Economic Dynamics in Discrete Time

This book offers a unified, comprehensive, and up-to-date treatment of analytical andnumerical tools for solving dynamic economic problems. The focus is on introducing recursive methods-- an important part of every economist's set of tools -- and readers will learn to apply recursivemethods to a variety of dynamic economic problems. The book is notable for its combination oftheoretical foundations and numerical methods. Each topic is first described in theoretical terms,with explicit definitions and rigorous proofs; numerical methods and computer codes to implementthese methods follow. Drawing on the latest research, the book covers such cutting-edge topics asasset price bubbles, recursive utility, robust control, policy analysis in dynamic New Keynesianmodels with the zero lower bound on interest rates, and Bayesian estimation of dynamic stochasticgeneral equilibrium (DSGE) models.

The book first introduces the theory ofdynamical systems and numerical methods for solving dynamical systems, and then discusses the theoryand applications of dynamic optimization. The book goes on to treat equilibrium analysis, covering avariety of core macroeconomic models, and such additional topics as recursive utility (increasinglyused in finance and macroeconomics), dynamic games, and recursive contracts. The book introducesDynare, a widely used software platform for handling a range of economic models; readers will learnto use Dynare for numerically solving DSGE models and performing Bayesian estimation of DSGE models.Mathematical appendixes present all the necessary mathematical concepts and results. Matlab codesused to solve examples are indexed and downloadable from the book's website. A solutions manual forstudents is available for sale from the MIT Press; a downloadable instructor's manual is availableto qualified instructors.

Jianjun Miao is Professor of Economics at Boston University.