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Dynamic Economics: Quantitative Methods and Applications

Author

Listed:
  • Jerome Adda

    (University College London)

  • Russell W. Cooper

    (University of Texas at Austin)

Abstract

In part I the authors first review the formal theory of dynamic optimization; they then present the numerical tools and econometric techniques necessary to evaluate the theoretical models. In language accessible to a reader with a limited background in econometrics, they explain most of the methods used in applied dynamic research today, from the estimation of probability in a coin flip to a complicated nonlinear stochastic structural model. These econometric techniques provide the final link between the dynamic programming problem and data. Part II is devoted to the application of dynamic programming to specific areas of applied economics, including the study of business cycles, consumption, and investment behavior. In each instance the authors present the specific optimization problem as a dynamic programming problem, characterize the optimal policy functions, estimate the parameters, and use models for policy evaluation. The original contribution of Dynamic Economics: Quantitative Methods and Applications lies in the integrated approach to the empirical application of dynamic optimization programming models. This integration shows that empirical applications actually complement the underlying theory of optimization, while dynamic programming problems provide needed structure for estimation and policy evaluation.

Suggested Citation

  • Jerome Adda & Russell W. Cooper, 2003. "Dynamic Economics: Quantitative Methods and Applications," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262012014, December.
    • Handle: RePEc:mtp:titles:0262012014
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    More about this item

    Keywords

    dynamic economics; optimization;

    JEL classification:

    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • C8 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs
    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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