1

b 1 09

Ch.1 : Introduction
to RBC

~ 1V1e (ec(,.tYYin~ fluc':\uo.tioYls tltlo.t occ~( [Vl reed output & ptvlploYtvleVl.t

-."

1t o~ qV<Q'IrefS ,6 fY-o /VI peav...

Pectl< in veal GDP (Anti \ tVO\,f4k +0 trou~lt\

1CJL/-g:4 2 -1.1- 0/0

1C15?J ~ 2. .3 - 2.1"0'/0

1Q5'7: '6 1- - 3.1- /0

11

1'1bo: 1 .3 - 1. b fI/ p

1Q-=J-O: 3 1 -1.1 ·t

,)Cl1-'> ~ 4 5 - 3.'+ ./, If you. wav,t cfo.+o. '''loY€,

f(e((v~lI\..tll.( '200t}_
ill.l.
4b v fS
4' 't1J"dev-s
Y-t; =: Ct -+ It + Got + (X t - 1fv1~) ~ dtttt...

(i) g~Ii2d ~+s

A) Ou.tplA.t Gtow~
~ IS distviblAted vou~\t\\y gylVlMetvicodl'l o.vouvlOL_ its MeCw) ,

IolA+ 'd- ~eerv\S to be CV\cn'~acte"izect loy (elat;ve1v IOVlg peviods Vt-I.t1~Vl it £li~ltttL~

£Above Hs usucJ.. po.t~, 'lntevupted by bvief peYiOcl5 WAeVl it is Yelariv€-l~

few 'oe-lov\J,

gton~(ol
MeaVl oeviatioV\
y 0.0003\ 0.034-5

C o.001tJ. b 0.0201

r 0.00163 O.O(,&'O

G -O.OODbS O. Oqb~

X-1M -0 .oo·,r~~ o.085:t

 2

g) wah'as ittr'\ t-AOdlll

1) &ot1tt outplAt ttll\cL input (Vl~d'\ets C\ft. competihve.. MO!'kets.

it,) No extevvlOJities

~ \AJ\tW>ut ~\t\ocks G) ti1e eco v\O(V\'y' in tkt. R01V1fey (VI0cle,l. eo'flver~eg TO

(). 'BoJaVlcecl Gtowt!A. Po.th, a\l1ci t~eV1 grv'WS $rvtooth''f'
( COYlsta Vlt growth ro-\'e)

t:xteV1ct the, CVloV\-~roclAastjc) f2..OtMsey Mode\ to \YlCOV-POyoJe- S,~oCKS to

prvcl~ te GVlrJ olo9 'I

-+----------'"1> t

c) ShockS
1) Tec.hVlo109Y Snoc,ks
to<',c....) -:: /A)K- oc LaO
\ ./

'}A ~ -rG€ IA. g~o~

€t· &lYlplAtevg I t<o~ots altev procP' process ~ f PfoclutHviftt·

2.) Wea~eV" SnoCkS L NattAyc:U. Oisasi"er'"oS

.€ -f Agvicu.\h)Ye c... tvUvlSM '\rletu'sttle.S dGpevui on weatV1e~
~;'. ~ weo.thev IS 0. potential £o(,{ret of f'tuciuQ hoV).
 1) Mone-tdr\1 g\1o~ks
~. MOVleV gupply g,. :rVlr~vest (2(Ate, . ~-,·effec,tinfltthOV1

4) Po\iticoJ. ~hockS

e.l. FaSnioVl ~ Fads

-ItJ sp€tilol info

0) Pcopa9a.+iOYl Ma.(,V\at1i~M
(JorJ.
~ M~ch().YlI~Mg thClt otvlp\if'l S'~oCk$ g propa9ate tV1(OlAg1A tiMe.
1) IVl+eV'"'tempot'aA ~ub~ti-hAtio n
~lnovk in t )
blAt affec+ at- t+1

Q.) stiCk'f P..1ce.t

~ Ne~. fuO,UCt1\1Ii"l1 gvlOU<- g, :;:) MPL l =) W~
16lAt) 'In recJ'l"L we" cannot ~w 1n tW- ~lttOY+ rlAVl.
-:;)
/~

/ ~) F:ic'iioYlS "In FiVltll'lG-iaJ. ML\fkets

€.t. AsI().V\ C"is".;> Ht:tMbevgeV" III U.S.

~
 4

@ Choices Unf.ieV" Uncev-ft\iY\ty

A) Modelli"9 Ut1c'Y'i"tlintreS
(sCtJli'cks)
~ To see "13IASif1€SS Cl(cAe" -;) j lAst adol \Ar1c€'fmin+y to tVle PiVet"' ~ _
~

we Ye~o.'1et'\Procl~.fi.l'· GlS the ecoY'lOr\1'IC ~ysteVV\.

'" "BusiVl€SS CLfcte as 0-. f'ai\uve. of ~ eCO(1OM;C

II

Gv~te'N\.

ASS()rVlp+iOV\~ :

-",) Theve aye.. 2 peYio~s; t ~cl t+ 1

1<-) Let s == 1, '2, ... , 8'

=- possl~le evevrrs I gt-ates of t1t<rufe thCH (V1Ot"( occlt\y iv) ~Je, t .. 1

'l\;~)
'iTs ;;; probCl~irlty thert GtCtte g LNiI\
-
4 eiD" 6 x mt-e,.
OCCtJY"
"

~ AH possibilih'eS of 0.11 eveVlts.

S:I

S c 1 £(1):1 n(1)::') U [.c(1), 1- )'\(1)] >< 1i'~

s :. 2. .-C ('2.), n (2.) ==) lA Ge(1), 1- (\(2)J >< iT'2,

s = S"

~v) ProO" FV\: I~ = ~. FCK, ~~

'lCtVlc1oM \/. lal?" (

lIv\Aev€t A = tec[.,V\olo9Y

At+,:::: S pOSS'\~ v~lue.s of tVtt- t~~~IYJOlogy In t+ 1.

 3"
1'3 1 0'/

v) A

J {$
vt~t,
.j,
1-Ylt) + (3
~ J
t, iY

ITs U[.ct-+l(,s), 1-Ylt~I(.s~

I

v\/ 0"

- A V'ep('e5e~w.\ivt HH ~uppl ie-S V\. unitS of tll\t1e evto(O(,AJfv1elAt

as. lo.boY
\--nc; \.N~ il\cof\llt = LNt V1t

- 111e HH ctivi elLS ii1e pevio et i InCOMe \: ('0 ~,S" "" pliO",: -Ct

$'Cl,vl ~: k-t+ I

- ~~e. t Con~tat\V\.t of
6t
1 Puioril :
l-<!~ + kHI - k~ {, W. Vtt + V"t k t]
L; Cwoou Vtov-J (\I1(,{ch tiMe. tWy'lI C1VOVI.<?

Peviool: - LNo~k
nd
2 lAMe!. CoV75Utvle

- me. HH veVlts e.-o.pital to -t;ytvlS.

- He suppli~s vvovk e.ffov+ to t1(}VJg.

- He, ConSl,WAeS all tne. ·lhc.O(Vle· eaYned ",V) t-hi$ peviool. --} . .Ct;+1

- P.JlAd.~et(~OVlstmJ(\t of .z,t\ol Peno~

not a f'n of £
% 'rh; clitlJ~· eV\ ·froM F€
t

v~~) \'10 Dep'lecianoVl

 b

Max i-l0., 1- 0'4) +: ~ l'lfs· U f'''CS), l-"'~+Ils)J /~

At[c-t -r kt-tl - kt - WtV\t - l ~

Y'e k t

f At..-,(S) [..c-t+1 (s) - W:t+I CS)- ~~TI(S) - [1.,. '(t.. I(S)]. 1

k t +1

"i,L~) The Ufiliht fuVlCtiOV\ is 1°9" virl1M1C .

\ LA (.c, 1- rt) = ku: -+ cfi.h (1-1'1.)

)
I

.~

;;t :: c
McAx k.c~ + epkC1-Ylt) +~ t,lfs: · kv~~I(S) + et> kt [1-nt-tI(~)J
At [s + kt-t-I - k-t- WtV\.-b - Vtk~ : )

~ A,...,(.S) t.c<tt(S) - W",(S)·Vlt.. (s) - D+ ....<sij-k..,1

foe: d;t = _1 -
At = .0
d];.t .£t

~
~Yl-t
= - cP--L + A-tWt; = 0
1-l'l.t

~ot
d..c.-t-t,(S)
-:::
rb 1r~ 1
Ctt-,(S)
- At..., (S) '= 0

'd;t = - (bTls G .-JJL -t- "\t+,(S) wt,-ti S) = 0

d Y\t-t,(S) 1- n-t+,(s)

;)£. =- -Ai ,+ 2. A..t-tI(S) [1 + vt+,CS)] - 0

. ~kt"-l S

~
 .ct :
7;
1 = 'A;)
, t
(1 )

ht :, 'P _1_, ::
T

l6;W-t; (~)
1- t'4

.ct+1 (5) : (bTls _1_ -::: At+I(S) (3)

4i" CS)
'

Vlt+t(S) :

Ai;
_ = L.At~I(G)[1+l't+I(s)J
S' (5)
~ OVl\"( i'ni<; vavia~ (!.aVl eonnect 1 Beg inro the O!?Jec'+lve.. ~.

A t<ep~evttanve. FirM M.~X'Mi ze~ pmfit (II) :

~ by 0(.,101 se"g of .f-ctc"tOVg of prvet ervtploy(?o(.I ;-aki C19

t\ p~/ic.t.S aG c;]iveV\.

"I
/ \

MeAX' 11 = ~'FO( f'J») - w·N - r·K

K..N ~~-- ' ,

Let ~_(K_J_N_) _=_ _K~_N_"_-00-J)

1
eO-'\ 1-00
Foe; = 0 -==) ('to = oOAtK t Nt MP",­

~
-
=) ( I» -co :: MPL­
(Nt = 1-00) AtK t Nt
~ /..­
.!...­
tk"
~ :::::. C1-cc") Yt
N-f:;
toMpe.titive ~q.fA.i \,btiUM :
~ eOVlsists of cdlo cotiOVlS

- qIAClVl tHie.s \ H H tkooSl 5 [ -c" 1'1., [!:.... t,), VI.., (SB:., '
FioVl c(,."ooSot (K t, K t+l, N· -t, N tot, )

- pn(c..e.S t Y'ot, (,.J-t, [Y'tTl (s), Wt-t,(S)l~1 1

/. ·treat ~ (k ~ pC! ~ Mete' ~

.-, Given PD'c..e-s,

,&
tVu. a-UOw.tion f -Ct , Y\t, [c-tTI CS ), Vtt+,(S)]s:" k t ... , 1 solves HH's prolo\eM .

fu..t Cdlo Ctttl OV'\ (K-t:l K-t-tp Ni;, Nt.... ) ~olves the ~f M'S problEUVI.

Mo.rkets cleClV" '1V1 eve~ dOtte .&. state.

DO. :. Sy

-" FOCs 3.. eu~t CoY1stro.iV\ts (.~xe usee{ to Ctl'ltl\"(ze. t~e. (eSOurCe alloco.hoVls."

os VJ0l\ a~ the ol'(()Qtv\icg of -rhiS econoMy.

.~

This ~tt ucdio\'1 gives TYle COVlcfltioV\ toV ~\lo ca.+iy1~

c.OYlSlAMpnoY\ g Le\su.ie optiMCl,ll y.

This is, r_r<.-S-'f:,-{1--n-)-=--w-'t-----cP-o-1-_.£_Y\_,]

~

4 (vtoX0 ~NtL 8~'1 \i hvl'utvl

~
tZttlv'\1'c., ~biel\A.
1- 1-Vl
K..t\fV\t. eVlQ.O'i"lyvlQV\-\'".
 q

One- Pevio(i Model

AS$().(III e, 1,) "c = Y

LL) w = :t..

N
~i,~) V\, (Of N) will be C\. tOVlstc<V\+ g be- 'IVlcUpelllde Vl +of wCt-}eo

- Ft:JM HH,

oc 1-1l4

{;Jt - (1,-- oa) ~A ~ Kt N~

== (1-oC).1. y.#;
Not

____- __ .1."'-t ,e,~

= ( 1- 00)

11;Wt _1~~]

Two - Pevio~ tv\odel

4 Lobov- leisure, cltloice 0 1Vl oiffeveVlt peviocls aye lin ked
)lAb.stitt.tteR (2) ,Clt) 'Wl1"O (6)

At :: "2s
At.. .,(s) L1 +Yt + l (&)}
ep '1 ::::.'~ I- lis ¢ [1 +Yt-tI(S)]

(1-V\~) ""~ [1-Y\t-t1(~)} (,.Jt-+ts)

= ~ ¢ (1+V'tt,)
( 1 - Vl tt,)· Wt-t-I

. (2J(1-V\~) ­
, (1- V't+l)
 10

As (b. (1- Ylt) -

(1- Y)t-t.)

