ps7macro2sp08 - Econ 387L: Macro II Spring 2008, University...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Econ 387L: Macro II Spring 2008, University of Texas Instructor: Dean Corbae Problem Set #7- Due 3/25/08 I. The first problem introduces you to dynamic programming in a finite T horizon stochastic growth model. Specifically, let T = 1 (i.e. a two period model). Let z t Z (a finite and time independent set) denote an exogenous technology shock in period t and ( z t , z t 1 ) denote the probability of being in state z t conditional on being in state z t 1 . Let capital holdings at the beginning of period t be denoted k t X and the state variable be denoted s t = ( k t , z t ) X Z . Let y ( s t ) = z t f ( k t ) denote output in state s t where f (0) = 0 , f > , f 00 < , c ( s t ) denote consumption in state s t , and k t +1 ( s t ) denote capital chosen in state s t used for production next period. Households start with k units of capital. Households are expected utility maximizers with preferences that satisfy u ( c ) > , u 00 ( c ) < , discount the future at rate , and have a uniform prior before period...
View Full Document

This note was uploaded on 08/06/2008 for the course ECON 387 taught by Professor Corbae during the Spring '07 term at University of Texas at Austin.

Page1 / 2

ps7macro2sp08 - Econ 387L: Macro II Spring 2008, University...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online