By Ramon Marimon, Andrew Scott
I must perform a little parameterized expectation paintings. I learn bankruptcy 7. it isn't well-written. The authors first introduce the overall framework, after which introduce a chain of examples. humans will be caught on the common framework half. they do not know WHY will we do this.
A greater strategy to introduce this system will be to take advantage of one or thoroughly labored out examples, paying specific consciousness to give an explanation for the tips at the back of doing what we're doing. this manner humans will recognize the tips at the back of the strategy, even if no longer unavoidably the final framework (who want to know the final framework anyway?) Then introduce the overall framework, and extra examples.
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Additional info for Computational Methods for the Study of Dynamic Economies
Disp(' The program is iterating on Bellman's equation. Please wait. 1: Evaluate all the first and second order % derivatives of the utility function at the steady state: R = log(e"Z*K~a - X); Jz = (e'Z*K"a) / (e"Z*KAa - X) ; Jk = (e"Z*a*K~(a-1)) / (e"Z*K~a - X) ; Jx = (-1) / (e~Z*K"a - X); Hzz = ( ( (e~Z*K"a) * (e"Z*K~a - X) ) - (e~Z*K~a)"2) / ( (e~Z*K - X)*2); Hkk = (((e"z*a*(a-l)*K~(a-2))*(e'Z*K"a - X ) ) - ... 5*D2H; Q=[ Qll Q12' Q12 Q22]; % Step 3: Compute the optimal value function. 1 Introduction Researchers often wish to analyse nonlinear dynamic discrete-time stochastic models.
4). • Step 3. If V,,+i = Vn, we are done. Otherwise, update Vn and go to step 1. , Vn+\ = T(Vn). It attempts to compute the limit of the sequence, V* = linwoo Vn9 Before we discuss the existence of this limit function, V*, it is important to understand that if did exist, V* would be the optimal value function that we are looking for. Suppose, by way of contradiction, that Vn+\ ^ Vn; that is, that we have not found a fixed point of mapping T. Could Vn be the optimal value function? The answer to this question should be "no", and the intuitive reason for this answer can be found in Bellman's principle of optimality.
3. 1. 4. 4. 5. Analyse the solution via impulse-response analysis and second-order-properties, possibly taking account of, say, the Hodrick-Prescott filter. 6. The next section skips directly to step 3 of the procedure outlined above and describes how to log-linearize nonlinear equations without explicit differentiation. 1 studies Hansen's (1985) benchmark real business cycle model as a prototype example, in which calculation of the Euler equations, the steady state and the log-linearization is carried out to see how this method works.