If W-e-tl '/ W-t ~/ '(b (1-Ylt) ~ 1

1+Vt+1 (1-Vlt;....)

-0 -!!I
wt +\
Wt,(1+V-t-t-\)

l' -:=.) =) ~ (1- tlt) )­ (1- nt-t')

1-Vl t '> 1- Vl t + 1

not; <- t'l-t+1

.~

LeiS"Ufe. IV) ~ eurreVlt p€viocl is ~lgltle( Yela,tive, -to the, \ejgCAVe 'If) ~ thtLt(fJ

pvloci,. 1- Vl t
1- Ylt..-I
i
~
repre,j,8vrreo. OS Opf"i'hAVI"j-h-f CO's'r I

==

= ::::.

U'
v
= ~ L lis [~ [1 + Vt+1 (,)] ( (1-)
s ..c-tof-I(S) JI
4
 11

~Lt~S+l-hfi,-ti()9 tV1e, bud.5e-t Cliv1strtlliY1f~ iVlto t&u.. ~L,(.leY t7q~atioVl ;

- (.3 uct~ t COY\st filt,-t Ot 1s-l- P~ 0 c;l ~ {p , 5-)
(.ttr
\.. //
::. w-t; Vlt" + Y-t; k-t- kt +, .of kt­
'::. WtV\.t + (1 + 'ft-) kt; - k t +\

- S\A~t CoYlstril(\"t of flnIA Pe-ria{)\,: (P,s-)

'cHI (s) ~ . Wt-tl' n-t+-l + (1 .... Vt-t,) kt-t'

1 := ~E (1 + X't.-t,) ConsvMpfi€M- S~
[wt V\~ ... (1-T~t) Kt - kt...~ ~-t+, ~I + (1 +vu ,) k"bt.J 'DuicS 1M

~\·n(t. 1W Proci~ m i'.; Col?~~Vo~\()S,

&. f{-() "" C31.{~t" Cott-s +(~ i {~ t :

Y-t; == t-t, -+ kt,+,

( 1 + V{..,) - DC Yt+l
k'tH
~
1
Yt - kt-t,
=
~EPC~J ~,
::
~Et~J
2­
"cot -::. ~
kt,ot-'
-::--) Lk~TI -== ot1~e-1; {
 12

\<t+l - ~Eof)
'It - kt +,

k't+, ==
~e oC ('It - kt-t-.)

kt + , :::= ~E rxJ 'It - ~Eoo k t + ,

(1 + (OEoe) k t +, '::: ~EocYt

kit-, = &~oC Yt

1+f;toa

:::

£It ~
Yt: - ~+I
-:::. y~ - EJ2- '1-t;

1+~(?

:::.
C- ~ ) y~ 1+04~

::::

=
~ub~tHvth~ tVtls into ~ -mV\~eVJcl( cono.ih'oYl 'fl oM p. q
.t. (N~ - ¢ .-L
..ct 1- Y1-t

-l- (1- 00) X- - <p_1_ (;et ..n. ~ (1-oC)(1+oc/b)

h 1- r'lt l'
1~~ t
(1- Y\~)Jl. '= '4> V\-l.
(1 + 00 {b) (1-oC) = 4>/~
-S­ .J1. - .1L Vlt =. cP Vlt­
1-V\.t

JL -= (<\> + SL.) nt"

( 1- \1\,,) (1 + 00 ~') (1- ~) :.

'" V\.'t ~t =
:;~J
 13

~) {("ponse- -to sv.ockg

~ use" elaStiCity" to Measure C\ vo.yio.~le 's yeSpOVlS ;veVless to -rYie,

COYlteY\l\poroV\eous tecnoloqy shock.

ocA.
~
At koot Y\~1-ac - k1;
1 + ocp

::: > :1
 \4

e.14-,~ COYlsicieY" an econorvly cOYlsistin9 of a COVlstaVltp'opCdcxtlc)'V' of. '1\1 fi V1itely:

"rved I VldivicLuaAS .
The fepre&eV\-tative '\V\ctivictuwl (Vt().)(IMiUt; tkt eKpecteol value o~
It

o-JAere, e '/ 0

,) Sttictll(
Corl CtlV e..

/ ,/p..)::~/,v.."'~~t r
.' OLAtput j; \ineCtv '\Vl tCtpHoJ.

Yt - AtK.-e + ~
g + OVl odditive dLsmv0o.V1ce:

~
;; VlOtk.
kt" ¢~1~\~'

1vu~(e. is no cte-p (ec iati aVI -:::=) ~lK_'.:,..t... _::='_'Y._-t_-_C__+_K.......:J

..:..l t

A£~Urv1e.1 fA = P1::: iVltevest.

FiYlQll'l, thQ dist\,AY"baYlce. followS 'a -tlrst- or-dey aLAtO(e~fessloV\ process,

ret == CP et - 1 + £.."t r
""""""N- ~
lVleCtVl- zero i,~.d.
_ . If
9ViOC,KS
., " ' ,
/
F>
i ""­
0 <.+)
111Q:,~V1W,V\"t Idl!,Vll1eat eks·htJ blA.\ioV'
~
~e~~l = ~et" + 6~~;) ',···H­
o '-9l1'v 0i;;$ (tfe f\..tec..\Vl-:zero
 15"
(5 1 0'1

(jt'f\U urH/ht is G~Clolyt(hC fV((V1

~
Foe blCOMes lineav:

"1 I
Conh0\ V. S pc,.;si\?le vall,lt of ~'V1()(ik.

Foe: c: 1- '2.ec = A f: ~

K: /\ _1_ 2. '\Is Y [K', e(5)]

= 1-t'P $::.1
K

\/
V
~
1-2ec = _1 2..
1-H' ".. ,
"s 'YK[~"
\
ecs)]

/
~velop~ ~ ~: v~ tK,e,l = (1tA)A
/
:::;;;. (1+Aj (1-2 ec) /

~ /

r-~c ­
C =
~

[c~ ­
 lb

FOC: Cob : o (~)

o
~l"a A~ P
-t, -/
~) (1- 26C-t) ::: ~A) Et(At+l)
A-:-/
V'-~Ct) :: Et (%~ Je Ctot;)

~t : ~tC~, 1 ~(e..'s ~vadoM

(10)
Wal£'

./ j;l'1euV' ·fo{lv\

b) Gue-ss tVlat C.oY1~U1V\P\iO(l +o.kes title foVlVl Ct, = oC -t-~Kl; -+ ret.

Give V1 -this ~ve,s Wvtcd IS Kt +, Q~

J 0 fUrlChOYl of K t ttVld, tt ?
c) hL1~t v~lue.s Must thL paaOMe'tM 00) (b, Y VtCtvt fby iC-u.. FOe. to be batlSfie6A. 1by all
volue.S of! Kt ~ et ~
h-oM e\,t~t &V1Sh'7Jjn.-t-=

(!t + Kt-tl ::: (1+A)K t + et;

Ku, ~
(1+A) Kt + e-t - Ct

Kt +-, =- (1+ A)K~ of- et - [00 + (b K-t'" Ye~]

(1 - 0) e t - oc
l~t~l) = (1 + A- ~ ) Kt +

Ct ~ G.t; C-t+,

oC + ~Kt of-yef:;::: ~t [00 + ~Kt+V'" ¥ etot, ]

-::. ~ 4- fb [(1+A - f.»Kt + (1--r)e-t - oe 1 -+ r G et+ t t

Ct = oc + t1"-A ~f>; K.... ,f>(1-Y),et -""~I ... ~~~

-- 0
 gh1e..t et ::;
oC + jb~t -+- If 4
~ ~
in ,il1eCl V to fVtll
QIJv~ CiT = CO ..... \(b(1+A-~~ K~ + f(1--r? 4 -~ " V\ SlAlel'S

.-::'y
~Kt -:::
A -=
let :
(!J (1

(!; (1-
+A-fJ) \<t
'() et. "='J '(
- "
~
1+~
cIJ = oc-oo(b . ") oIJ ~
0
t
n1~ \JCtlue.g: cr thi.. PCllOtjVI~h~{S (Vll-{st be- ·fbv 1UL Fo C ·w b~ s·o.h SAe d
,Pl1\" all voJlAes of Kt a..,.J et­
c

6 0

~
Kt+\

! K.., -
4 ~(W\~ Btte:h'oYl of '\itt,' S

:::::.

K't-t' Kt + .L e't
(b
 'Iou Irtttve., Kt lAMa e-t;
~ f'roclllcL

i\JeKt p~jiod Ou.tp~d : You VtClIlf.. \.<'t-tl:; K't + _1_ ei;

1+A

C1+A) Kt + , •
= (1+A-) [K + j..
1+A
1.1
(f •

(1+A)K+e

d) IMA.cAt ore tVte- etfectr of a oVle--tteVle slttovK. tv ~ on itJe pllth~ Ot Y;1 K, av,.c{ c?
,.

W~ QSSlMVlt '\'t.v-. -fbl\ow,"j AR(1) FWce·5S for tkt- tecVJVlo lo~V ~V1oCV"""
et :=: <p et - 1 4- ~t
l'
<!on~\c£uS as <fYll~-·\1(Vl.l., ~\Ao(Y-

C'rI~ ~ 1: 1~O) ... , 0, . .. j

&7ns~t 0. ~ y~t~ of S'ntte VO\Ylttvle~~

kt~' -= k-t + .-1- tot;

1+A
 /q

~tttvt ftol'V\ tW. i n",tia,l pevioc! vJ.1e Ye. ~t;:::: 1

l~:l ~ [~ ;ll~l ~ [~l!

1V\eY\} ~e, follGw\ng pevioct,

[
r~:1 ~ ~ ~1[;:1 ~ [;l 0

= [~. ~Ar[~~ ~ [: .:Al [~}1

I~:l :A11~:1 + [~l·

::

l10 0

r
l~ ~ [::1 [~ l~ [~1- 1
3
+ ;

- 1
l~ ~ [~:l + [~;:~)J
[~l [~ :lf~:l + [~].o
-:=.

=
r: ~A r[~l + [: ;A]3 [~1· 1

::::
[~ ;] t:l
If­

+ [f+A(1;3~+ ~~)J

/
 " 2/
/5 09

C) Plat1Vling Pm b\eM
~ tJSe. 2'f1d. we,\mvt 1Vleov-efVl tv (ilaiw. title pflll?lefVl +0 -t1'()d out me PY1'CL$

"In the S'Ibter\ll.

\1H (5 BentMIioY':
;t = Mo.-x k.,c-t + <P ~(1- V\t) + ~ L i1s l k..c (s) -+ q,k [1- v\CS)] ~
- A [.cot -t k t ... , - Wi; V\~ - (1 +Vi;) ~ J
- '2 A.L5) f.ccS) - wCS) I'll!.) - [ 1 HlS) k H .l i
tJlvp
rO.C; "ct;;
@ =::

wt
@ I"V,-". =
A,w't
fvI gS..c1 1-"'~ '= -::.

~
<pet
1- (lot

1- V'.t;
W(S) :: d> £C$)
1-r1(S)
~'ils ::: A(5)
.cCS)
S 1,2.."",$
~ 'ils cP
1 - r\lS)
= .A (s) trJ CS) \
A ~
L A(S) [1 + yes)]
~
.!.. ~
2. &7i$ L1 -+ yes)]
'ct ..ccs)

1 =: I
.1- ~ L lis J.- [1 -+YCS)] I
..c{; ...c(')

/
 2'2

FiYf\ll ~ 6eho.vioY:
v-t ::

.c 1-oC
Mo.xi\ :: Al t Nt - 1Nt.V\t - (1-t Yt-)K t

rOc..~ Wt : (1-oe) A",K; N~oC = (1-00) Yt

N-e
oC-1 1-oC
('1+ Yt) :::. cO At, Kt Nt 'C:
oeJi
K.t

..1-
.ct.
-= ~ P2.l\s 1
kt + ,

fu(Vl p, '\1 :

.f!; :: wV\+ (1-+y)k - Y

~
o(J 1-00
'lot :::
..ct + kt-t' = A.d<t; N~
oC 1-OC
£\:; + ot) (b,t;t - At; Kt Nt
1-oe
IJ2t ::::- 1
1 .... oef>
00
At K't Not.
I
Eql,t\ li ltN-tuM
LottSVI"1ptiOr1
Ceo"'~r't -w p,12)
OC 1-00.
== Y--t+1 + ~"'I -::: AtK-t Nt
oO~
~ 'I-oC
(~(b + 1) ~, :: At"Kt Ni;

Eq,ui \iItlviVM
&0l,,1~
I
 2'3.

