Recursive macroeconomic theory, Thomas Sargent 2nd Ed - Chapter 17 pdf

... 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.13In a ... condition for capital to deduce a downward-sloping curve K = K(r).This is drawn as the curve labelled FK− δ in Figure 17. 6.1. We can use themarginal productivity conditions to deduce a factor price ... probabilities λ of being ﬁredeach period when they are employed. With probability µ ∈ (0, 1), each un-employed worker receives one oﬀer to work at wage w drawn from the cumu-lative distribution...

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

... Concluding remarksThis chapter has introduced two equilibrium concepts and illustrated how dy-namic programming algorithms are embedded in each. For the linear models wehave used as illustrations, ... theparameter values listed in exercise 7.1.Exercise 7.6 Self-controlThis is a model of a human who has time-inconsistent preferences, of a typeproposed by Phelps and Pollak (1968) and used by Laibson ... equationsthat are to be solved jointly by simultaneous backward induction.Though the equilibrium concepts introduced in this chapter obviously tran-scend linear-quadratic setups, we choose...

Recursive macroeconomic theory, Thomas Sargent 2nd Ed - Chapter 9 pdf

... have already en-countered repeated examples of the situation that, before an equilibrium withvalued currency can exist, the equilibrium without valued currency must be alow-interest-rate economy ... these equilibria is credible, in the sense of subgame perfection, to be studiedextensively in chapter 22.Narayana Kocherlakota (1998) has compared gift-giving and monetary equi-libria in a variety ... issued IOU’s (the ﬁrst term) andgovernment-issued currency. The right side is thus an abstract version of M1,which is a sum of privately issued IOU’s (demand deposits) and government-issued...

Recursive macroeconomic theory, Thomas Sargent 2nd Ed - Chapter 23 pdf

... borrower under the more restricted contract.23.4. Limited commitment and unobserved investmentAtkeson designed an optimal recursive contract that copes with two impedi-ments to risk sharing: (1) ... one-sided limited commitment: the borrower is free todefault on the contract and can choose to revert to autarky at any state.Each period, the borrower confronts a two-period-lived, risk-neutral ... compensated for the reduction in current payoﬀ by an equiv-alent increase in the discounted continuation value while country L receivescorresponding changes of opposite signs.Since the constrained...

Recursive macroeconomic theory, Thomas Sargent 2nd Ed - Chapter 1 potx

... insured away. Higherpresent-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 ... humans share a com-mon ancestor called Eve who lived 200,000 years ago. All of macroeconomicstoo seems to have descended from a common source, Irving Fisher’s and Mil-ton Friedman’s consumption ... notation in chapter 16: Athere conforms to −btin chapter 16. Chapter 1Overview1.1. WarningThis chapter provides a non-technical summary of some themes of this book.We debated whether to...

Recursive macroeconomic theory, Thomas Sargent 2nd Ed - Chapter 2 pptx

... stationary stochastic process, all second moments can be en-coded in a complex-valued matrix called the spectral density matrix. The auto-covariance sequence for the process determines the spectral ... diﬃcult to predict variable; and (b) nevertheless that θ(L) = φ(L)so that the stochastic discount factor has subtle predictable components. Fea-ture (a) is needed to match observed prices of ... program can be downloaded from<ftp://zia.stanford.edu/pub/˜ sargent/ webdocs/matlab>.Hint 2: The mean vector is the eigenvector of A associated with a unit eigen-value, scaled so that the mean...

Recursive macroeconomic theory, Thomas Sargent 2nd Ed - Chapter 3 docx

... 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 distributedor Markov, straightforward ... (3.1 .17) whereˆk denotes the “two-period-ahead” value of k.Equation(3.1 .17) can beexpressed as1=βu(ct+1)u(ct)f(kt+1) ,an Euler equation that is exploited extensively in the theories ... can be used for problemsthat cannot be solved by hand. Here we shall describe the ﬁrst of two specialtypes of problems for which analytical solutions can be obtained. It involvesCobb-Douglas...

Recursive macroeconomic theory, Thomas Sargent 2nd Ed - Chapter 4 ppt

... 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 utilitySuppose ... V is a discounted present value that an insurer has promised to an unem-ployed worker, Vuis a value for next period that the insurer promises the workerif he remains unemployed, 1 −p(a) is ... (4.7.1), we apply a compu-tational procedure described by Judd (1996, 1998). The method uses a polyno-mial to approximate the ith iterate Ci(V )ofC(V ). This polynomial is storedon the computer...

Recursive macroeconomic theory, Thomas Sargent 2nd Ed - Chapter 5 doc

... devoted to characterizing the conditions on A, B, R,andQ under which the optimal closed-loop system matrix (A−BF) is stable. Theseresults are surveyed by Anderson, Hansen, McGrattan, and Sargent ... those prob-lems otherwise is why linear quadratic approximations are used so widely. Wedescribe those approximations in appendix B to this chapter. In chapter 7, we go beyond the single-agent ... linear optimalcontrol. (For continuous-time linear system, these concepts are described byKwakernaak and Sivan, 1972; for discrete-time systems, see Sargent, 1980).These conditions subsume...

Recursive macroeconomic theory, Thomas Sargent 2nd Ed - Chapter 6 docx

... refered to as Bewley models, that weshall study in depth in chapter 17. This model of unemployment is sometimes called a lake model and can berepresented as in Fig. 6.4.1 with two lakes denoted ... each period she remains unemployed, or a ﬁxed wage wthat the worker receives if employed. Once employed, the worker is employedforever with no chance of being ﬁred. Every odd period (i.e., t ... the conceptof a “mean-preserving increase in spread.” In particular, a distribution indexedby r2is said to have been obtained from a distribution indexed by r1by amean-preserving increase...

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