Recursive Models of Dynamic Linear Economies

Lars Peter Hansen; Thomas J. Sargent

Lars Peter Hansen and Thomas J. Sargent

Recursive Models of Dynamic Linear Economies

In: The Gorman Lectures in Economics

Princeton University Press | 2014

https://doi.org/10.1515/9781400848188

Overview
Contents

About this book

A common set of mathematical tools underlies dynamic optimization, dynamic estimation, and filtering. In Recursive Models of Dynamic Linear Economies, Lars Peter Hansen and Thomas Sargent use these tools to create a class of econometrically tractable models of prices and quantities. They present examples from microeconomics, macroeconomics, and asset pricing. The models are cast in terms of a representative consumer. While Hansen and Sargent demonstrate the analytical benefits acquired when an analysis with a representative consumer is possible, they also characterize the restrictiveness of assumptions under which a representative household justifies a purely aggregative analysis.

Hansen and Sargent unite economic theory with a workable econometrics while going beyond and beneath demand and supply curves for dynamic economies. They construct and apply competitive equilibria for a class of linear-quadratic-Gaussian dynamic economies with complete markets. Their book, based on the 2012 Gorman lectures, stresses heterogeneity, aggregation, and how a common structure unites what superficially appear to be diverse applications. An appendix describes MATLAB programs that apply to the book's calculations.

Author information

Lars Peter Hansen is the David Rockefeller Distinguished Service Professor at the University of Chicago, where he is also the research director of the Becker Friedman Institute. Thomas J. Sargent is professor of economics at New York University and a senior fellow at the Hoover Institution at Stanford University. His books include Rational Expectations and Inflation and The Conquest of American Inflation (both Princeton). Hansen and Sargent are the coauthors of Robustness (Princeton). Sargent was awarded the Nobel Prize in economics in 2011 and Hansen received it in 2013.

Reviews

"Drawing strong connections between mathematics and economic intuition, this rigorous and insightful book contains an extremely broad set of applications, treated from the same consistent framework. The exposition of the benchmark model is outstanding and unique."—John Stachurski, Australian National University

"Modern macroeconomics relies on dynamic equilibrium modeling and the statistical analysis of time-series data. This superb book teaches both techniques hands-on. It guides readers towards mastering a library of computer programs that work for many practical problems, a library that readers will then build on in their own macroeconomic research."—Martin Schneider, Stanford University

"This is the ideal book for those who want to study, understand, and work with linear-quadratic dynamic economies. Providing a thorough, authoritative, yet accessible treatment, it contains a superb analysis of the connections between various linear-quadratic dynamic programming problems, the general equilibrium properties of these economies, the type of aggregation applicable to them, and the time-series implications for quantities and prices. A great book by two giants of the field."—Fernando Alvarez, University of Chicago

Lars Peter Hansen, Co-Winner of the 2013 Nobel Prize in Economics

"In this tour-de-force of modern macroeconomics, Hansen and Sargent have written the definitive text on linear-quadratic economies that illustrate the connection between preferences and technology and the appropriate time-series representation. This gem of a book not only provides a thorough review of mathematical methods and related computational issues, but also includes cutting-edge economic models. It will be the required reference for anybody who works in modern dynamic macroeconomic problems."—Rodolfo E. Manuelli, Washington University in St. Louis

"It is nearly impossible to think of a better set of coauthors for this subject. I read their superior book with great pleasure and learned much from it."—Jesus Fernandez-Villaverde, University of Pennsylvania

This book is chock full of results that will be useful to all interested in dynamic linear models, including material that will be novel to even the experienced macroeconomist. Buy it, read it, use it.---Kenneth D. West, Journal of Economic Literature

Thomas J. Sargent, Winner of the 2011 Nobel Prize in Economics

Frontmatter Free access PDF PDF	i
Contents Free access PDF PDF	vii
Preface Access restricted Content is available PDF PDF	xiii
Acknowledgments Access restricted Content is available PDF PDF	xv
Part I. Overview
Chapter 1. Theory and Econometrics Access restricted Content is available PDF PDF	3
Part II. Tools
Chapter 2. Linear Stochastic Difference Equations Access restricted Content is available PDF PDF	15
Chapter 3. Efficient Computations Access restricted Content is available PDF PDF	33
Part III. Components of Economies
Chapter 4. Economic Environments Access restricted Content is available PDF PDF	61
Chapter 5. Optimal Resource Allocations Access restricted Content is available PDF PDF	79
Chapter 6. A Commodity Space Access restricted Content is available PDF PDF	125
Chapter 7. Competitive Economies Access restricted Content is available PDF PDF	131
Part IV. Representations and Properties
Chapter 8. Statistical Representations Access restricted Content is available PDF PDF	153
Chapter 9. Canonical Household Technologies Access restricted Content is available PDF PDF	191
Chapter 10. Examples Access restricted Content is available PDF PDF	217
Chapter 11. Permanent IncomeModels Access restricted Content is available PDF PDF	233
Chapter 12. Gorman Heterogeneous Households Access restricted Content is available PDF PDF	253
Chapter 13. Complete Markets Aggregation Access restricted Content is available PDF PDF	269
Chapter 14. Periodic Models of Seasonality Access restricted Content is available PDF PDF	291
Appendix A. MATLAB Programs Access restricted Content is available PDF PDF	327
References Access restricted Content is available PDF PDF	379
Subject Index Access restricted Content is available PDF PDF	393
Author Index Access restricted Content is available PDF PDF	397
MATLAB Index Access restricted Content is available PDF PDF	399
The Gorman Lectures in Economics Access restricted Content is available PDF PDF	401

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Recursive Models of Dynamic Linear Economies

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