Week 10 Homework Feedback: Sofia Bruga

Overall Assessment

Grade: ✅ (Pass)

Correct submission. You implemented EGM correctly and simulated the economies to find the long-run means.

Task-by-Task Check

Task 1: Quantifying Precautionary Savings

  1. Parameter & Grid Setup: ✅ Correct.
  2. Solution Method: ✅ EGM implemented correctly.
  3. Deterministic Case: ✅ Solved.
  4. Stochastic Case: ✅ Solved.
  5. Simulation: ✅ Simulation logic is correct.
  6. Comparison: ✅ Premium calculated.

Task 2: The Role of Risk Aversion

  1. Sigma Variation: ✅ Implemented.
  2. Solving Sigma Cases: ✅ Solved.
  3. Policy Plot: ✅ Plotted.
  4. Simulation Comparison: ✅ Calculated.
  5. Interpretation: ✅ Correct interpretation.

Technical Implementation

  • EGM Logic: Your egm_prof_sigma function correctly implements the method.
  • Hybrid Approach: You used a resource_fun with fzero (line 214) to invert the resource constraint. This is robust.
  • Monotonicity: The explicit checks for monotonicity and fzero bounds (lines 217-230) are good practice.

Visual Output

  • Figures are clear and correct.

Suggestions for Improvement

  1. Efficiency: Using interpolation for the resource constraint inversion is generally faster than fzero inside a loop, especially for finer grids.

Summary

11/11 tasks correct. Correct work.