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Computations and Quantitative Models (ECO-AD-COMQUANM)

ECO-AD-COMQUANM


Department ECO
Course category ECO Advanced courses
Course type Course
Academic year 2022-2023
Term BLOCK 2
Credits ,5 (EUI Economics Department)
Professors
Contact Simonsen, Sarah
Sessions

28/11/2022 10:00-11:30 @ Seminar Room 3rd Floor,V. la Fonte

12/12/2022 11:00-12:30 @ Seminar Room 3rd Floor,V. la Fonte

Purpose

Professor: Alexander Monge-Naranjo ([email protected])
Half credit: 10 hours

Description:
This course covers the basic dynamic models of incomplete markets that must be familiar to all research economists, not just those doing macro. In the first lecture, we overview the different directions that we can take to incorporate contractual frictions and incompleteness in financial markets. In the following three lectures develop the baseline dynamic incomplete markets model. We start by characterizing the individual’s optimization problems and then derive some of the key general equilibrium implications. We then sketch a few extensions, including models with aggregate fluctuations and models with equilibrium default. The ensuing three lectures and part of five, are devoted to recursive contracts in the presence of limited commitment or private information problems. Again, we discuss the implications for individual dynamics and for the cross-section of agents. A number of leading examples and applications will be used. If time permits, we will also discuss the design of optimal government policy, with and without commitment.

Topics covered:
• Sketch of computational methods
• Incomplete markets in GE: Aiyagari/Bewley/Huggett
• Incomplete markets with default • One-sided limited commitment
• Two-sided limited commitment and moral hasard

Teaching material:
• Jerome Adda, Russell Cooper, and Russell W Cooper. Dynamic Economics: Quantitative Methods and Applications. MIT press, 2003
• Nancy L Stokey and Robert E Lucas. Recursive Methods in Economic Dynamics. Harvard University Press, 1989
• Burkhard Heer and Alfred Maussner. Dynamic General Equilibrium Modeling: Computational Methods and Applications. Springer Science & Business Media, 2009
• Mario J Miranda and Paul L Fackler. Applied Computational Economics and Finance. MIT press, 2004

Grading: Problem sets (30%) and final exam (70%)

Description

See above

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Page last updated on 21 September 2018

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