- Docente: Renata Bottazzi
- Credits: 6
- SSD: SECS-P/01
- Language: English
- Teaching Mode: Traditional lectures
- Campus: Bologna
- Corso: Second cycle degree programme (LM) in Economics (cod. 8408)
Learning outcomes
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.
After completing the course students should have an understanding of how to numerically solve and simulate dynamic optimisation models in economics.
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.
Readings/Bibliography
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.Teaching methods
Lectures, discussion of papers from the literature, practical sessions in Matlab.
Assessment methods
A final written examination will count towards 70% of the total grade. The remaining 30% will either be based on student presentations of relevant papers from the literature or on take-home problem sets, depending on class size. The final examination will consist of two parts: one part with multiple choice questions, one part with open questions. No support material is allowed during the final examination. An example exam paper will be made available among the course material on AMS Campus.
Teaching tools
Lecture slides (available from AMS Campus), computer codes (Matlab), and possibly student presentations (depending on class size).
Links to further information
Office hours
See the website of Renata Bottazzi