Numerical Methods for Macroeconomists (with Julia and Matlab codes)

Abstract

A primer on numerical methods in macroeconomics for advanced undergraduates and beginning graduate students. The book relies on classic economic problems, such as the determination of labor supply, economic growth, and business cycle analysis, and provides codes to solve them. It covers the following tools: (1) solving nonlinear equations via bisection and Newton’s method, (2) computing maximization problems by golden section search, discretization, and the particle swarm algorithm, (3) simulating difference equations using the extended path and multiple shooting algorithms, (4) numerical differentiation, (5) conducting Monte Carlo simulations, (6) constructing Markov chains, (7) interpolating functions, (8) computing dynamic programming problems, (9) solving policy functions using the Coleman, endogenous grid, and parameterized expectation algorithm, (10) solving the Aiyagari heterogeneous agent model with and without aggregate uncertainty.

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