(1-00) (1+oa~) 'it (1-y'\~) ': ¢' Vi; Yl.t

Let ...n..::: (1~oC)(1-toe(b)

-Y;

.JL ~ (1-n~) -:;:..

<\> ~ V'\t­
.sL. - .Jl. V\ i:;; :- <PVt-t

(cp+.n.) not;
= ..n.

tt ~ .il-
4>+51­
l
lAm SupplC(
(At -\'fA'§"
'= ~ biN' D~ .
[;((,e-ti ~ i ~Y1~
 '24­
22 1 09

~ WMCUS Pa.P€vs en f2,eeJ. 6i4s;ille&S C'IcAe-s.

A) EGfwt;\('a c. Presc.ot+ &. FiVlt1 E. Kydla.VIC)l
~ sueks tv elCp1a.iV\ yeCLA(re Vlt .p [ue-tLAat10V1S IVl eco flO (\11 j c ac+ivHy ~

Mo-l<IM\ zi~ gtrtlte~ ie,~ r() ttu.. Ivtovkets.

-'> Key pcuarVle te~.r ()re, QSS i'iJrleet volue-s bo~ec{ OYl o\o~evvohoY\ S VlO+ di{e~tl~ (elo.ted

tv \)vtSlness cycles
f?Jo. - HH'5 b~iora1 responses
.., fhJot~ Input ~VtavU

~ tlVlalt{-ze bv.Si(le-~s evCAes in Z. stepS:

1'tot ~tep ; lbvti \0. a Mode-(

4 inc{ucltd OVll'1 yeat qp,uVltief. i )

t.e. olAtp(..olt J re-Itdive. pdUJ

t'~ 5te.p : 6X+eV1et t(,.\J.. IVlOck!

w "ncLucU- ViOMi () aL q()'QVltihes

~.e. (Vlot1e~ J.. abroLLtte P(lCU.

to()cwSiOYl~ - ~ ~econcJ. MC4-~ be uVlVleCeSsQr'Lf

- C3uSillesS C~vle g ea V\ 't;)e expla.iVleet alMost eV\ti(e,l~ by just real QU1Vltifus.

e: tQY1O /Vll.( is gf-a;te. (k t 7 &+;)

rvl,(~e,lI\old,ts Bekaviov:
'tVl,'r eKpectafuV\ is Ott +1tv1e 0 bosevl 01""1 dO+Cl Cl+ -\l(LV\t 0 ?

W1C-"ll-tt\V"I~ "\1f.vducut

- ()V1ceytaiV\t~ IYlvolvec{
 25

e\a{;.livilvt of gub&iitu\iot\ %et 1

\e,I>!.t(e"
~
J 1-«
Glce, 1-n.) = ( C' -¢1 .l ct» - 1.
1-0
-t
e\a\;n(il~ of ~~'jA.l-?~·hh.A.nl)Y') ~vv (Jetl'oc1.
~
f'.' j E\ t:'. 1~IS(,{(e., (:fl.,u.. lhvt€.- e,tIlJov.;:vtRvvt Is iWfMcJizeJ. to :1)
nl\fI\. t.t ef ~q(,('U\Ot1:

Mo..x Eo LDC
t~o
~
t r '-t
(Ct.l ) - 1
1- If
4>

'
1-~ J
. ~
~{lltei'S:v1,(t g..el"'\f'lV'1{\"~4Nt
iY!J 11 171!- \({,l.y'i+~ ",(1\'\
«WhWIUM.
~~

(1-4» (C~~lt~)-Y c~~,t~ - At

t-h 1-cP 4l -¥ 1-cfl 04'-1)

'i' (Ct ..it) (Ct At '::; Atw-t

l-<.t+\ : At == E1;At-t, (1+V-t-~)

:::.
~"':.')C1-+Y'-to - £ )
Et .
= &t ~(c:~; )t~l)o ~~!~~,J (1+ Yt-c\)
"--'=<t---¥' ~
~ 5-b [ (C:+ It'1-' f c~~ It+. l
t
7f

l'
(1 + Yt - ~) J
.f-t

0t'f1(,t. (kt ? 'l./;) ,s e.[Ov1()(I11.t'J r·t-zt;re..­ .~) FMc{

CD F(,'~r5. ?OliVi fV1­ II (k i7 'l~) (2) i.fr..we,~id<~ tbltCi( h'l: )if"t )(t. J 7 t- )
4 ~~~t b~ opn (,-'It'\£.,._
4rv4.<st I_~ ",p-nOAaA.
~v
If) ._', -=
(k't:)~t) n qlv l "1 'It.... D,ICl,'~
.
f,\ .1:,:
.
I:~(.+ &f C (tt-l:-? V-t, lL)
~oH~ ~
gNen 4W.. p-rici~ ~ . ,
k lk"7'Zt;) ~ kt; (]) A 1(;\\(11 ~F Mf)l1r."Yl k1.'
1'"A:-,\
: qrk. "2.. \
" "'t; J z;;;.!;J

® ~;';\d/'1 hr.·~ (I'l Ck-b~ ~I; )

r(.~,tb )
 2b

vr

::;. "lot - Yt kt - WtVlt

Zt' f (K t , not) Oar-put Ct:.,nsJ'fZullt-- O(ifp~l.r fuVl 0e {,t,/locuted. .ft1 uuveVlt Ct:­
'()( \Ylv'e,~hV\eVlt-~
C\Z.S PioJ"~,
tUVtVlOLCXj'i paritJVle:r-tr

gltwlks ~ n:u,\o.OM V

: B:h.
, V\t;­
k-t ; ::. =- (1-c(»Yt
kt

Nc:t'hovuJ
! JvQ;M e
I,e U~· IVll:\1UY1CJ. Jl1W'M{J./::: O.J.;i+

:::.
yw Iflt. (l(,te,., + d€pf€c-ia.:Hot\ rtlte (RHS)
t ., ~
us. = t+cJ~ :;. O,Oi..f tY-OIYl K'fcJ.luvu;.{ ::: 0.0-1
~
~ifelo{ ii1; r (o1a.t/Wh\J2- ::: r 0 l{ ~'S

if ~ -= O·b4­
C1 . . cP)~ C'/~b

~ "::- 'l.b
'I
 L.o.w of' Motion: . _=--:-_~_').(-t_)_-+_(_~ -_6_)_K_-t~1
J..k_t-t-_\
~

-.?!:i + (1-b JIk:) 6 ~ ·fj-v.6!i'OYt of Ov.lp,..tr

f' ~
)~ lV1I/~teli\,
Y1;
f ' 0,1 i 1-0 =.lYOiAiCiVl of O~{\r",tl
't<; WI)~i.tMecl,
?. II) ~\~ f\A.V1 2'
.~

Mafke +e. (UtI;

OUtplilt Mark£tg c,[eCtv -:;') Cob of" )..lot = y~

TVlput MCtvLdts Clett f -:) C4 ~

kr
s S
Vl t = Vlt

l(.lvvt l09 :
-)"kc~ + ~ ('t-1)hvt Wi:; -:::: - P -O~Ct1"' -+ cPC¥-1) kw -t-t, + Yt+1 - b

; ~~:+~ + cf (~-1) kLWt - p

P
-t- Yt-tl -
\---y--./
b + cP C~-1) ~ (,'"'t+1
1.5 O.IJ"i... o~o If
13/a'iVl v'2­ ~ vJrl,tVl p::: 0,02. ~>
e-' I

=; CoIVeSPOYlJ·tv LCj
 P ::: O.ott (6=_1_ = tJ_q'f
1+~
t+

G-hez & BeckeV' (lq~5) :

<:p == 2­
3

2 NoVl- Mavket Acti vi ties.

3
; I

T
1-~ 1 :.
-
)4V1
~

1-cP - n
T ..£
~
.f -::=- '2Vl
'1"
Ma7Y\i ./uJ£ (l.p L\

•
f iC neVl0o,L.<M, t-tCtVl~V\ Owtct S/Y)glewVl (,qgq..)

~ ::: £5

b
.J/;

1 :: 5Vl

Te(ivlVlolO~lf ~~ock.: C~olovJ IS)

Y :::: -z K1-~ VlcP

Not o.CCOIAV1t (tw qrolN'~ In Input:

Prescott ~
6kv = bh~ - ep~kV\-
.'\" .
\CV\O VIi) ~ 0,1: vd\'! Ct I
o.iJ&.t 1\'\ v,s
ealmllLte, V(XY'(AMAl) b.-r YUnYl~ Ve~(e5SI'oYl ;

L1 ~ ~-t - D.tvt, i!t-1 4- ~~

l-t; =P "21;-·1 -+- 0 ~ 0~ 1.

2-
V(J.y (~.fM l.t) ~ VOV' C~ivt y) + e Va'/" (A Jvt YL-) - 1. e Cf;V (D~Y) D ~v\..-)
J.
Wt-. ~ ~ I'\-z.
iJ
J'tteaSlAve,MeVlt BvV"ov (4~ V\.) ~ Use, surve'1 fo v

4 A su'(ve~ of eMploV e vS ccttr~aVloL ~ioLe.) H-H_

4 A ~uyve'1 of HH (~upP"1 siclL)

To f1Ylc! VQv(~.tu Vt) =; l;(Se. eov(bAt-Vl", ~Jvt. Vl.- z) rY1stectol of VDV (;::,1M, rt)
''f ,1'
VI + V1 Vl-f- Vz..
 33
2'7- 1 oq
GH2. 1,
Ch.2 : Linear Difference Equations
Llo/u.lV' 1)'ffeV'"9V1Ce fq, (,ttl tio lAS

fiaM : ~e'" FoYMev-; "The MaC'(l) econof'll ics of Se,lf~ fulf; lilt; fl9 Pmphecles ~ 6!1t,2

--S) -this ~ecHoV' foe-uses OYl a ctepevdence Df itJe pfeseV\t On The, pa~t the CtrfteS 1Y-om
-\11e ClCc,uMulttnoV\ of C-Ctp·,ta,,\,

A) l.intari-z. in 9 NOr1\intAV" Mod.glg

0.-) Nontit1eaV" Models to ftpfeteV\t elofloMief;

;",ppost, [.Yt '" fc Yt-1; ,,;,) 1

/ .
eVlclo:JeVi e-o us e:'tDC;£ Vl eo u S
vCtYi(;lbili.
VCtriCt~
1\
l'
G!eteo"'i Ylt ct ~ '\W. cl.e,terrvltlle.et by wc+oyS it-lCtt aye. Q(.,(~iclL of
econofVlic 0e-k Ot ~l'\.ts ~ cRoMaiV\ O-P iY'lC/.;uify
~ GNP ~. weetthe v; polih'cc.l p'ocess.

lh(s etLlA.O.;lioY\ is 0. c;(e,~c,(Jption o~ ()l,,{y be..li e,f a~olllt tCtu- wCt~ tYt~t Yt- d~P~Vlot$ OVl

- its OwYl past h,stoY\f; Yt-1

- e/<.o~Vleo~S vatl(i~; ),.(t

refllc,f NtfN ~~. f\Aotltl ?

Th"S qropk Lt~lt<dll( I)seet toY' DVYlo.MIC MOr1J)...
f (Y't,-1 , i(.)
1'V1;ev€. (Xlt (VtO-lt- tVt.aVl 1. tteAA4. gmte.-.

111i~ IS still (). t<"Ch'OVl

-b
Y
r
U-V1 (}ta I? \ e. If Yr:J be,~I\Y) 1/\ ~ intef\lU, CY~ yc.) =) ~ ~ yc
'SrUt£.t'{ t;;~{e"
If Yo \A V' (Y~ Vb) :;) Y6 4 y~
b) L.tnea r i2Jf19 AtAtot'\OMOI,(~ Eq,UAb"Or'l
~ FUVt6fioYl f(,) does Vlof deptvtd e~pllcHl~ on -HMo(.
-;=-.

