Download Discrete Time Dynamic Economic Models: Theory and Empirical by Brian Ferguson, Guay Lim PDF

By Brian Ferguson, Guay Lim

Fiscal habit is inherently dynamic. whereas issues swap constantly over the years, a lot of financial research is predicated on discrete time, similar to a month, zone or a 12 months reflecting the periodic nature of data-collecting and decision-making.

This ebook introduces and develops the thoughts of discrete time modelling beginning with first order distinction equation versions and build up to structures of distinction equations, alongside the best way overlaying such themes as:

* Non-linear distinction equation modles * Random walks and chaotic methods * Optimisation in discrete time types

This well-written and simple to stick with ebook may be essentially of curiosity to higher point scholars conducting monetary modelling. the character of the book--bridging a spot among economics and econometric literature--will suggest that also is of curiosity to all teachers with an curiosity in econometrics and mathematical economics.

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88) is a short-run market clearing condition, giving us what is sometimes referred to as a series of short-run equilibrium prices. The equilibrium of the difference equation characterizing the system gives us what we refer to as the long-run equilibrium price, and the key question so far as the dynamics of the model are concerned is whether the short-run prices eventually converge to the long-run equilibrium price. 92) with characteristic root λ = −(β1 /α1 ). Since both α1 and β1 are positive, the root is negative.

36). 32) is the stability condition for the case of complex roots. 33) are satisfied, then, our system must be stable regardless of whether the roots are real or complex. 36), the sum of the roots, (λ1 + λ2 ) = −β1 while the product of the roots, λ1 λ2 = β2 . These relations can clearly be helpful to us in determining the stability of the system: if, for example, β2 > 1, then at least one of the roots must be greater than 1 since if both were fractions their product would also be a fraction. Unfortunately, their product could be less than 1 even if one of the roots was greater than 1.

33) are satisfied (assuming (1 − c) is a positive fraction). 25. 8, monotonic behaviour requires that v be greater than 1. 63) cannot both be satisfied at the same time. 63) the time path of Y must be cyclical. This particular version of the multiplier-accelerator model, then, imposes cyclical behaviour on the economy. 48 Second-order difference equations We say this version of the model because there are other versions of the same basic model. We have made investment depend on lagged changes of consumption and have made the level of current consumption a function of current income.

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