An Introduction to Computational Macroeconomics

This book presents an introduction to computational macroeconomics, using a new approach to the study of dynamic macroeconomic models. It solves a variety of models in discrete time numerically, using a Microsoft Excel spreadsheet as a computer tool. The solved models include dynamic macroeconomic models with rational expectations, both non-microfounded and microfounded, constituting a novel approach that facilitates the learning and use of dynamic general equilibrium models, which have now become the principal tool for macroeconomic analysis. Spreadsheets are widely known and relatively easy to use, meaning that the computer skills needed to work with dynamic general equilibrium models are affordable for undergraduate students in Advanced Macroeconomics courses.

Preface

Part I: Basic Dynamic Systems

1. An introduction to computational dynamic systems
2. The dynamic IS-LM model
3. Exchange rate overshooting

Part II: Introduction to Macroeconomic Dynamic General Equilibrium

4. The consumption-saving optimal decision
5. The consumption-saving decision and the consumption-leisure decision
6. The government and the fiscal policy
7. The firm and the investment decision: The Tobin’s Q model
8. The basic dynamic general equilibrium model

Part III: Economic growth

9. The neoclassical model of exogenous growth
10. Ramsey's optimal growth model

Appendices

Appendix A: Some mathematical concepts
Appendix B: An example of a dynamic system in MATLAB
Appendix C: The arms race model in DYNARE
Appendix D: The dynamic IS-LM model in MATLAB
Appendix E: The dynamic IS-LM model in DYNARE
Appendix F: The overshooting model of the exchange rate in DYNARE
Appendix G: The consumption-saving decision in MATLAB
Appendix H: The Newton-type algorithm
Appendix I: The consumption-saving and consumption-leisure decision in MATLAB
Appendix J: The consumer problem with taxes in MATLAB
Appendix K: The Tobin Q model in DYNARE
Appendix L: The dynamic general equilibrium model in MATLAB
Appendix M: The dynamic general equilibrium model in DYNARE
Appendix N: Solution of the Dynamic Stochastic General Equilibrium (DSGE) model
Appendix O: The neoclassical growth model in MATLAB
Appendix P: Ramsey's model in DYNARE

Index

Anelí Bongers is a Young Talented Research Fellow in the Department of Economics and Economic History of the University of Málaga (Spain). Having received a PhD in Economics from the University of Malaga, her fields of research are mainly focused on technological change, economic growth, environmental economics, and international migration. She has published in journals such as Research Policy, PlosOne, Technological Forecasting and Social Change, and Operational Research.

Trinidad Gómez is a University Professor of Mathematics in the Department of Applied Economics (Mathematics) at the University of Málaga (Spain), where she teaches Mathematics and Operations Research. With a PhD in Economics and Business Administration from the University of Malaga, her main lines of research are focused on solving real problems in the field of Economics and Business, taking into account economic, social and environmental aspects. She has participated in regional, national and international competitive projects, as well as contracts with the Public Administration. She is the author of numerous publications in journals, book chapters, and books.

José L. Torres is Professor of Macroeconomics in the Department of Economics and Economic History of the University of Málaga (Spain). His current research areas include technological change and economic growth, and stochastic dynamic general equilibrium models. He has published several books and a large number of articles in journals such as Research Policy, Technological and Economic Development of Economy, Journal of lnternational Financial Markets, lnstitutions and Money, Review of Economic Dynamics, lnformation Economics and Policy, Public Choice, Macroeconomic Dynamics, Journal of Macroeconomics, Eastern Europe Economics, Empirical Economics, Economic Modelling, Open Economies Review, and SERIES, among others.

Macroeconomics, computational macroeconomics, dynamic general equilibrium models