'! == f(y,x)
This fu,Vlc.HoY\ fee) has ~ fixed.. pO'If\tS' a,t y.tl, 9'b~ 'Ie
<, .'
4.o.re ~'lnte(~eC+ioVl~ lY\ .,1tv,. ~q).p\t\.·l.AMt{e,
l:t. ~ y!]
-" At \Stable. steadl( etofe-; J Y. 0= Cl + byt-,l
ltv~eve b:- f'l CV,)<:) IS ~LL stope. of f( . )
- - e<.otultteol at nI(eof polf\t y
:= y-by

SoLliLrlOY/: ~ ~eC{ueV1c..e. tYo, Y1, ,.,} OpprOCll/iAf y

1lAe c(lffoveVl(L ~ft" W V10V111{\ea.V ~ t(·) ~ ttu ctfl/rOXi MttiiOVl b€co~

ev,
'S Y"lttl I

c) L.ifleavizifl9 NOVl,(l.c.(tDnol'4ou~ ettuationt

-'J ASSUMe." Yt::::o mnc{OM vc{Yia~ vy t!: S(v1ttll bOUVlded. ~t CoYltaiYlS ).(

~
-tc> cttHl1cl y ~ fey, li)
g Op(xll'XIMate fe-) ~ First-order' Ta1'[ov S~v1V; ~
y. . .

~ ~~

[flo =' 0.. + bY, + C~tl

WrJe(e" C- ~ fit (. v, );t)
(A =" Y- by - c )i
-» \hL o.s5\Al"lpnOV\~ -y IS swbQ ( eVlsuv:e that tvre etev i oJi oV1 of t)(t) 'h) fYl}V\I1
" v. is $'MGtll \ l):{, 'f ~
CUVI be kept C!vbitrovi~
SMUll "It
by p,ckl~ 4W.. bOlAV\&S On ).(, o<ppr-opvitAt(!"Ll(,
 .J~9(e-CULnOY\
'"

f(k~) 1'.5 strJ'Ctllf tOYlCttue,

g;
o~ S <:: 1.

I~TI ~
C1- ~ ) K~ + Yt - Ct, ,
K1 k*
kt
tf; ::: (1-S)Y-c
Lf{)eo,yjLI~ fA Non lmwY" Dit'f'€y0Y1c.Q. Bq,LW;h'vv\ Lt- ~ 1
At :: otA o

Gross Ivwes-tvvIell\t :
$ eoostaVl-t gavi~ mte..
L ~ 1­
t

0' -:::: q(7)wt'tA mte.. ot teul/1VJo lo~ j ccJ.. p(7)~feSS

cgi f\ c;., P(o) I S hDMO~(1 eous of d~(et i

1"kt Solow MoclU has Ot -0trst- orc;(ei'" VlO ( l - \inea Y' dlfferenC£.- ettutlh~ ~

'0 kt.j.\ :: s· f(kt;) ..... (1- 6)~-t

(;J;Ie (e. k~ ~ Kt :;. K~

Ati,Ctl At
- ~~
1

At ~ Pmclutn vH'1 qrovvt~ furtJlA.,lA fi·~

Yt -::; f(k t ) :- Yf; ~

Y.,
Atl-t At
 =

~i'()u.. rCo) IS l"ilonoronie-cJLy '{)CyeD~jV19 Ir'l V(t

{f.;

The, rvtO£:h.;l VtCl5 o.t MOSt 1 ~tyictl( pos.,tive- gt-eo..ctlf srate tho.t satisfies ~

qoC'~ lVll.tvKe+ elearlllB equo..+ioV\

S·fCk) ~ (o+b-1)k

r-/

~ u~r~ kt ~
kt - k
--W k
~
I'

k t +, cA. kt

tiMeve 0.. == s: . tk (k) + (1- ~)

1V\a golow Mode) te-lls that kt LM11 eov1Ver~ to k

.(l'
S·/r'l(.t kt is tkt fa+io' of capltaA stoelt.. to Cl '3WW\Il~ P(-octucJ1vity treYlc!.

~,
"-"
y :=: fCk)
k -= K-\:-
Ao 5 t

fCk) == VI;
Aao"t

-l/) CapitaL &. OlAtplAt qrow tv1mugk nM~.

~l,ttl K OMcA Y d.o Vlot qiVw D..t 0 Sre-tl d~ ({A tt.

~O ,II< (»..cJ.. '( HuchAcrte, OroUVltt ().. 0IOlIv'''j +YeVlcJ. (iVl ttu.- U.S,)
4 the fluc-hAa,tcOYlS Ctve- r'tt vtclo(Vl vov1CH~ft,s.

~
t ()1Y"ottua ~ ,die<. of 0 SfocVJosh'c.,., c£ tfFefeVlve,. et(uation.
 - 1y(;; -=

f,) ~lvi~ Rn;t- ()'f(}ev UneaV' Mod.tJ..'

~ 10 l,tt'ldefstaVld Vlow (). StOCV1tl~tiC lineav rvIocte-l genemtes De ~totioncj(1 pwb oUst,
\'Va, (Vtu£,r first \<.VlOW f,th o.bout -r~e Vlonsto.tiOYlGl 'f"( belt\. of tIrl.e. VlOVlgtoC!rlObh'c, (\IJoci£,l •

(}..) First- OrtJ.ev VeteV'Ministic eq,(,t(ltlOr'\$

NeW GIOWttA fVloettl:

A~SUfV1e, At stuble s~e{(dl( gt-(;t1E~,:

Yt ::=. fCYt-1) c.::',

::: (fcy); "~

+ f'CY)(YH
.
- y..) ­

r./" ' .

~ 'e:;)
~ Y- fey) ~/';-l-(f~g)'}yt_1 s\ov'·
.J ~

!
,f('i> -:- --~~ ~ .:-j-=-...::.-:=-,-=-....--".----~
I

Yt =' 0. -\- b Yt-1 I

I
I
i
I

Yt :: fcy,):{) + ty(v,x). (Yt -,- Y) + fl.«(v,i~J().(t-~)

Ye = fo,~)
\.
- fy(Y,,~,,)y- f"CY7):i»){ + fy(Y,;()Yt-, +
"----..r---/" •
---v--- -~---
b • C
Pi ~ed. COYlst-a.,l,II,T­
"

0-­

Y ==' Yt;-1
~
y -= Y,
- : a+bY
'/
 /

If 1'01 ~ 1
'It tv(lver~!' +l> a o.s 1,'-'00 'i y"
1-b

1.f -1 '­ '0 4 0 Yt eonve~$

1.r '0 L.. -1 Y-l; e;tive~S

•
...
. ,­
 gc;

b) R~t, Or(j.e~ Stoc~~ttic Eq,l.latiC'yi~

).( € [A
.131 ~.
-;) IV1trocllAce I ike a SV10ck lV1tv tVu. c;;:¢efVl .

iVle 1){~tri~\AtiO(\ in -thiS loouVlol Vlevev CVtaV1~. ~

eye. ()f (). Markov j?me-efs

If Yo IS ou~ldt. tW. rnte-rv",1 C ,/\/\/,

[ ().+CA
1-1:>
, tl+CBJ
1-1::>
~
"0 YH l y" ~ -') tW. i{lt-evvcJ IH 10Y1~ t\~ 0,( b.e: 1.

" l\A1A~~ \?e.

;(\~~ "",is \oo ..d..

If A~ 0

A<.SUMpnonS:
'It) "l-tt i~ o.rali"VI .(}OM 0. pf?Jb. c(1s-t. tV1Dt is' jnvavioV\t t\t1rouBVt tilVlt.
i~) ~ parCHVI@,tey 0 L b L. 1­

If (i.) 0'( (iD ,\; violate~ ~) it1...t MOcW.. will flot qeVl£>,ate. ex smtyoy)Of~ dtst.
toy' tVle va Ilit e.s o-f ~ e Vlcl09 eVlOUS va v1a~S.

~oll,ttiOYl~ To Cho.rz;lcJeviu ~ se.qul?nCL tY,~ in Terrl.1S of f).(1;~

U(1ole"v COYld.ifiOYlib on I'7U1c/O/VI'l/').{t =) tftu- prol? dl'st 0 f 'it (!oYlVer¥S to en1 i nvariavlt

pr-ob c{cH vy tW- IllteiVoJ..

 4-0

XC) £ettLAenug ()f ProIo~loility Dlsm~1i£>V1S

[lot :0 (). + b Yt - ] - NO(1&-+velttt<Sh'c PI fferen c..e eQuC{nOY1

c;olu-h'oYl ~ A $eq,uene.t Ot' iWb, O'St - tlttCtt obeys, the fZ.~cl.«(sive. Y'elctlio~SVli p
cleBnecA Of +i1e ei(uCI.\lOJl\ Itrel'(

1/

rep(('SeVli! tW. Prob. tC1at- Vt; wll lie in iVle s~t S CIt t
qivetI\ 00 info +VJo.t Y "Yo cd elate 0

... ,
-'. t

."'.

, ... ~ ..

Att-:;.'2

1Yie~e.. caVl I?e ('Oi1S1'tucJecA. y-eeuy'give.l~ ~(;yVl t!A.£ know\') cUsts of' l ~t ~
If Ibl.( i =1 tG- t (SI'to)l:=l c.onvero/'~ to aVl if'lVo.viaVlt cli$t.

l'ilYi GtC· I Y,,) = G(·) V Yo

t .. oe

Gt(Y t "' TI tY5~:=O )

As T gets lar¥y =) ; nfo about tht.. vollAt of Yt bl2wiVle.s Iess useful y ~ol
li.: G-t('i4THY.~:=) =
oe GC·) 9
 Lt./

eJ SoLving Hi~\1eY-Ot'c;teY lAnea" MDd~l~: .

~ SecDYld - Ou).e'f ,Avttv (e0 (e.)s i,,€' Prvgn:trvl

//~
'f'he, n()+tAnJ. geneadiwlioV\ of tW... Y!fS-f-Orclev G't()aI1OV\ Cp· 3'1) is
(). lb1vcho.stic vectoy oiffeYG'nce eqVlatioV1.~
(
\ [Yt :::: b + A YH + C X J
~~:: [, ::: :'~1 V:::,": ee:;:~: ~ndOM v
b ~ n >< 1 vectoy of eDV1St~V\tS

A J. C = MatyiceS of toetfic;evtts

SecoVlcJ.-o(ciev ve.c,tvy ~'1ste(V\ :

-IZt -: ; b1 + Ai It-1 + Az 'l.t-:z. -+ C1 Vt- ]

j

••
1Vle~e SeCoYltl- Ordef vec+ov S'vste(\l/g ave eabill( Vltinoled aG -Arot-ordey- vecto(~ysft-s

by inuea~in9 iW. olifV1eVloioYl of itu. S'tate vector avd (Qdetlilf'''& varjOt~eu

...
lY\ ttu.- Ma-h1ces s. vectOY al?ove. . •
1VtfV1, Yb -::: ~i +~'1t-, -I- CVi;
kev tv DyIWIV\',G q\{~ref'l' " va(uR.
t- "}is tll~O (~VI e,¥Vl /.
II-'s ,'lot je,st ,1. S\()~, \:M \
 ~ The \?ev,o.viov- of tin;t-ordev- vectov- mode-Is is tOUl'1ct by deco(V)pO~in9 tC1.L

(V\o.tvi X £ytteM '\VIto 0. set of fi(st - orctev- eq uati oVl5'

Ei~tV\ vfA.l\,tes -:: : ·~V1orac.teYistic roots"

~ poYaMetey~ tVlC\t gove\'Yl the. b'tav'ility of' '!tie. tyste(Vl of ~ql.AC\tiOVlS

A :: 0.. SColo.'Y

, i

'2.1"'2- tAtI.n1X A

e1efV1ell\'I' of A

A tollection at' 2 vec.tvv £ "") Mtth1>< A -= [~ ~ 1

1 1..

~2
1- ---------­
~-i-
 1/-'3

Zq 0/ 09

AX - ,A T" .x = 0
(A - >.. I",) X -= 0

A [~ ~J [::1 - Ar""X

\0- 11 - ) " o
L Ct Z\

..
~ .
1$ \!lOMOIJlVlet'US eq~Cl.J11lVl qyrte.tVI.

=) ~1(l91,(IOt~ MCdYl)(.
iI'
V

~ ....

