4/2/09

3.1 Computerized Steady-States
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9 comments:

  1. AnonymousApril 11, 2009 at 12:38 PM

    I have a question about the utility function. Should the second term be ln of 1-n not ln of n?
    gr
    Fabian

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  2. jdgApril 13, 2009 at 10:07 AM

    Hi, Fabian! Of course! It should be (1-n). My mistake. Sorry about that.

    ReplyDelete
  3. AnonymousApril 13, 2009 at 8:25 PM

    I am a little confused about this. I used part b to write the function in part c. How do i verfy part b using part c then?? Something must be wrong!?
    gr
    Fabian

    ReplyDelete
  4. jdgApril 14, 2009 at 8:33 AM

    I have now put up a version of Problem Set 3 which should be
    errata-free. I have also added a new part to make it clearer.
    Try to do it now and if you are still in trouble, please let me know.

    ReplyDelete
  5. AnonymousApril 14, 2009 at 12:11 PM

    I am also confused about this part. First I tried to use the formula i found in part b, then i thought I should use the bellman equation. Unfortunately I don't know how to deal with the n.And the new version of the file doesn't relly clarify this point.
    Thanks.
    Eleonora

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  6. AnonymousApril 14, 2009 at 12:44 PM

    Eleonora, you should deal with the optimality conditions you get from the Planner's problem. You can write the problem recursively (i.e. Bellman equations) or sequentially. In either case, you should get the same Euler equation and other f.o.c.'s. To give you a hint, from the Euler equation it's easy to get the steady-state k/n as a function of only primitives. Then you can use the rest of foc's and the RC to obtain the steady-state allocation.
    I hope this makes the problem clearer for you.
    MT

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  7. jdgApril 15, 2009 at 9:53 AM

    Yes. That is correct. First take derivatives, then impose the steady-state conditions. Finally solve the resulting system of equations. You should obtain the equilibrium allocation as a function of only parameters.

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  8. AnonymousApril 17, 2009 at 12:16 AM

    Dear professor,
    I solved exercise1(c) using the original utility function, I mean log(n), not log(1-n), cause I took gamma to be negative.
    Then I solved for steady state k/n, expressed only by some parameters. Moreover, I got steady state of y/n, i/n and c/n, but not k, n, y, i, c.
    I don't know if this is correct or we can get k,n,y,i,c instead of the ratio?
    Thanks!
    Yunrong

    ReplyDelete
  9. jdgApril 18, 2009 at 10:18 AM

    Hi Yunrong!

    Please redo the exercise using log(1-n) and assuming that gamma is positive. And you must get k,n,y,c,i instead of the ratios. Good luck!

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