Synopses & Reviews
This book is a companion volume to Dynamic Macroeconomic Theory by Thomas J. Sargent. It provides scrimmages in dynamic macroeconomic theory--precisely the kind of drills that people will need in order to learn the techniques of dynamic programming and its applications to economics. By doing these exercises, the reader can acquire the ability to put the theory to work in a variety of new situations, build technical skill, gain experience in fruitful ways of setting up problems, and learn to distinguish cases in which problems are well posed from cases in which they are not. The basic framework provided by variants of a dynamic general equilibrium model is used to analyze problems in macroeconomics and monetary economics. An equilibrium model provides a mapping from parameters of preferences, technologies, endowments, and "rules of the game" to a probability model for time series. The rigor of the logical connections between theory and observations that the mapping provides is an attractive feature of dynamic equilibrium, or "rational expectations," models. This book gives repeated and varied practice in constructing and interpreting this mapping.
Synopsis
This book is a companion volume to Dynamic Macroeconomic Theory by Thomas J. Sargent. It provides scrimmages in dynamic macroeconomic theory--precisely the kind of drills that people will need in order to learn the techniques of dynamic programming and its applications to economics.
Synopsis
Thomas Sargent Is Winner of the 2011 Nobel Prize in Economics
About the Author
Rodolfo E. Manuelli is Professor of Economics, Stanford University.
Table of Contents
1. Dynamic Programming Brock-Mirman (1972)
Howard Policy-Improvement Algorithm
Levhari-Srinivasan (1969)
Habit Persistence: 1
Habit Persistence: 2
Lucas and Prescott (1971) and Kydland and Prescott (1982)
Meet a Linear Regulator
Interrelated Factor Demand
Two-Sector Growth Models
Learning to Enjoy Spare Time
Investment with Adjustment Costs
Investment with Signal Extraction
2. Search
Being Unemployed with Only a Chance of an Offer
Two Offers per Period
A Random Number of Offers per Period
Cyclical Fluctuations in Number of Job Offers
Choosing the Number of Offers
Mortensen Externality
Variable Labor Supply
Wage Growth Rate and the Reservation Wage
Search with a Finite Horizon
Finite Horizon and Mean-Preserving Spread
Pissarides' Analysis of Taxation and Variable Search Intensity
Search and Nonhuman Wealth
Search and Asset Accumulation
3. Asset Prices and Consumption
Taxation and Stock Prices
Contingent Claims Prices in a Brock-Mirman Economy
Trees (Stocks) in the Utility Function
Government Debt in the Utility Function
Tobin's q
A Generalization of Logarithmic Preferences
Arbitrage Pricing
Modigliani-Miller
Arbitrage Pricing and the Term Structure of Interest Rates
Pricing One-Period Options
Pricing n-Period Options
4. Currency in the Utility Function (no exercises)
5. Cash-in-Advance Models
Private Wealth
Unpleasant Monetarist Arithmetic
A Permanent (McCallum) Government Deficit
A Useful Identity under Interest on Reserves
Defining the State Vector
Computing an Equilibrium
Interest on Reserves and Stock Prices
Incentives for "Private Currencies"
Other Interest-on-Reserve Schemes
Stock Prices and Inflation
6. Credit and Currency with Long-Lived Agents
Value of Unbacked Currency
Computing Equilibrium Interest Rates
"Self-Insurance" and the Permanent Income Theory
The Distribution of Currency
Rate-of-Return Dominance
7. Credit and Currency with Overlapping Generations
Credit Controls
Inside Money and Real Bills
Social Security and the Price Level
Seignorage
Oscillating Physical Returns
Indeterminacy of Exchange Rates
Asset Prices and Volatility
Unpleasant Monetarist Arithmetic
Grandmont
Bryant-Wallace
8. Government Finance in Stochastic Overlapping-Generations Models
A Version of Kareken-Wallace Exchange Rate Indeterminacy
The Term Structure of State-Contingent Claims
Wairas's Law: 1
Wairas's Law: 2
Constancy of Fiscal Policy
Altered Version of Logarithmic Preferences
Appendix. Functional Analysis for Macroeconomics
Periodic Difference Equation
Asset Pricing
Index