-1
=) (A -AI",) eJ<1~tS

rvOYl q, i 110 v{ Ia l"" MOt..fyl)C

~
-1
(A-Ar",) (A-AI,,) x :::c 0
X -::- 0 (C<N1+<~diCtVM)
 I.A I qeVll?1Pctef>
Z-'('2,.
'1V~ LllJ.Cll;{rzl. hC et(,uoJiOVl

C\A-"'\I~1 =

JA' - A ({;t11 + an') + (A11 Q Zl - o.1Zjl2.l) ~ o f

l/ \"

la., \1>
thtVl, we, qo t A /\. ('l vllues of' ~)

-Htle((!.,ore also Z Ii flea'lll.( cttp~t

et(ua\i0Vl5 ill tW- 'eAeC't~~ o~ ~t
-U- ~
o.eterl'mYie,S ~divechDYI.~ ~~

VA;! ylA.
,
c'
(Ay~ AY 1
1· , ~
Yt-1
YL = b + 0.. Y"-l
'.I. I
6' b yb

A Move~ ev€cr pO;Ylt to ().. cHffeyent poif)t blf flu. ~Y1sfvrf\llc:1.tiOY\ 'I ~ AY.
z.x2

Poi i')fS thoJ line.. 0Y1 tht eiqeVl vectors Y Gcre MOVect in a spec1cJ. waif,
~
b) Hi~heV'- Oretev Det€Y'f\I\irtistic f''l.tA.O.titmg.

gOMe- properties of ~q,()O:(e.. fV\O.mCQ,s t ti1eiv- oppliCCdioYl h? dif'feYeVlC£.- equatioYls

f) It A is syrvtrvtetvic =) tt-1L (Vots of A ave., (ecJ..

(Otv,eV'wl}.{.;> tVt.tl{ MCn.r be, eOl1l1plex)

2) If %u. 'fOot~ we c-olVlple)( ;:;.) ~I.( MCll( 't/e- "iVl~ic£L" 0'1' "oLAtsicU" tW uVlit evelt,
1{ M roots ore re 01. =::) "ls > 1­
(J( As .( 1

3) H '\he. roots are..- coMpleX" => titLcAI COMe. in C,Orvlple)( paiY"'s

S<. boiiA roots of Ct poiV' are eitv,ev "iV15"ic;U" Of 'o/Atrid£.

+tv (A l1it C4cl.c.­

1+) Ii all (ocn$ ore "iVlSicU" 'tCu l)V\'lt Cl.(c1e,

~

5) If fVu. roots aye "ou.tsicitt" '+W. uvlit Clfc1e.,

~

b) If 'ttv. svsteNl Vto.s at leCt~t 1 rvot t!-1.at IS' ''outsid.£-'' ~ uVlit tL/CIe-,
:j
 4h

Y-t = b + A Yt-1 .+ :cx-j;;

IA1 [ .c 1

~
AI.\ ~ 1­
A1 00

o ).,,2,: o·
o 0

> 1.

1V1 (). ~ecoVlcl.- Order SysteM -:;;) VlClS 2 solutioYls', ,A'" awl Ab

~) itO ~ ,As < 1 ~') tC-u 8V sh?1\I\ eonllef¥S fV\oflotoV\i cCtllL( to

iW- steCAett.( gtate-,

it tW- rvois CAve ('j)(\I\~)( ~ lie, iVl~icV., tW.

" II
2.) UVj·lt e I...-cle.
~

3) If at lQCt$t 1- root IS ne-~a\-1\Je" bAt both I As I '" 1

~

theYl} tf,\,C.. systeVVI w\1\ flip troM 1. sieLL Ot itu steaC:<lf ~mte to fC..e.. ot0~v­

Oes It to(\\}e(~s.
 A source

B) Sf ftI.L roof) Ode, ComplQ,)( & lie "outrioll' "tt1e- uVlit Clvcle-9
~

to) If at least 1 root (~ negCtl1ve-J !:Mt both IAsl > 1

.g,
~Vl/ M sy1;-teM wl\ -P\lp {YOJY1 :1- slott of thL gteAAtf ~tate to tf;u ot/llev

as It dive~s to 'rntiYl"I+Y.

@ H IA 1 1 > 1
=::) 4iv £teMl.( gmte.. I~ cCt(led a CaiJ.d.Ie. PO'llt
1/\.z.\ <. 1- \ -Y;
..'\01
1
)..2. >0 fVu. Sys+-efll1 IS UI'1~+ctb& foy- Cllrvtost- aLL Ivlfh'c'£ COYdil)e;r(
(unless *u- Ce-t of iYlinM eondi11OY1 s +Wet be9i(\ on tW..
ei /1.U1V(2(:!VV" a.,soc.iat~ol lIY t!N.. b~h.et.. et'~V\value-)

e~", Xt ~ 0. + £Xt.-1

4 \b \ L 1 => COnve(~eV\.t seq,()e~1CL tv SOMe, [0Y7SWV1+

l Ia\ :> 1 ==> Oive(~V\,t ='> outsiok tW w1it circle
(not (;\ wMer$iVlt sequ en(..£. uvJ\es s Jo =- 0 )
 .,)1

....
tI-.
•

c) V~ona,Ii'Z.ir1g SvsteMg of Nonswchasn'c e'luahoYlS

-) W Metl10ct of COMpl.khYl9 solutioV1 S by +1ndiYl~ linear COfV1vino,t1ov\£, of

-rmVlSttl'(Mea VO-v1tA~S,

NOl'\stvChttS+JC fl{[,(OetlOYl ~

Yi; = 'q--±~Y~-1
71D', '"'JJ
~ Oi~oV1Q.li2i~ A - by sto.ck,'~ 2. ~rqeV1VCtlue equah'OYlS.

'l l? •
- Y a-t Yare ,n!hpetAdt.rl·
of e<>lO(" otLow',

~
.by t,\ncl ine )ineeIY &Jt>!VlflCthO'n" r
of tG1V1~f'vn"ed. \ioYiow.s
Let Q. = [Y~ Vb] I
I
is Ctcl-1ieved ~ cfiogo>1cJ'zA A ,
~
J
\
"--..
-~
A ::::
Q[A"() A'o0 l ex
-1

I A -= QI\Q-1{
.
~e(e /\ :; olia00Y1cJ.. Matrix of ei¥V1\1al\A£.-S,

1- WiI<cV\ derenli\iYie,g 'iIlSictt/OLA.fS'W.·~ l,{Vl',r circl~.

'1VI.e,Vl, d.e~\)~ G\. V1~VJ vect()v of truV1Sto((V]eet voriQ.?U s; "Zt

.
t< 0.. trClVlS forMe.d.. Vet tov o.p c-oeffie i eVl tr ;. (1;,
., ",

frOM Yt = '0 + AYt - 1 ' "

~ -tyz:,,,sfo rMi'L5 •i

(~1_~ lQ1~)+ =: A\Q1 Yt~~/'

'"
 "..

:::

4 ~1Y1(..[ A is oliCl5onai ::::) eeculA of equa.1iOVlg is' inole-petAdeV1t tOt ttu. oit1e-rs
-') fue eql,{QlioYlS Ore 'ScalflY" dfffeveYlu et(~lo. noV)
-!> ECtllh, Z~t is ().. lintaf tDMbi(\a.l'ion. o-F Yt ~e(e" the we{~VJt-G of tke...

~orv1bino.tioY1 aie ttu. eleNleli\t,g Ot oYie of 'lOWJ of fuL I{werse of tkt. fV1Mvi)( [if

r(?t'0 eV\ vec+-ofS of A

1J

(;fY)CL 'l,,- ­ Q1 Yo/;

It =
[~"~21 1"][y~:J
c(
Y

[l,'l
'lzt
-
I"tL Y,t
ct'2I Y,t
"l
Ii Yzt
t(l.Y2t
(
(
)

If IAbl > 1 :::.') Zzt ::: 0 ~") q,21 Y1t 4- 17..7.. y zt =0

Yz-/; ~
-
11..1 Y1't
, q}~
. '/
 50

Z2.t :=
\

If =; 'ttu.. S\.{~teNl (;VJ1\ tonve(tp +u C-OYlSraht

~) ..."'" . JIVM'jC MCfY\OroV\iCo,H

1 'tn-Rn"itv,

If t=l =::-) t. 11 == ~1 + A "l1O

0­

t=2. -;;')
~1l ==- fbI + AI).. C~1 -t- )...CA Z10 )

:::: ~1 -I- A~1 + ()..o. /-c 10

t:: 3 .,;:0)
1.1~ :::;:c fb1 + A0..[ ~1 + A~ ~1 -t- (A0.. )~ l10 J r
i
I

tl. '1 Q.)3

0
- ~1 + A ~1 + (At:<) ~1 + ()\ l,o
0

1,-:1. . t
Z1t -::: ~1 ~ (AfAi + (;..0.) 11o
J"O

•
 5.1

Ch.3
ertj : Planner
Plcm Y1ev-Equilibrium
eq(,tl libriutvlAllocation
AIIDW.tiOr1

~iep 1.: Oescviption of fi.U1daM eVlttt:ls

~ The eCO(\O~\f IS' C!escYibe-d loy ~ follovvivzg fUVlctCliVleVlmls:
""'" .;:<tl'416\
t) PrefefeYl ce-,g (',ngmVlr-ClV\eous &. tntevtef1t1ponv uti llhf FL{VlCtiC'YI)

L~) tec,{rjt10 l09Y

iii,) (). tOflGtmint S'et.

~ f\!l(;:lvkets +VV' exc!tlul1gifl9 C01YJM odihes5' l'oYIrumeY'$' OY Ar{1llf O!/e no-t

expl'citL~ gpeci fied

-") The, pltlYlV\ ey CVtoDSes iiu. OpiitV1M tOrY/modity o.lIocanoV1 ')
\N,;& velyifl9 On trocU !< pn'cu.
~
1Vu. p lCll1 l'le v c-L.toos.e-S - ClBWe9Clte. e..onS1ANlphOVl

- 00gfegecfe, cop~e- stoCk

1;\ LOboI'

PrvclV\.

IV\~to.V\m.n€ous Utility FUr1ction

IU(Ct)Nt;)
,
- L09Ct + e,Jtl

Ct; :: o.qqregate... Con~uC\1ptJ'OVi

N-t; ~ V'- Laboy ~upply

.f..f L-e[svre ?

Fov CaSe Z
l Cl2o""ev 'S )
 Tect1Vlo logy:
[ f O(~)Vi» At ~ K~ N~-oc At ]

(;bnstrtti nt ~e,t:

1) F~s;i l? ility CO()SfntiVlt

[C i + It - K: N~-c<J At I

i,i) Cttpita,\ Ac,curYIulat1OYl eo~stmi(\t

~t-t-I ::=. (1- ~) K t + :r t {

{;vV1eVe.- 2J (; [OJ 1 J ::=. qUlAderle.r depreciafioVl rate

U,~) Leis-CAfe. - Hue..cr~ Ct>(lS+m;V\t c-nr~ CoYlst{(;lI/lt)

r~t+.1c = 11
~v) AGSL{Me- tV10t ikL In"d-1M CCtpi-rM g-rock 15 po~Ih\le.- &- if IS g/Ve-Vl

Ko > 0

S+OC.VU;\Snc Prod,uctivity Shock

1 At-t-I -::=- PAt + ~HI (
-
vJ;,ere. it-t-, -- NCO, 6;)

rn~M~tlon :
(<7..- It)
~ Ct , Nt, KHI ove c.Vic?Sen b().S"ed on ti-u. info L\vQila.ble., at tlfVl€.- t_
~
corrlfol 'Ia.rial7les
 53

~te.p Q. : Objective, rc.trlC:liOVl & Constmit'\t ~et

~ It's c-onvenieVlt tv reduc.-e IYllAn-'pulate. +i-ct Co'rJstmin,t get

D EliMi net te ),t In tkt Utili-h-t fu

- by QubStitutill9 -f'tOrvl +-kt L-e-isurt- Hour!" Cms-rrnlYlt into IV1SWVlTUVlOUS Uti/~ F>,

! lA ( eli, Nt) = l09 C-t; + 13 C1- Nt-) (

1-00 .
c/:; + K-t+1 -
<Xl
K t Nt At + C1- ~) DC E Co, 1)
At +, = PAt + "1;.1;+1 St+1 A.- N Co) 6~)

Ko > 0

Step?> ~ PlanVJev OptiMization ProbleM

Pletl1n-ey-'s task ~ To jVl"'r1i(\t1ize tiu..lnteYtf'(\t1pOyAA LJt7I'n.r Df Cl r<epreseVltcH7J£

CoY1$ufV1eV ~ubj eL-t tv tf,u. CoY1.st'ru IYl t- J'e- t.

