An Exercise on Discrete-Time Intertemporal Optimization
This paper, using the different alternative methods of dynamic optimization - the Lagrange/Kuhn-Tucker (LKT) method, the substitution method, the Hamiltonian method, and the dynamic programming approach - derives the conditions that must be satisfied by the solution to the so-called Ramsey problem, hopefully in a way that can be understood by advanced undergraduate economics students. This is done by assuming that time is discrete and that, for simplicity but without loss of generality, there are only three periods.
|Date of creation:||Jul 2013|
|Date of revision:|
|Publication status:||Published as UPSE Discussion Paper No. 2013-06, July 2013|
|Contact details of provider:|| Postal: Diliman, Quezon City 1101|
Web page: http://www.econ.upd.edu.ph/
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- Brock, William A. & Mirman, Leonard J., 1972. "Optimal economic growth and uncertainty: The discounted case," Journal of Economic Theory, Elsevier, vol. 4(3), pages 479-513, June.
- Maurice Obstfeld & Kenneth S. Rogoff, 1996. "Foundations of International Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262150476, March.
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- Dorfman, Robert, 1969. "An Economic Interpretation of Optimal Control Theory," American Economic Review, American Economic Association, vol. 59(5), pages 817-31, December.
- Olivier Jean Blanchard & Stanley Fischer, 1989. "Lectures on Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262022834, March.
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