Dr. Philip Shaw
Dealy Hall, East 522
Office Hours: Monday, 2pm-3:30pm & Thursday 2pm-3:30pm.
aim of this course is to explore methods used to compute numerical
solutions to dynamic stochastic general equilibrium (DSGE) models with
applications to both macroeconomics and finance. The course
begins with a rigorous exploration of numerical methods including
function approximation, numerical differentiation and integration,
non-linear equations, numerical optimization, and the simulation of
multivariate Markov processes. Utilizing these tools, we will
pursue solution methods such as discrete state space methods and
parameterized expectations. Finally the class will end with
solution methods designed to solve models with heterogeneous agents
with and without uninsurable risk.
The grading for the class breaks down as follows:
Final Exam (50%)
Textbook:Heer, Burkhard and Maussner, Alfred, 2009. "Dynamic General Equilibrium Modeling: Computational Methods and Applications"., Springer, 2nd ed.
Where to get Matlab: Click here!
David Griffiths' Guide to Matlab: Download here!
Practice Problems Posted Below:
Matlab Code Posted Below:
I. Numerical Methods
Section 11.2: Function Approximation
11.2.1 Taylor's Theorem
11.2.3 Linear Interpolation
Section 11.3 Numerical Differentiation and Integration
11.3.2 Numerical Integration
Section 11.5 Non-Linear Equations
11.5.1 Single Equations
11.5.2 Multiple Equations
Section 12.2 Markov Processes
II. Discrete State Space Methods
Bellman, R. 1954. "The Theory of Dynamic Programming". RAND Working Paper P-550. Download Here!
III. Parameterized Expectations
IV. Computation of Stationary Distributions
Aiyagari, S. Rao 1994 "Uninsured Idiosycratic Risk and Aggregate Saving". The Quarterly Journal of Economics, 109(3), 659-684. Download Here!
Hansen, G. and Imrohoroglu, A. 1992 "The Role of Unemployment Insurance in an Economy with Liquidity Constraints and Moral Hazard". Journal of Political Economy, 100(1), 118-42. Download Here!
V. Dynamics of the Distribution Function
Krusell, P. and Smith, A. 1998. "Income and Wealth Heterogeneity in the Macroeconomy". Journal of Political Economy, 106, 867-96. Download Here!
VI. Deterministic Overlapping Generations Models