ECON 5760

Computational Economics

Dr. Philip Shaw

Dealy Hall, East 522

Phone: 718-817-4048

Email: pshaw5@fordham.edu

Office Hours: Monday, 2pm-3:30pm & Thursday 2pm-3:30pm.

The 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:

Midterm (50%)

Final Exam (50%)

Textbook: 

Heer, Burkhard and Maussner, Alfred, 2009.  "Dynamic General Equilibrium Modeling: Computational Methods and Applications"., Springer, 2nd ed.

Software: Matlab

Where to get Matlab: Click here!

David Griffiths' Guide to Matlab: Download here!

Practice Problems Posted Below:

PS1 PS2 PS3 PS4

Matlab Code Posted Below:

taylorapprox.m taylorapproxvec.m lip.m lipvec.m myfun.m CDDer.m bilinear.m bilineardemo.m myfunps2.m CDJac.m capitalsim.m NC.m NCint.m NR.m eulereq.m

Course Outline

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

11.3.1 Differentiation

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

Simulating Markov Chains

II. Discrete State Space Methods

Chapter 4

Bellman, R. 1954. "The Theory of Dynamic Programming". RAND Working Paper P-550. Download Here!

III. Parameterized Expectations

Chapter 5

IV. Computation of Stationary Distributions

Chapter 7

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

Chapter 8

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

Chapter 9