Macroeconomic Theory: A Dynamic General Equilibrium Approach by Michael Wickens
By Michael Wickens
Macroeconomic concept is the main up to date graduate-level macroeconomics textbook to be had at the present time. This e-book actually bargains whatever new via emphasizing the overall equilibrium personality of macroeconomics to provide an explanation for results around the entire economic climate, not only half. it's also the ideal source for economists who have to brush up at the most recent developments.
Michael Wickens lays out the middle principles of contemporary macroeconomics and its hyperlinks with finance. He provides the easiest normal equilibrium macroeconomic version for a closed financial system, after which steadily develops a accomplished version of the open economic climate. each vital subject is roofed, together with development, company cycles, financial coverage, taxation and debt finance, present account sustainability, exchange-rate choice, and an updated account of financial coverage via inflation concentrating on. Wickens addresses the interrelationships among macroeconomics and sleek finance and indicates how they impact inventory, bond, and foreign-exchange markets. whereas the maths wanted for this e-book is rigorous, the writer describes basic thoughts in a manner that is helping make the publication self-contained and straightforward to exploit. available, entire, and wide-ranging, Macroeconomic idea turns into the traditional textual content for college students and is perfect for economists, rather these in govt, significant and advertisement banking, and monetary investment.
- the main updated macroeconomics textbook to be had today
- Web-based workouts with solutions (June 2008)
- Emphasis on basic equilibrium macroeconomics addresses the full economy
- most recent advances in macroeconomics coated absolutely and completely
- offers up to date account of financial policy
- Covers sleek finance
- broad mathematical appendix for at-a-glance effortless reference
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Extra info for Macroeconomic Theory: A Dynamic General Equilibrium Approach
39) by setting ∆kt+1 = ∆qt+1 = 0. 40) by setting ∆kt+1 = 0. Before the productivity increase these two lines intersected at A. Note that at this initial equilibrium qt = 1. Following the productivity increase there is a “jump” increase in qt so that qt > 1. This induces a rise in investment above its normal replacement level δk. Initially, kt remains unchanged and so the economy moves to point B. New investment increases the capital stock each period until the economy reaches its new long-run equilibrium at C by moving along the saddlepath from B.
These are the Euler equation and the resource constraint. For convenience they are reproduced here: βU (ct+1 ) [F (kt+1 ) + 1 − δ] = 1, U (ct ) ∆kt+1 = F (kt ) − δkt − ct . 17) ✐ ✐ ✐ ✐ ✐ ✐ “wickens” — 2007/10/15 — 13:08 — page 24 — #42 ✐ 24 ✐ 2. 8. Consumption dynamics. A complication is that both equations are nonlinear. , a solution that holds in the neighborhood of equilibrium) obtained through linearizing the Euler equation by taking a Taylor series expansion of U (ct+1 ) about ct . This gives U (ct+1 ) Hence U (ct ) + ∆ct+1 U (ct ).
It is the fundamental dynamic equation in intertemporal optimization problems in which there are dynamic constraints. The same equation arises using each of the alternative methods of optimization referred to above. 4. 2 ✐ 19 Interpretation of the Euler Equation It is possible to give an intuitive explanation for the Euler equation. Consider the following problem: if we reduce ct by a small amount dct , how much larger must ct+1 be to fully compensate for this while leaving Vt unchanged? We suppose that consumption beyond period t + 1 remains unaﬀected.