HARK icon indicating copy to clipboard operation
HARK copied to clipboard

ConsIndShock model is broken for log-utility

Open Mv77 opened this issue 3 years ago • 4 comments

Describe the bug Trying to solve IndShockConsumerType when CRRA==1 results in division-by-zero errors.

C:\GitHub\HARK\HARK\ConsumptionSaving\ConsIndShockModel.py in make_vFunc(self, solution)
   1222         vNvrs = np.insert(vNvrs, 0, 0.0)
   1223         vNvrsP = np.insert(
-> 1224             vNvrsP, 0, self.MPCmaxEff ** (-self.CRRA / (1.0 - self.CRRA))
   1225         )
   1226         MPCminNvrs = self.MPCminNow ** (-self.CRRA / (1.0 - self.CRRA))

Expected behavior Provisions should be made to use log utility when CRRA==1, so that one does not divide by 0.

Mv77 avatar Dec 20 '21 21:12 Mv77