Modern business cycle theory and growth theory uses stochastic dynamic general equilibrium models. In order to solve these models, ecomists need to use many mathematical tools. This book presents various methods in order to compute the dynamics of general equilibrium models. In part I, the representative-agent stochastic growth model is solved with the help of value function iteration, linear and linear quadratic approximation methods, parameterised expectations and projection methods. In order to apply these methods, fundamentals from numerical analysis are reviewed in detail. In particular, the book discusses issues that are often neglected in existing work on computational methods, e.g. how to find a good initial value. In part II, the authors discuss methods in order to solve heterogeneous-agent ecomies. In such ecomies, the distribution of the individual state variables is endogeus. This part of the book also serves as an introduction to the modern theory of distribution ecomics. Applications include the dynamics of the income distribution over the business cycle or the overlapping-generations model. In an accompanying home page to this book, computer codes to all applications can be downloaded.
Alfred Maussner, Burkhard Heer
Springer-Verlag Berlin and Heidelberg GmbH & Co. KG
Date of Publication
Economics: Professional & General
Place of Publication
Country of Publication
Springer-Verlag Berlin and Heidelberg GmbH & Co. K