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Unformatted text preview: 1 R t-1 ( 1 ) = 1 R E 1 u ( c t +1 ( T )) | t 3.1.1 Inverse Euler Equation Consider again the original planning problem ( 43 )(with incentive constraints). Let ( c * ,y * ) be the solution to this problem. Now consider the following perturbation around ( c * ,y * ) y = y * c s = c * s for all s 6 = t,t + 1 (for xed t ) for all histories t u ( c t ( T )) + u ( c t +1 ( T )) = k + u ( c * t ( T )) + u ( c * t +1 ( T )) for all t +1 such that ( t +1 | t ) > 40...
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This note was uploaded on 12/10/2011 for the course MAT 121 taught by Professor Wong during the Fall '10 term at SUNY Stony Brook.
- Fall '10