Recursive macroeconomic theory, Thomas Sargent 2nd Ed - Chapter 24 ppt

... interest-bearing government indebt- edness equals the present value of the net-of-interest government surplus,with 6 In chapter 9, we studied the perfect-foresight dynamics of a closely related system ... parameterization in Figures 24. 2.1 and 24. 2.2 shows that there can be mul- tiple values of R m that solve equation (24. 2.22). As can be seen in Figure 24. 2.1, some values of the gro...

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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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... 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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... the state-contingent consumption to- day and the promised discounted utility tomorrow are functions of the initial promised discounted utility levels. Define v as the expected discounted utility ... function for a com- plete markets economy with date- and history-contingent commodities, whose markets have been reopened at date τ ,historys τ , given the wealth levels im- plied by the tails ......

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... promoted strong interest in the Ricar- dian proposition. Barro described the proposition in a context distinct from the present one but closely related to it. Barro used an overlapping genera- tions ... used data on two returns, the real return on a value-weighted NYSE stock return and the real return on U.S. Trea- sury bills. They used the excess return of stocks over Treasury bills to com-...

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... steady state. 2 To ensure well-defined maximization problems, a maintained assumption throughout the chapter is that parameters are such that any derived consump- tion growth rate 1+µ yields finite ... equations (14.5.5). Each worker is assumed to be endowed with one unit of time. The Exogenous growth 447 We see that a constant consumption growth rate on the left-hand side is sus- tained in a...

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... distortionary taxation. And any tax revenues raised in earlier periods and carried over as government-owned assets would then also be handed back to the households as a lump-sum transfer. If, on the other hand, ... indebtedness carried over to and maturing in the next period t + 1, denominated in time (t +1 )- goods. The market value at time t of that government indebtedness equals b t+1 (...

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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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... 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 ... method proceeds by constructing a sequence of value functions and associated policy functions. The sequence is created by iterating on the following equation, starting from V 0 = 0,...

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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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