HW7 - Homework 7 Jonathan Heathcote due in class on Tuesday...

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

View Full Document Right Arrow Icon
Homework 7 Jonathan Heathcote due in class on Tuesday April 25th 1. Model Consider the simple RBC model that we discussed in class. A representative agent / social plannner solves the following problem: max { c t }{ k t +1 } E 0 X t =0 β t c t 1 γ 1 γ subject to c t + k t +1 = e z t k θ t +(1 δ ) k t z t +1 = ρz t + ε t +1 t +1 N (0 2 ε ) where { c t ,z t ,k t } are time t values of consumption, the technology shock and capital respectively. 2. Exercise 1. Write down the set of Euler equations and other equations that characterize equilibrium. 2. Compute the steady state of this economy and report it. Use the following parameter values: β =0 . 99 =0 . 02 =0 . 3 =2 =0 . 95 . 3. Linearize the system of equations by taking f rst order Taylor series approxima- tions to them around the steady state. 4. Solve the system of equations by following the steps outlined in class. Report: (i) Eigenvectors and eigenvalues for your linearized system (ii) A decision rule for the choice variable (
Background image of page 1

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

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

Page1 / 2

HW7 - Homework 7 Jonathan Heathcote due in class on Tuesday...

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