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Loading... Recursive Methods in Economic Dynamicsby Nancy L. Stokey
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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.
(retrieved from Amazon Fri, 24 Apr 2009 07:58:16 -0400)
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Wikipedia in English (4)
But there is something about this book that puzzles me: Whenever you mention this book among economists, people say, "Yup, that (i.e., the kind of recursive modelling treated in this book) is the way the field's moving." The only thing is, I don't actually see that. Have the people who say such things been reading the Macro journals lately?! I can't even remember the last time I saw a dynamic programming problem in a published paper! Now maybe this is just because my interests are learning and expectations, where we don't use these techniques. Where are people using this stuff? In growth theory? In simulations of DSGE models? Not at all? I'm just curious. If any economists read this and know the answer, drop me a line. (