Recursive macroeconomic theory, Thomas Sargent 2nd Ed - Chapter 19 ppsx

... current-period endowment in exchange for a raised promised utility v t+1 >v t . Promised values never decrease. They stay con- stant for low-y states y s < ¯y(v t ), and increase in high-endowment ... partici- pation constraint does and does not bind, we obtain c =max{g 1 (y),g 2 (v)}, (19. 3.18) w =max{ 1 (y),v}. (19. 3 .19) The optimal policy is displayed graphically in Figures 19....

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... −w t τ (s τ )n τ (s τ )],asexpressedintermsoftime-t,history-s t con- sumption goods. Thus, the household’s wealth, or the value of all its current and future net claims, expressed in terms of the date-t,history-s t consumption good ... current position. It is all that is needed for a planner to compute an optimal alloca- tion and it is all that is needed for the “invisible hand” to call out p...

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... that can be regarded as extending the ap- proach that we used in the villager-money lender model of section 19. 3 to an environment with two-sided lack of commitment. We followed Kocherlakota in using ... contract. 20.3. Recursive formulation We choose to study Kocherlakota’s model using the approach proposed by Thomas and Worrall. 2 Thomas and Worrall (198 8) formulate the contract de...

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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 197 7 paper Should Control Theory Be Used for Eco- nomic Stabilization? asserted that Gordon was too optimistic. Prescott claimed that in his...

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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 ... the Kalman filter in chapter 5 and the appendix on filtering and control, chapter 5. 26 25 See Hamilton (199 4) or Hansen and Sargent (in press). 26 See Hansen (198 2), Eichenbaum (199 1)...

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... Bertsekas (197 6), Bertsekas and Shreve (197 8), Stokey and Lucas (with Prescott) (198 9), Bellman (195 7), and Chow (198 1). This chapter covers much of the same material as Sargent (198 7b, chapter ... 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...

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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 ... (4.7.1), we apply a compu- tational procedure described by Judd (199 6, 199 8). The method uses a polyno- mial to approximate the ith iterate C i (V )ofC(V ). This polynomial is st...

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... recommended by Chow (199 7) and Anderson, Hansen, McGrattan, and Sargent (199 6). 11 Blanchard and Kahn (198 0), Whiteman (198 3), Hansen, Epple, and Roberds (198 5), and Anderson, Hansen, McGrattan and Sargent ... linear optimal control. (For continuous-time linear system, these concepts are described by Kwakernaak and Sivan, 197 2; for discrete-time systems, see Sargent, 198 0). The...

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... 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., t ... revealed by “nature.” (Jovanovic assumed that T = ∞.) We use the recursive projection technique (the Kalman filter) of chapter 5 to handle the firm’s and worker’s sequential learning. The predicti...

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... analyzed by Lucas and Prescott (197 1) and Sargent (198 7a). The recursive competitive equilibrium concept was used by Lucas and Prescott (197 1) and described further by Prescott and Mehra (198 0). ... (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 the...

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