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. 13 In a ... condition for capital to deduce a downward-sloping curve K = K(r). This is drawn as the curve labelled F K − δ in Figure 17. 6.1. We can use the marginal productivity conditions to deduce a fact...

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... Concluding remarks This chapter has introduced two equilibrium concepts and illustrated how dy- namic programming algorithms are embedded in each. For the linear models we have used as illustrations, ... the parameter values listed in exercise 7.1. Exercise 7.6 Self-control This is a model of a human who has time-inconsistent preferences, of a type proposed by Phelps and Pollak (1968) and u...

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... 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-interest-rate economy ... these equilibria is credible, in the sense of subgame perfection, to be studied extensively in chapter 22. Narayana Kocherlakota (1998) has compared gift-giving and monetary equi- libria in a...

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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 ... humans share a com- mon ancestor called Eve who lived 200,000 years ago. All of macroeconomics too seems to have descended from a common source, Irving Fisher’s and Mil- ton Friedman’s consump...

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... 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...

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... 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 distributed or Markov, straightforward ... (3.1 .17) where ˆ k denotes the “two-period-ahead” value of k.Equation(3.1 .17) can be expressed as 1=β u  (c t+1 ) u  (c t ) f  (k t+1 ) , an Euler equation that is exploited e...

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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 ... 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 remains unemployed,...

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... devoted to characterizing the conditions on A, B, R,and Q under which the optimal closed-loop system matrix (A−BF) is stable. These results are surveyed by Anderson, Hansen, McGrattan, and Sargent ... 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-...

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... 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 lakes denoted ... each period she remains unemployed, or a fixed wage w that the worker receives if employed. Once employed, the worker is employed forever with no chance of being fired. Every odd period (i.e.,...

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