Recursive Methods in Economic Dynamics

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  • Format: Hardcover
  • Copyright: 1989-10-10
  • Publisher: Harvard Univ Pr
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This rigorous but brilliantly lucid book presents a self-contained treatment of modern economic dynamics. Stokey, Lucas, and Prescott develop the basic methods of recursive analysis and illustrate the many areas where they can usefully be applied. After presenting an overview of the recursive approach, the authors develop economic applications for deterministic dynamic programming and the stability theory of first-order difference equations. They then treat stochastic dynamic programming and the convergence theory of discrete-time Markov processes, illustrating each with additional economic applications. They also derive a strong law of large numbers for Markov processes. Finally, they present the two fundamental theorems of welfare economics and show how to apply the methods developed earlier to general equilibrium systems. The authors go on to apply their methods to many areas of economics. Models of firm and industry investment, household consumption behavior, long-run growth, capital accumulation, job search, job matching, inventory behavior, asset pricing, and money demand are among those they use to show how predictions can he made about individual and social behavior. Researchers and graduate students in economic theory will find this book essential.

Table of Contents

The Recursive Approach
An Overview
A Deterministic Model of Optimal Growth
A Stochastic Model of Optimal Growth
Competitive Equilibrium Growth
Conclusions and Plans
Deterministic Models
Mathematical Preliminaries
Metric Spaces and Normed Vector Spaces
The Contraction Mapping Theorem
The Theorem of The Maximum
Dynamic Programming under Certainty
The Principle of Optimality
Bounded Returns
Constant Returns to Scale
Unbounded Returns
Euler Equations
Applications of Dynamic Programming under Certainty
The One-Sector Model of Optimal Growth
A "Cake-Eating" Problem
Optimal Growth with Linear Utility
Growth with Technical Progress
A Tree-Cutting Problem
Learning by Doing
Human Capital Accumulation
Growth with Human Capital
Investment with Convex Costs
Investment with Constant Returns
Recursive Preferences
Theory of The Consumer with Recursive Preferences
A Pareto Problem with Recursive Preferences
An (s, S) Inventory Problem
The Inventory Problem in Continuous Time
A Seller with Unknown Demand
A Consumption-Savings Problem
Deterministic Dynamics
One-Dimensional Examples
Global Stability: Liapounov Functions
Linear Systems and Linear Approximations
Euler Equations
Stochastic Models
Measure Theory and Integration
Measurable Spaces
Measurable Functions
Product Spaces
The Monotone Class Lemma
Table of Contents provided by Publisher. All Rights Reserved.

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