-!:Y

PICmVley ClttooteS equilihqv(V\ a~q(etJate. q,tdintities fV.- tW. e-J,zole

econoMy

£t· Ct + Kt-tl = K: N~-oeAt + C1- 6) Kt

At + , ~ PAt + £'t+l

K. > 0

=
gte.p '+ FOC&

~]
Ct : 1 -==
Ct

oC
Nt ; = CAt) (1- oe)
',,_/~
Kt N;CX)At;

.1l
K-t.tl : (At')
,_/
= ~ Et [A t +1 [<X) <:-,1 N:~~ AH1 + (1-bJ] ~

TVC

. I
, J

111eVlJ eliMj YlCttlY\9 At" ='> PlclYlYl.ev­ ettui liWvJV1 I'~ ,chafGtctevi'Z.e~ '0'1 f I
J

1tt.t follolr<ing eqIACltioV\S;

.1­ =
C-t"'

TVc o

-
Not~ There eire. S eq,.LLtdioY7S
f". 8 vaviables: Kt , K t + 1 , Ct , N-I;, At;
 58

~tep 5 : "J:Vl+erpremtiDYl
LllboV'"- Lei'llft Cl1oic..e.
00 -00
B -
(J t )
( 1 - DC) Kt Nt At
f t
~
o~ v.\i llR-( . MU~~ M PI..
U1i\flv1 ~ of '-­
\DSS Labor Vt11 f.h-t Go.i(\
sn\ib\\t'l
-) OptiMoJ. proviSiOYl of Labov is 6V1oseYl bll eq.uC\.tiIl9 tht COS<Atilikt of supply itt8
i Move- \.Arf,t of labDY (0) w/. tf,u (VICtV'-oinAt 1 pro{}..ucAivThj [C1-oC) J.<;N-oCAtl

\tJe:l~ntQd tNi'th ~ /VtuCt

-7 This eq,uanoY\ hold.s on 0. peviocl by period. ioClds-,
gi I)C e. It ctoe~ not i nvol ve Clny expectetnOVl to" fV1e, N+I,A Ve. ,

t
L
MU ct-J
lJtil~ loSS
-7 -1l1is c-onc;fltion eq,lACttes, at t\tle M~Y~ iV), The. ufr\Hy loss at -nf\lle t
(c{ue to postpoVlifl9 tv next peviod 1 tAVlit of con.l'Uf\Ilph"OVl) :J

~ itJe v+it"d\.( ~~·'n 0+ tllVli- tot 1? -r-o.ki(\9 ·Into account fA c{iscoUYlt

-to.c,wv ~ IX. tVLL (e.-tu(V1~ -f}orVJ fywestin9 thClt conl:'UiVlphoYl un"/t.

c; I~

~ Tvle elJt!eY'" Eq,uatioVl dnves rVu.. plaVlV'lel'"'~ opn(V1cJ. CoYlWlVlpHOYl &. ,'fIVesi {\'IBVlr
(OVlet itte<ewy/l. itu.. copitM ~iCu(\ltlAlQtiOY\)
 5b

~lAPPDU;,- we" cue 0'" pOlioci t oI .1

·' 1:; T
- CO()~WV1eY.l 9;v/2- up 0.. un"! t of ConsuMption

Vtili~ Loss = (1-\

\Y
II .
V

00-1 1-OC
vWllvV\ has MP = CO K t 1"' Nt +, At + 1 - ~

~
o 0 TOMoy-yOW'S expected. retu(t') = Et(ooK~~; N~: At + + 1-~)
1

Wvlev€, Et :: expecto.hoV1 opemtvr} COYlcfdioYlcJ at time, t info:

o
! '

'The, pr~seV]t d.i~couV1t vcdu'e of UtilHy GC1in

~

Ct :::0 f (K t ) K t + l ) (

C-t+1 ::: f (Kt+l, K +2.) t r

~

1}]1$ \s ().. Second. on;ler- £tov~asiic Viffe(erJCL e"tL<&ttlOy);1 IAlt1t'GVt 15

oHeVl Callelt Eulev fq,ucd;OYl,
 Fea~i b'i I i1'( Covtstmi nt
[ G~ + Kt + , == K: N;:,'" A"t + (1- ~) Kb ]

-miS equcdion tells tltlat tt1e ?1C\V1Y\ev- ()~es e:tll yeSOl,ore-es C<.vai lable. IVl

~ eCOYIOM y .
?Jut If -tYJis FeaSi'oi1i'1lf COY1~taiiV\.t l;Je(e VlOt ~atisfiecl ~ et(uaITft-t,
+hen £Ol'Vlt feSOUYCes WOlA,lci Vlot 'oe wed. > .

