Recursive macroeconomic theory, Thomas Sargent 2nd Ed - Chapter 7 pdf

... (Y t /n, Y t ) . (7. 2.10) Exercises 199 7. 6. Concluding remarks This chapter has introduced two equilibrium concepts and illustrated how dy- namic programming algorithms are embedded in each. For ... B 1t F 1t ) . (7. 5 .7) The equilibrium sequences {F 1t ,F 2t ; t = t 0 ,t 0 +1, ,t 1 −1} can be calcu- lated from the pair of coupled Riccati difference equations (7. 5.5) and (7. 5 .7) ....

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... Models c ^ 2 c 2 c 1 _ c ^ 1 t-1 c t c t t+1 c t t _ Feasibility line with slope -n Budget line with slope -n/ z , Figure 9 .7. 1: The feasibility line (9 .7. 15) and the budget line (9 .7. 17) when z>1. The ... have already en- countered repeated examples of the situation that, before an equilibrium with valued currency can exist, the equilibrium without valued currency must be a low-int...

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... implement multilateral long-term lending among corre- sponding “banks”: notes issued by individual A and owned by B are “honored” or redeemed by individual C by being exchanged for goods. 13 In a ... equation ( 17. 4.4) and assets by a t = −φ. 6 Consumption must be nonnegative, for example, if we impose the Inada condition discussed earlier. Average assets as function of r 577 K r KK r 10 -...

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... borrower under the more restricted contract. 23.4. Limited commitment and unobserved investment Atkeson designed an optimal recursive contract that copes with two impedi- ments to risk sharing: (1) ... one-sided limited commitment: the borrower is free to default on the contract and can choose to revert to autarky at any state. Each period, the borrower confronts a two-period-lived, risk-ne...

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... insured away. Higher present-value-of-endowment consumers will have permanently higher consump- tion than lower present-value-of-endowment consumers, so that there is a non- degenerate cross-section ... programming challenged But Edward C. Prescott’s 1 977 paper Should Control Theory Be Used for Eco- nomic Stabilization? asserted that Gordon was too optimistic. Prescott claimed that in his 1...

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... 30 −15 −10 −5 0 5 impulse response 0 1 2 3 10 2. 177 2 10 2. 177 6 10 2. 178 10 2. 178 4 spectrum −15 −10 −5 0 5 10 15 0 50 100 150 covariogram 20 40 60 80 −30 −20 −10 0 10 20 sample path Figure 2 .7. 5: bigshow2 for Backus ... correlated. Thus, it can be veri ed from (2 .7. 9) that the term σ 2 j in (2 .7. 10) and (2 .7. 11) satisfies σ 2 j =var t (log m t+1 + ···+logm t+j ) where var t den...

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... Bertsekas (1 976 ), Bertsekas and Shreve (1 978 ), Stokey and Lucas (with Prescott) (1989), Bellman (19 57) , and Chow (1981). This chapter covers much of the same material as Sargent (1987b, chapter 1). – ... permit uncertainty. Es- sentially, we add some well-placed shocks to the previous non-stochastic prob- lem. So long as the shocks are either independently and identically distribu...

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... involve no opti- mization, just computing discounted expected utility. The appendix to chapter 6 describes some related examples based on search theory. 4.6.1. Example 1: calculating expected utility Suppose ... (4 .7. 3) Here V is a discounted present value that an insurer has promised to an unem- ployed worker, V u is a value for next period that the insurer promises the worker if he rema...

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... those prob- lems otherwise is why linear quadratic approximations are used so widely. We describe those approximations in appendix B to this chapter. In chapter 7, we go beyond the single-agent ... B  P j B) −1 B  P j A, (5.2.7a) starting from P 0 = 0. The policy function associated with P j is F j+1 =(Q + B  P j B) −1 B  P j A. (5.2.7b) Equation (5.2 .7) is derived much like equatio...

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... dots), [m =10,λ = 0] (the line with circles), and [m = 10,λ= .1] (the dashed line). 5 10 15 20 6.2 6.4 6.6 6.8 7 7.2 7. 4 7. 6 7. 8 8 Figure 6.A.2: Mean wages as function of tenure for model with three ... refered to as Bewley models, that we shall study in depth in chapter 17. This model of unemployment is sometimes called a lake model and can be represented as in Fig. 6.4.1 with two...

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