Recursive models of dynamic linear economies

Lars Peter Hansen, Thomas J. Sargent

    Research output: Book/ReportBook

    Abstract

    A common set of mathematical tools underlies dynamic optimization, dynamic estimation, and filtering. In Recursive Models of Dynamic Linear Economies, Lars Peter Hansen and Thomas Sargent use these tools to create a class of econometrically tractable models of prices and quantities. They present examples from microeconomics, macroeconomics, and asset pricing. The models are cast in terms of a representative consumer. While Hansen and Sargent demonstrate the analytical benefits acquired when an analysis with a representative consumer is possible, they also characterize the restrictiveness of assumptions under which a representative household justifies a purely aggregative analysis. Based on the 2012 Gorman lectures, the authors unite economic theory with a workable econometrics while going beyond and beneath demand and supply curves for dynamic economies. They construct and apply competitive equilibria for a class of linear-quadratic-Gaussian dynamic economies with complete markets. Their book stresses heterogeneity, aggregation, and how a common structure unites what superficially appear to be diverse applications. An appendix describes MATLAB ® programs that apply to the book's calculations.

    Original languageEnglish (US)
    PublisherPrinceton University Press
    Number of pages399
    ISBN (Electronic)9781400848188
    ISBN (Print)9780691042770
    StatePublished - Dec 29 2013

    ASJC Scopus subject areas

    • Economics, Econometrics and Finance(all)
    • Business, Management and Accounting(all)

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    Hansen, L. P., & Sargent, T. J. (2013). Recursive models of dynamic linear economies. Princeton University Press.