ConsuMers e;tve Vlot Ovl tltle'lv- bVlct0e.t Ii V\e.-,

-Vi

•", A-, lOI1~ Oes titleve.. VlD btAcl ~ DOOI..S (i.e. poIlu noV! ) :;
COVlIU Mevs wo(,(.let lot ~t1eY' off by MOV', r19 oYl tltu. btAct9M line. -' i Ci;
Iji1uCltjOVl Cl ,'os.! stlA.
"Tntflsversalit ConditiOVl (ne) - Musr be f(lilpoucl ?,I) orct..ev-tv (iAle 0lA, I­
ce vmiV1type.J' Of etl'.i'lib1o
~~~ ~T (~T) K T o
1
/1fI %a.d.ow ~ (,t. of K. ~ 0 ':7 1Yut-- !;..Ie. ass~ u'/ili'ht if. Srvictly
/
en cre.£!' 1'Y11j .
// ---') we <AVe. gOlvi~ QVI 'Infinite VlOV"ZOVl pfVblefVI,
! ~ .' ...
I f Kt ~ oc ~
\ WQ, ~V1oulcl p(eveVlt titlcxt 1tle. CtApircJ. stoc.k -follows an Q;<plosive ptAttevVl"

~ ~
~ TVC E?V1c;u(e.~ *tat explo~ive poHeY'S <Ave ex:cLvtded 1YO(Vl bei (l~ aV)

eq,udibriulV\ sollAhCiYl.

It 's V\O+ worth occurVIvdcding a. so lox~ OrvtO(,(.V1t of ~apita,(

( ~i(jU- its' p-tJ'et. = 0 -:;:;) iW- stock Vlt!S litO eCOYioMic vcdvu.)
1h1. deYivettion of t(,u... TVC is preseVlt-eet In LA S'e.PCHPte. se.t of V10tes .
e
Ch.4
~t'f~: Competitive
Competitive Equilibrium
Equi\,bviwVl
~t€-p 1: DescviptioVl f>t the f3CJJrlOtll\y

-'J In -rhis eCOYlOMy;; ft1ere, ('AYe

{i(rv1S

VlO(Vl0gevlOU$ gooel,
-> CoVlsUlVlerS" g, {1'('(Y1S tro.c:lt- comfVIoc:fdies 'IV) tke- vaYiou$ t\tlavkgt s fbv goods­
~ pro",
".""
Inputs,

OvNl itu, eap', tcJ.. stvvk

l""eVlt "1+ tv t'w.. PivlVlS

guppllf laboy tv th.t +7r'lV1S

- ctervlClVlcl COY1SUf\I1pti"oV\. 8< jvwestMeVlt tj0ocl.5

, !

deMand.. ot{pi-r-cJ. Gtvck t. I ol?OY gevvius \ I

gupp\y t~e vlOMOBeVlO()S good (c-t; g. It)

~te,p Q: CDnslAYV\er-s

~ COr1S!A(V\er,s o.ve lAV\ifoYrVlecl.l~ c1istvibvtted. Dvev- tvJe lAVl\t '!Vltev-VtM.,

!vIsmV1taneo~s Uti Ii n.tJ1oti 0 r\

l). Cc:, .-e;) = L09 .c; + B "it

/rJIIeve, B > 0

IV\ter-teMporr:t1. Uti Iity furlCfi' an

t.c~ t: o ' [~tf:D) - Eo !o ('t (Log.c~ + B l Y

lA ( t )

hVl€l"e, (3 e (OJ 1) ::: of$" C~,lV1t .friIc;n:w

As> v.M e., edl C0>1sutVIey£ V1tA.,Ve, +W SCtrVIe. <;ubjeeJ7ve. cHSCOUVlf" factov
 Ccrlstro.iV\t Set:

j,) FeaSibility Co~stmiV\t

[.c: L: + = w~ V1~ + Y"t k~ I

v===::>
t()YlS"'lIV1eV~ InCOfYIe-.
~ Wt n: WO:JL toil I
r~ k~ == YeV1t7~ e.apiTovt ~toCk W 0rMs.

~ &nS(,((1I1el.Y tttke. P'J'CQ., VVt ()Mol ft; OS given.

~ -e; Cl;v\cl C~ tlye.GlttoSfM:OU.tof'+w"S'ClMe.. q,uaVttiht.:'·

CfVleC{V\s/ Output y IS nOfrvtevliz.eot -tv Vl1ili~.; y;:.c.; + ~:

ii.) CapiW ACCUMUltt-noVl CoV1.Str"{,liVlt

f k t:, = (1-6) k; + ~~ I
t,J,1e re 2J £. (0/1)== o{),{cdterll-( eopfu<1 cleprecianoYl mte.
k: = tVu capiW ~tvc.k. oW\'led by 'Y-tV1. COYlSUMey­

~~) Leisufe - Hot.trl ~t'lgim;(It

[Vl~+/C =1!
lV) AssuMe/ m itl,tia.1 r:apTW gj-OCK. ;~ poSitive.

[(¥ > 0 1
\J) ~Wcl-l4Stic Pmduc.tivitv 'lttoc[.(
.rAt 1-' - PAt + ~1-1 1
Wvie(e St+1 """NCO)6~)
 rnforMLl.nOVI :
(oy ~;)

~ .c::; Yl~ ) ttVld ~k:+, ctve,." CVioseVlloo~ect OYi itJe info Met-do.ble, !At tJ'l\I1e t
\ -v-..I
Conrro\ vavlo.\:7les

= eV1(;{0Bevwus q,+ttte. variable.

Ai; == exogeVlDu5 bmte. vL\viabU

£tep 2A: eonSIAMey'S CotllStmiVlt !'et

~ It's coYlVeYJieVlt to reduu rYItH'lipulCtte ~ cOYlstrz;tint £'et­

,
, ,,

Y y
-ct + k t +, = Wt V1: +Y-t;kJ + (1-b)k;

A-t+\ := P A.., -+­ ~t-tl

k: '> 0

y y
S.t. L t + kt-t, IAI..,ltl: + 1'".., k; -+- (1- 6) k;

At-t, -= PAt + ft+,

k"Y > 0
 b1

~t~p 2C:

Foe: (1)

y
Ylt tzJ

= ('f)

T\!C : o

el;MiV10Jjf1.~ ,At :» [oYlSi.A.fvlef'S l?t{u[ik"'1V Nl is- CLttamctel1zed 'o.t

tkt tolloLN1Vlj W1_.~;.::.et.:-i+i-.::.'0Y1--=.~_: --.

e,

TVC

'-.----~-~-------------\

f\Jot~ 'TVtere. CAfe 5" equanonr

,&
5 VClY1Cd::;de.S
Step ~ : Fi (tVI S
~ FIrMS O:r(!, I).Ylifol'rY1ecl\~ c\iSTv1'outed ovey the tAVlit iVlteyvcvl
L.e. f € [0,11

- lol?ov c1e(V1{).Y1a
&\ Investf\1eVlt clef\l\ClVlct

"Foe:
('-t; =

~~ l}; CoMp~t1tive. l;q,lAiiilt'YilAlV\ \)efinitioYl

fs 0. Get Ot tontinl)OUS pnC£.- fiAVlC,tioVl /Nt, Yt suc.L,-, tf;,aT

1') tonslAlVlel1: ave. MCt)(it'V\"\zin9 [)ti li~ - (b) holds

z) 0rrViS elVe., MCI.l<iVVlizinB prvfits - (7) VtoJdS
3) All MCiYke+- e"lear-s ;

UJ Cupi1d-~tvGk MClyke t ; i k: ctr ::

Sf k! d-f

~LLJ Ivwesfl'VleV\t MCi.vket: J~;

y
eX- y == ), If et t
:J

Lv) COrl s\)(VJ Pti OYl j\/\()y ket : L.c; Gty ) .cf elf
f
:=
 b'3

Co (V1 pe:ti h\le., l7q,ui li ltMUIV\ IS elttCtt'ttc,teli zu;l Ic.t +t1i -to llDWiVL~ . ~clinO)/l ~
16 = .i. //VI;;
.£-[

1
;:..;
- ~ ~t [(~tl) (Y H1 + 1 - 2J )]

.c~ -+ k;r, - tA!tV1; -I- Ytk; -+ (1-b)k;

~TVC
/'
~.r:; ~T (j;) k;.. l 0

/ At + , - PAt -I- ~-t+ I

w-\:; =- (1-oC) GV"tft G

,Vl tfree At-

r{, =:
cJ]
(J/r- I Gn-t)
t;
f HC
At

rhl :: at! L1t-t1

k H1

Ch.5
Ct-i.5:: Nonstochastic
NoV"! lJ,tvchosticSteady
£tettcA\fState
gtate.(NSSS)
(NSSS)

AJ OeYivanoYl f)f fA NSSS

~ WrJeV1 we, <;olve 0. dl(f\D fV1i C MOcW !At (ASing Cl Lo~-~ln€aV" Appn"ciMtl+ioYl
~

~ NSSS -:::: tVJeve.. rs (lO uncevtCtIVlty

r At ~ PCA) =) A]

~) NSSS fDr- ttu. PlaVlnev- Cq,CA.i li~Urv1

-) EClUililv¥iLArv"I (<; GVto.~ctevlU'd 10vr tke- ti?1l0wI equcdiOYl S ;
g =: _1 (1-00) K: N~oe At (1")
Ct

..1-
Ct
:: ~ Ei; [..1.- (oe K::,' f-J:7 Atl-I-+- '1 - 6)
CHI
1 (2..)

Ct + Kt + 1 = K~ N:- oo At-+- (1- S) Kt

109 At + , - (1-p) l00 A + P L0C) At -+- \vt .

'-..J .

)
0 :=:
liM
'f""oc
E{i>T ~)
C
KTJT
, /
/

//

N!1ere, "Vi ::: 1Ai\t]lte vlOis- e..- Ar

 b-5

,i1".rV
1

iheV1] Ctbstrv.c.;!l'ng frOrYl ~ 1VC, tV1e re CUe. -:5 etlucdiOY1~

- '3 UnLMO~Y1S: CT N- K I

I~S
, " TT

l~ = [C, N, K] ]
NSSS Ve(;l-ov

c) TVVlPOsifl9 (). tJSSS

1) E?11(vi'IYlIA+-e- e,Kpec,t"uhOYl open;d"OY1

2.) \)<l)p 0<\\ bU~Sc,vipts,

o se,t?tll voYiuWg - S!; value.£

2; <:SiGVlp\ify t solve ttu UYlk,vtowYl (c) iV, K)

os (}v -BAVtchen of p0((il(Y1 ete<j g p(edeterrvlInec{ quuntities

4-") Ar;suCYle; A:= 1

- oC --rXJ­
1 (1-oe) K N A
E
i

t;.t€tP i: frOM tke- euler- &quatioYl

CSlil(J., A ~ 1-)
f1 - oC ~ )-1 + 1 ­ 2>

F
1
~tep '2. = ConsiCUx tht- capittJ. A-cC!Arv]lA\e<.noYl CQfl.stIetiYl't": - h-oM C~)

K N1-"" -Sl-Z
of:
C ==-
KoO
-
1-01:
C - f'I - ~
1Z K ,K

00-1 1- 011
f. - K N - S
K
C
V....
::: (~)OO-1 _~
C -- K(F-a) Cq)

Step'?> : COYisickv Cb)

e -::: 1 C1-00)~)cO
C

-~~
!3 :::: .1 C1-00) F 1-"" (IOJ
C

~+ep q. ~ £\A bS ti -Iv t e.- een Into (10)

.- - $
- ~olve- tDy K~

G -:::. .-1- (1-oO) F ,:.00

K(f-~)

K,-~ -=- 1 ( '1- OC) F -.5!2­

1-""
(r-6) e­
~o~ve, .fay N· ~
~ (1)
1 = c£t~~1-o&' + 1 ~
(:>

~ ~)-oe - .1.+1-cS
(!I

G+ 1- a) ~1-~
j....

~ C+~;~·r K
 C = K
oO
N
1-IlCl C
- oK.

Ctep 5: HSSS VeCTOY

- -;2?­
K =
F-,b1 C~)
-B­
F 1-.0

..1-:
1- 00

N :::
~+~; ~d) K

00 1-aC
C ::: KN -c\K
-
I := ~K
-00 -1-OC
y ::: K N
Ol-t b =
Ch.6 : Log-Linearization
Lc>~ - LlneClvizanoY'
-"r DfteV1 c1YlL1CY1J/ eCCiVlOMiC fVlod£,ls 6 Ve" tvo oiHic(..d+ to $'olvC,,; % tf"u.'f involve,

0.. SysteM of VlOfl-lit'leav et(UlA.tiOYl.r ::0) S'ollAh'OYlq does not et(i.rts

IVII (/ V\JO-lj S tv line~,rju fi.u. MOetd..;

T,,) L~tmi£jl.tt) UneCtyiz.cdioY1

it) Lo~ - l\neCtyj ZOJiOVl

--!?
mVi/ 1) vv~ e.OMpute, 1'W-- SoluhoYl (lulVley;c.cdll( Ciet ttu.. C-O/)l\putev .folve­

\'W.. ~vste{V\ Df eqUtltiOYl g -BY" giVe-Vi pan;:UVleteV" .1',

:2) We CtlVl Ctpprz.>)(;~te. tVu. MOeuA Ot( well CU; pOSJi/o1e- by c< fVlocid

thClVl we. CCtVl &,Dlve,

4 qel'le@te~ e><p(essiOYlg 'In term\? of e.{a$ticiti~.

er. P.-od'" e{oS he-iti e..s

'i,ubStitutiOVl elasticihe-s

~te.p 1: lOW d<zy;va.tive-~ 1L TGl'llcw f:x avzsioV\

(Jy = afcu"u .• ).-t'I1) d).(1 +.~.+ ofc).('"" .• ).-(.,) O}(n
o)€, d~n

PI (,4:J ffoM (2.)

1 =­
Ct

At gt-eaetlf stuJe.. : Ct ~
C-t-t-I -== 1
K-t -:::. Kt;+1 K.

Nt == "'t+ I = N -:;> Fa.,..- ~,'Mp"'Ci1tt:J 9et (\It :;; .1 Vt

!Nvu", lo&-II>7eclVi2-tiH~
At ~

At +1 - i
 1­
~I 1
i (b~) [oOKOC-~~J&41-bJ
Y

~ Ge K
oC
-
1
+ 1- 1
~

O-lj­
. 0 0-2­ ::. - ~ oC ( oo-,'K
)
00-\

0..1. ::. - ~oC KoC - 1

01.\: -=
o.s ~ KoC - 1

-;::. - C
{).."
I-<­
~tep'Z ; gfo-ndQ,rd MltfflX ForM ;) ,Ei¥nv~lULS'$,., Ei$t'vweofo,rs '
"­
J
~1
1\

1 0 Ct; 0-2- Cl. 3 Ct'l-I

/\
0
1 a~ a, <i-t'l-\
c
CAb o.q.
/I
K,. 0 1 0 KH1 + f) o 0 0 WtT /

0 0 At 0 0 1 AH1 -1 o 0 0 w"t-t,
lrJA
I WI
/

Ao Yt;

y~ ­
1
rr.Mo€vt

1Vl(~ ghows tVtClt 1tu Modt,.,1 ckp.eVlQt,!' OYl MD.1Yi X' A.

~

It's COYlveVlieV\t to eulculo.te., E'¥Vl val(,{£-S of' Matrix A

(A - I).J 'I = 0

we V\lj.ol \ A - I A\ - 0

Ai, L i :=:) 'lV1sic(;.. tltu- ('{Yl'lt cive-le,

Ai, '> 1 ...;') ou:tsiclL ttu.. unit civc,te..
 92

g-tlf~: . rordan OecoMpoSHidYl

-') l)ec..otvlpo.sitVj MlA1Y1 x A

Frvrtl (13J

Yo\; ::. A'Y~+I + .B wt"~J

. . .~

~ ~V,,\~ e)(pec..m:\0n<; o·~ c.oncti11on on tl'Mt 1:; lnfo

[A
L­

.~.A

~_j§I\~-')E{;'i~1
-1
:: 1\ IS Q. Yt + 1

