hw-07 - Homework 7 Graduate Macroeconomics. Viktor...

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: Homework 7 Graduate Macroeconomics. Viktor Tsyrennikov Question 1. Exercise 9.3. Assume u ( c ) = ln ( c ). Ignore part (c). Question 2. Time is discrete. There is one perishable good at each date. Uncertainty is fully summarized by a first-order Markov process s t with transition density F ( s t +1 | s t ). Individuals live for 3 periods: age 0,1,2. An individual born at history s t ranks different consumptions streams according to: U ( c | s t ) = E bracketleftbig ln ( c ( s t )) + ln ( c ( s t +1 )) + ln ( c ( s t +2 )) bracketrightbig , greaterorequalslant 1 . Note that every individual values consumption in the second period of her life more than in other periods. Financial markets trade one unit of stock paying d ( s t ) units of good in state s t . Stock is traded at the ex-dividend price q ( s t ). Individuals initial endowment of stock is zero. Individuals receive 1 unit of good in the first period that they live and no income in later periods of their life. Assume that the economy startsno income in later periods of their life....
View Full Document

This note was uploaded on 11/10/2011 for the course ECONOMICS 601 taught by Professor Viktortsyrennikov during the Spring '11 term at Cornell University (Engineering School).

Page1 / 2

hw-07 - Homework 7 Graduate Macroeconomics. Viktor...

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