Just pushed the full overhaul of Appendix A of the Intro to Life-Cycle Models. Now covers a wide variety of shocks. Explains the three shock types: semi-exogenous, markov and i.i.d. shocks. How to use up to four of each shock type.
Also covers how to do age-dependent shocks. And how to move from ‘stacked column grids’ to ‘joint grids’ and how this can be used to handle correlated shocks.
Also explains all the discretization methods currently in VFI Toolkit. includes four main approaches to discretization: Tanaka-Toda, Tauchen, Tauchen-Hussey, & Rouwenhorst (Tanaka-Toda tends to perform the best of these). And also all the kinds of processes for which there are discretization routines: AR(1), AR(1) with gaussian-mixture innovations, AR(1) with stochastic volatility, AR(2), VAR(1), life-cycle AR(1) [life-cycle here means that it is non-stationary in the sense it changes every period], and life-cycle AR(1) with gaussian-mixture innovations. I have tried to harmonize all these discretization codes to take inputs in the same order, using same notation, and giving ordering of outputs. These discretization methods can of course be used independently of VFI Toolkit itself.