Dynamic general equilibrium modelling : computational methods and applications

Modern business cycle theory and growth theory uses stochastic dynamic general equilibrium models. Many mathematical tools are needed to solve these models. The book presents various methods for computing the dynamics of general equilibrium models. In part I, the representative-agent stochastic growth model is solved with the help of value function iteration, linear and linear quadratic approximation methods, parameterised expectations and projection methods. In order to apply these methods, fundamentals from numerical analysis are reviewed in detail. Part II discusses methods for solving heterogeneous-agent economies. In such economies, the distribution of the individual state variables is endogenous. This part of the book also serves as an introduction to the modern theory of distribution economics. Applications include the dynamics of the income distribution over the business cycle or the overlapping-generations model. Through an accompanying home page to this book, computer codes to all applications can be downloaded. --back cover The International Workshop on "Human Interaction with Machines" is the sixth in a successful series of workshops that were established by Shanghai Jiao Tong University and Technische Universität Berlin. The goal of those workshops is to bring together researchers from both universities in order to present research results to an international community. The series of workshops started in 1990 with the International Workshop on "Artificial Intelligence" and was continued with the International Workshop on "Advanced Software Technology" in 1994. Both workshops have been hosted by Shanghai Jiaotong University. In 1998 the third wo- shop took place in Berlin. This International Workshop on "Communi- tion Based Systems" was essentially based on results from the Graduiertenkolleg on Communication Based Systems that was funded by the German Research Society (DFG) from 1991 to 2000. The fourth Int- national Workshop on "Robotics and its Applications" was held in Sha- hai in 2000. The fifth International Workshop on "The Internet Challenge: Technology and Applications" was hosted by TU Berlin in 2002 pt. I. Representative agent models -- 1. Basic models and elementary algorithms -- 2. Linear quadratic and linear approximation methods -- 3. Parameterized expectations -- 4. Projection methods -- pt. II. Heterogeneous agent models -- 5. Computation of stationary distributions -- 6. Dynamics of the distribution function -- 7. Overlapping generations models -- pt. III. Tools -- 8. Numerical methods -- 9. Various other tools. In 1928 Frank Ramsey, a young mathematician, posed the problem "How much of its income should a nation save?" and developed a dynamic model to answer this question.