one representative agent, if I understand correctly, we do not need to include this if we have good market-clearing such as Y=C+I+G. For models with more than two households (bankers, entrepreneur, saver, borrower,…) such as Gerali et al (2010), Iacoviello (2015) ( maybe many more), is there any way to not include the BCs of agents into the mod file ? And what kind of equation do we need to replace the BCs.

Thank you so much in advance!

#2

The default way to proceed is to include the budget constraints (which are first order conditions) und the market clearing conditions (except for one due to Walras Law). Typically, you can derive the resource constraint by combining the budget constraint the and the market clearing conditions. So the former can replace one of the latter as it contains the same information. For multi-agent models it is often more convenient to leave out the resource constraint.

#3

Thank you very much. It is much clearer now.