Value Function and Optimal Decision Rules of a Linear-quadratic Approximation
AbstractThis code supports the text in Javier Diaz-Gimenez, Linear Quadratic Approximations: An Introduction, Ramon Marimon and Andrew Scott (eds), Computational Methods for the Study of Dynamic Economies, Chapter 2, Oxford University Press. The functional form of many dynamic optimization problems is so complicated that it is impossible to find a closed-form solution. After having calculated the steady state or stable growth path of the economy, one can expand the utility function around that state with an LQ-approximation to study the dynamic behaviour of the model under small shocks.
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Bibliographic InfoSoftware component provided by Quantitative Macroeconomics & Real Business Cycles in its series QM&RBC Codes with number 122.
Programming language: Matlab
Date of creation: 1998
Date of revision:
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