Welcome to Dynamic Models and Computational Methods in Economics

Spring 2012. Wednesdays 9:50am to 12:40pm. N-603 and Computer Lab.

Office Hours

Hugo Benitez-Silva: Wednesdays 4pm and by appointment.(SBS S-649).

Syllabus

Announcements

Assignments

For the Week of January 25 and February 1, 2012:

Read the notes on Stochastic Decision Problems.

Also Chapters 2 and 3 in Ljungqvist and Sangent's book, and Chapter 12 in Judd's book.

Read the NBER paper by Judd I linked below, and Rust's discussions on economic complexity that I also link below. As well as Rust's recent piece on dynamic programming, and a paper by Keane on structural models, and Rust's response to it.

Notes on Stochastic Decision Problems: Theory

Judd's insights on Computational Economics and its connection with Economic Theory.

Rust's insights on Computational and Economic Complexity.

An Overview of Dynamic Programming by John Rust.

Structural vs. Atheoretic Approaches to Econometrics, by Michael Keane.

Comments by John Rust on the paper by Michael Keane titled "Structural vs. Atheoretic Approaches to Econometrics".

Also, read the short paper by Wolpin in AER, May 2007, pages 48-52.

Review paper on the estimation of Dynamic Discrete Choice Structural Models by Aguirregabiria and Mira. No need to read it right now, but useful reference to have.

Also very interesting and a good reference is Manuel Santos' chapter in the Handbook of Macroeconomics (Chapter 5) titled "Numerical Solution of Dynamic Economic Models."

For the Week of February 8 and February 15, 2012:

Read Phelps (1962), Levhari and Srinivasan (1969) and Hakansson (1970). We will talk about these models in class on, and some code will be provided in the next weeks to solve a related model. If you are interested in the topic read also Thurow (1969), Nagatani (1972), Miller (1974), Zeldes (1989a), Zeldes (1989b), Deaton (1991), Van Der Ploeg (1993), and Heckman (1974)

Derivation of the finite horizon counterpart of the Phelp's problem using CRRA.

Assignment 1: Due March 7, 2012

In class we derived the closed form solution of the Phelp's problem for log utility. Do the same for the CRRA (Levhari and Srinivasan) and CARA (Hakansson, but under certainty) utility function. Moreover, solve a finite horizon version of this problem for the log utility case (or one of the other utility functions). Choose one of these derivations and hand them in. The ideal is that you do one infinite horizon and one finite horizon, but not one of the cases we did in class.

Hint for calculating the infinite horizon with CARA.

For the Week of February 22 and February 29

Notes on Discrete Approximation of Continuous State Finite Horizon MDPs

Notes on Quadrature Integration and Quadrature Grids

Notes on Drawing from arbitrary distributions: the Probability Integral Transform.

Notes on Bisection for Solving Non-linear functions, and Finite Differences Derivative Methods.

Notes on Monte Carlo and Quasi Monte Carlo Integration.

For the Week of April 11 and April 25

Assignment 2: Due May 7, 2012.

Notes on Life-Cycle Models.

Notes on Models with Income Uncertainty.

Zeldes 1989, QJE