Numerical methods in economics

Prof.ssa Renata Bottazzi

  • Date:

    18 FEBRUARY
    -
    28 FEBRUARY 2019
     from 11:00 to 16:00

  • Event location: Seminar Room, 1st floor, Department of Statistics, Via Belle Arti 41, Bologna

  • Type: Cycle 34 - Short courses and seminars

All dates: Department of Statistics, Via Belle Arti 41, Bologna

Prof.ssa Renata Bottazzi

Mon 18/02 11:00 - 13:00 a.m. - Seminar Room 1st floor
Wed 20/02 11:00 - 13:00 a.m. - Seminar Room 1st floor
Fri    22/02 11:00 - 13:00 a.m. - Seminar Room 1st floor
Mon 25/02 11:00 - 13:00 a.m - Seminar Room 1st floor
Wed 27/02 11:00 - 13:00 a.m - Seminar Room 1st floor
Thu  28/02 02:00 - 04:00 p.m - Seminar Room 1st floor

Learning outcomes

After completing the course students should have an understanding of how to numerically solve and simulate dynamic optimisation models in economics. The first part of the course is devoted to introducing the theoretical setup:  recursive methods are discussed in relation to standard dynamic models, such as a lifecycle model of consumption and savings; and, the numerical methods that are typically used for the computational solution and simulation of such models are introduced. The second part of the course is devoted to the practical implementation in Matlab of the methods acquired in the first part.

Course contents

1. Theory of Dynamic Programming (DP): Bellman equation and recursive solution.

2. Numerical methods for DP problems: value function iteration and policy function iteration. Interpolation methods, numerical integration and simulation of the model.

3. Analysis of an economic model in finite horizon: solution and estimation methods for a simple life cycle consumption and savings model. Infinite horizon and solution methods.

4. Practical implementation of a simple DP model in Matlab.

 

Suggested readings

The topics covered in this course are mainly based on the books listed below. More detailed references and relevant papers from the economics literature will be provided at the beginning of the course.

Adda, Jerome and Russell Cooper (2003). Dynamic Economics. Cambridge, MIT Press.

Judd, Kenneth (1998). Numerical Methods in Economics. Cambridge, MIT Press.

Ljungqvist, Lars and Thomas Sargent (2012). Recursive Macroeconomic Theory. 3rd Edition. Cambridge, MIT Press.

Stokey, Nancy and Robert Lucas (1989). Recursive Methods in Economic Dynamics. Cambridge, Harvard University Press.