le..+ Z{; = Q-'y{;

~
= Q
-f'lKt
A~

\ Z{;
.
~
1\ (;:t,
N
l-t-+l
6_1

0·b)

A, E", &.HTI

r1 ~Z{;

z.>~
=

~
).2. E~ l:z.t+1

A 3 Eb "Z!Ml

qu" L l.., =
I
I\"l -t
­
:::.
/ -1
1\ G! '{{; [
2!t+1 = ~,
0
A2
D
~lrt -~ -~~ \t:y~:J
3 q,~1 1.3'Z. l{.n
(
B ]f' , '1 +'l1~·Kb
o 0 t{,11 Ct + c/"3 At
C\-:rj
=. A 0 A A A

~ A tt ZI Ct; + C/,tz V\t .+ 'l..·nAt

o 3 " A
t{,l,\c t + 'l.37,. K t+ q,J3 At
I'
 ~te.p q. ~ L.AW of Itamted - ~>cpecmtiov.t S -
l~ = 1\ Et;~~
- ...... ,./.

i CHI = 1\ E-I:;+I 'l-t-tl.

"It; = f\ Et; (/\ Et-t-I Lt;.;2,.)

2­
== 1\ Et 1: t-t'l­
~
"T

7 t = 1\ f-t It-t''

£-te.p 5: TrvlpoS'e ~strl:tint

'RrJ(Vl (11") :

2.) If A1 > 1
~
I
li-tl = A 'lot

&
-1
Y-t~1 :: AI Q-1 Y

t
\I
·---v--·-·---------­ --"7...i. .
-~./ --~-

I ( '111
L
Ct-tl + 112 Kt-t-I +
---y--

::: 0 . >M C£
q,1'!> Avl)
~

).1 '> 1 =-) ;.\.1 i-? ovttri04 -ltu.

~
tArI"lt 'Cifc:,\ e.

z,t..,::: 0
g~ b: Vec-\oy A"';to(e~(e$sioVl ,g PO\\~\f (1.((1CtiOVlS
Gu.bSl1M.1e,. (\~) '\(\,To (12.);

~ [a. + a'~)J K, +

~
17, .

~ A A
KH \ -::. \o 1 1,1(t -\- bz At
~

I~...l_110, bJI~~ -\- 1°1 ~H'

ClAu, ] lo rJ lA.l l1 1
iZem? At + l ~ eA", + (".+1

() 0 The L.lwJ ot Mo-noYl of +kt. gte<:t"e" vt~xjClbU--5 In f!tlis (V10~·

~
'ihe,Vl/ tW. evolu;tioVl of tkc. yeiVIo.iYl"Vl.B vonaWt D.ye vttte1w\IVleet -I1rJyoVt~l.-\

+W. tollow\~ '" Poll elf funcJiOVl S "

ct., Yo, ,,) =' If [t1
~ttp ~: -rWlp~lse, (<~r0rtS~ fur'\C-nOfl
~l.ApPO>t-, 1;Je. o.tt \n"re(e~teo. '1(\ tVv... d~no.(Y\;Ct "MpOl.GJ ot ,-tiM€ , t inY\ovaliOY\ tv
/+~(;\t)ilO\O~;CcJ. 0V\o.~:~t =) Impact of £,~ OVl K"i"1 g. Zt-t-I ;

g:l - [: :·1 [~1.~ l~2l

Ch.7 : Papers related to RBC
-

PrJ Prescott (l'lQ;5) ~ ~ Alru.ac{ () f- Busineg Cf{(//e, f\-1eaSuteM£V1.t,

Mo-x. Eo[~o (-;-1 (1-ep) k Ct· + ep ~L-(1-V\t)J

(Ct,I<-t-tI.Y\tr.'
t-;.o
­

Foe:

\ el t k
At
1
t
-
e 6-1
V't

Kt-t-I :

\./
v
--(1)

- ~OVl-L.ineav Equafio YJ
1-Vli;
l /
(
TI'CV1e (tllO co..hoV\ ('lJYlo(inOYl -4 tM[g It!ovv iv itUDca-t-e, ~-w t.oVlslAfV1pnOYl g.. £t.1viflj
fO"to MO«O (rI,

111M) L09-line&\Yiz\~ orounc;t +tA.L ~eacLl{ state:

At steCtcl~ gh:de ; r::::: 1
ki;:::: k-t-t, :::: k

L.HS :

+ @~41 ek'-·(1$-(~~t Q~~)Bk'-'n'-~ - ~)ek'-'n'-®

~ ~' ~
 A

Kt =- dk",
k-t;

A
Yl t :: etVi t
Yl t

.D"t ::: d.c t

..ct

= ~ [1 -Q:L\Vlt
)1=V1
l
l1-Vli· J

1\
'c't =

/I /I

kt+\ V-t
-1 A /\
Q .ct-tr - A ..et-
A
II 1\

Vl Vie

ttl
AQ-1
A

"It-tr Zt

A A
=) fJ:. e(/Mj VlUre.- ..c.t GlM.~ .-CHI

~
/I
11\", - ()..() k. t + Cl 1 Zt
~ V
~tt1.te. V•

. .

x 0) gwckastic Vtc.tt'V" Viff~re~CL E'etuatiovt,

1Y. ~. b + AY,-, + c;J
~Vldo"", y,

At t=-1 , '11 = b+A'Io + GX 1

t-=2 , '1 2 '== b + A (b + A Yo + C)( 1) + G)(l.

~
-t-l
Yf, ~
2. AS (b + CXt-_S) + At,yo
8=0

1
AS -= [QI\Q-1Y = Q AS Q-J
If V lA-I ~ 1. :::) eU'c\tl elelVH?lIltr of AS conve,e;es tv 0 os S ~ 00

OM,! IAJ> 1 =) /\ 1\ eoYl1-ttifi 0. dictVOYlcJ. -e1e(VleVlT tV!Ci-t qrows ~ bOlAnd,

\IIJI

[, (o,v\~ J2,i~Vt \letl(,\)., ~t Cs- o~ds{eu ~ cmH- civcle-)

1Vu. ~tabiliht ~j nOV' foil' CI. vec,f()('-valw..ct <zquah'oYl y-eqwve.g

0,1\ et'seVl~va.l~ of A q~ou.lO< be iflsiciL ~ un'ltcircle-, Iy I~T~ 1--1

~ ------'0

111;S eq,uah'oY\ Yep(e~eV1t&" a tiMe £'E'viM -:;;.) ~ Movin~ Ave~ Rep;-eseVltation

4 sinu. Y-t; is Movi,'"e! averu'j-t- <lfc:dL
PC\$t ...-ea1iz.£Hions of oljstuv~aYlc..£ tevM
Xt.
 g-o,

e'f.. Beho,vioY of tW.. Solow l<e£idutNl . ,.

[Y-t = b+ Ct Yt-1 + ct + dVt-]

= vt. + c3 v t - 1

procluc;.-!ivih.t_ pmductivlh.(

ctiShAt17aVlU- - ~'ltJD(.,V,

..
FroM uS. olaffi., K-u. (e~id.ua,(. I()f -tW... Y~r-i?5siOY1 of 'It on Yt - I t-l;v1o{ t gtiH S/;'00'S

<;ubstaVlhal OtuwCOr-veta.tiOV1 .

~
yVioc;U.,li'' -j Vt a~ &tv\' tlt.,d-oeoYfe,.(a:teol proce5~.

o
~'Solow Residual" rMI
~CVMVIO'j;CoJpa'~

(c.aV1 M€.(lSVJe. tW.. eOlV1b'lfle.o.. .effec.i1 of At; ~vtol V-t; by 9\AQrm(..-h\~

Q.f' the growth In "0P\..{1'S ft'OfVI tiIu.. qrowth of ()utput:)

oC 1-oc
Yt r= Vt> (K 1) (At L t ) I' .

IhIS eC(,iJCl.hoY1 vvlll V10t wor-k if labo"'- ~L.Appl~ flue-hAutes Over- tiMe,

Gina i Lt} \iVlll be cor-vela-teet vy oIisfuv bane.£. -\-e-nvl.

L..eCt~t gq;uaf€-S e"'titvtute,~ of 00 ClMol [1-00) \iV11l be bias.

o P If vt is 'oi~ vall.t£ ::0) L'" i =) recJ wCl.J-€ r

 f\~~iAMpt1OV\S: Prod'" m ,'s Co blo- Do~let'S
- Co fV1 peti hve, fac+ov rvtCl y tats
~
Foe: . {1-oC)Yt- = Wf;

I.-t

. Vt/a4v,-, + ;<t + e,
/' ~.~ ~ $ WOl/K

t ~,","'" i«L k"'''' .;~ p",'''Uiv,''t • .

MeaSU(e.~ -+W. perbistevJ(/~: Of c,{evitHioY'S ·f.(-I?Nltre Vl (1.

1
[ o
-ct.] Iy+-] =
1 s;r't

~ outplAt yesr ctuoJ ;~ -hvrY\ ttu. Y(2.B ress iOVl 0 f "

Vi; "
on Yt-1 QMo( S 1't-1

CltMeye Vtod de Vlotes c(evietJioVl ~CiyY) tr-eVlol)

A /I
'11-1e SR yesictuo..t IS trom Cl. yeg(e.ssioVl of' r;('t on SI"t-1
~

lVlQSe. (esictu.oJ. gkou.lct be. i oUVlt1c.cJ. uVldev- tVu rV100W wI!t,'Gh rs o(Vl'Ve.V1 by

9 \::Y1ou<) et;.
0.. £ in 1e.
 ~2

3 2. 01

Pvescott (l'teb) - U51'n~ fv1o.tlAb

A vepreseV\totive o.~eV\t fItll1xi 1\I1·IZe.-S·;
- L. 1-eI ~
~t + Ct - StKt n t

I CaIlil-lJ. ACCUrvllAloJiOYl:

e..W'Y€Vlt Procl '"

TOW Yeso"n:.,{. t<vo.ilab-Q

- (1)

- Cz.)

- (Lf)

e.tiU1i !t>rJ'Ur'l1 IS iVLe(e·ft,fe, Q Vlonhnecw (e;<pectatiOr'UtL 'llysr-€NI of it d,i'ffevenu- ettl,lClIiWlS

&. TW LAw of MohOYlfbr i:'-t> )V1 it
vootic<~~
Cz, "1<,;, Ct> V1~)
1 :::. (5)

-it (~)
l-n
= C~)
'::i
1-~ &
k k Yl + [1-6) k - C Lg)

Fa.. . ~1"'1pHcihr ~ v\I

C'" '"
A
~e-t V\. = 1 = Et Ct +1 + ell. EO k-t+, + C<3 Et i H, (tl )
7

tltu,Vl ('2) J. (i?) Ofe

A

k t +,
_. A

0-4- k t + o.s Zt
A
'" + o.(,,-C-t> (10)
\'3 r10{~1;t
"
It-t, == pit, + cc,t+1
(II)
 j,,-~r ~ \;~) ~ Jt~-' 1i ~~- } I 'L_";

= O-!J Yt + (Al2: t -+ ~;t _

CA z ::=. ~e (1- e) k- e

-:::: -(:>(1-f)) k- e
° 3

Ott = C1-b)+(1-e) k-
,
e

as -=
k- e

0." =- -~

~0- Unear'izcdion :
!

aG
j

t - ~ (Ct~ c) == f.> 6[1-0+ (H) k- @)]-e

f> -&+ (I-e) k--rtJ ~ &',,;C)

I .

.. 1

=- [(1 . . elk~& -+ C~-~)l K(kt-k\ -+ k1-8riJ/l~-"l.) - ~~.rtt-C)

~~ It. "). k \: f k\: C

-:: L(1-a)l.<~e-t- (1-0J E: t k~ -I­

 [~: Zt
]
[: :J [:
a:z..
1
0
~.
KH1
/'­

'i!t'l-I
+
1

o
0
(42-

0
:,]
A

'Yt-tl

~t+\

wt"'
C

l
tv
~"'I
I ( f
'/1; - Ai YH1 -\- A2 Wt"'r'
'4V
-tW,( e, is e;<peufah£vvl
t
jIl<?
~ bu r odd. e,Yt( +e(I'\A
D'~n;<,,~
~

l Yt = AYt +, + 13 wti-\
•
1 (12)

-1
B -:::.
Ao AZ

= [' ooT ~I> 0't~.

o 0 (oJ
Az.

------------- ... --.-.--~

JOV"MVl Oecof\1posHioVl
~ c\(!(OmpOS\V1g Y"ltltnx A
[A =: QAQ-1]
f\ "" 0. cJ. i050fl oJ. Mt\-\l1)( of eigeVl vt\Iu.e-.r
~
\ A L~ K 2J =

iheV/} etefJ'ne 0­ flew vectvv- TYZAVlStooll1eet VO r-IQWg, ;

/<.1 .'''\
/
(Q
-1
Yt +1 ::
I\~ !~ -
:-1 -1
A 13 Q Wt-tl
1 !

'::'/ lnsicLL'tW- undo C·'I''(.,le.. :::::) this !'WI" ,'~ ·foyward.

A1 .c. i ~~ble. root!

~o o
o 1.02... 0

o o .8

A A A

o o 'Vi1 .t-+;, + ¥,t.. k t + V'3 2t;

o ,V21 ,""
'..c t + Vu. k"" t + VZI '"
l'l;
1\ " /I
o o 0·8 V~\L+;, + ,vn k'l; + V:?3'2 t
'3,,3 '31'1

- prvo'(.{ChVe,h\v..L 'j-v YlO.') - rv1CtY r..e r ach'viH-&J

Cal i~tiO)1: -,- oUS-Count- (Me uf 4- /v h
peVal'l{)tAM.

= O.01Z[ _ depredah'tN\ Q·F eapilnt I) uU,.d. -#tv 10 l(r.r

l1- CCtPj~ C-QVl be. us.ed Ion¥Y -=) ~ is YMal/er-:
e : : O,'f =c' 0, bLf - (abC!>"s !;inav€. i()f r'ylC~
6 -= o.76'S .- <;,E (}ft-e{)'!V/olo51 l:itxk
7
{frY'" rob"", veriotu,q;J!.s.
y/<- =

1° =
.L!k = II<. - b
c:1.:l.
:::. ~ b (1- e) k- 8

Cl'3 := -~(1-&) k- e

Ott ::=:: (1- ~ ) + (1 - 8) k.-~

cAs- ==- L,-e

r, ~ y-k

°b = !:...
r­
= c_k

~6Lu+l0Y1 toM MatLo.b:

EI<~V1-Vtll~
J\
:

~
L O.'H?q
c)

rvtcdyj X of 81§£V\veGtof'S;

-1
- O. b't 08
-O.Oq]
Q = -O.'T:j. -O.qz -o.H
[
o o O.c1~

II
1\
'-c t - -o.:r:rkt -o.12'1t;
~

~Ul:Jstiluh~ -li1i~ Intv ~ law of MOh'OV\ :

oI /'
K =
A

-0. '33 Gt;'

A

+ 1.01 kt;' + 0. 0 (, Zt;

II

t +\
1\ 1\ A II
- -():~'3 (- O.11kt-- O.1gZt;) + 1.D1kt: -+ 0.010 Zt;

; OyrEll SVS~"l:" o~o;.J [~:l

1 1
exo~eneous
'w Mo,i'O v\.

,
I
. "
 1-e
Zt; k t + (1 -;- 6) k t
~ lOt) It'neClV"

AT steaoll{ St-at-e, :
..c + k = kH~ + (1-h)k
-(7
/C­ =­ k - bY-..

e = Y - 2>
k v..

~+td-e. V, /
.k..,
" , \~
---->
Yt"+1
II
CHI

~ ~
/I

kt it A

"- kHZ
"'­
/I

Zt; Yt

FroM C'l): T~kl\~ i2xpectrdioY\~ of COYlct',tiOYlo1. ()Yl t;~ t Info J

Yt -;::: (A)E:t;Yt+,
'it ::: (~ Et Yt+1

Q-1 Y.L "t; = 1\ ~ Q­ 1 Yt+1 ,

Let S-t­ - Q-1 y

-\;,7

- St - f\ S SiTI ,., (13)

~

(Itt)

[~t1
A1 Et s1>t-tl
5z !; = .Az £t.Sz;t-tl
S3t .AJ Et S~,tTI
La.w of Itarated.. expectations
gt == AE£Sty
(~~(-5tH

£t = A Et (A Et + , s,tt-z.)
2­
::: 1\ E:t St+2.

0
T
~t 1\ Et 5 tH

Foy all )..~ ~ 1. :

Let lilV) E S-t+T does not elCploh -Iva ~t

i~oc

Fov Ai <. 1.

t;rl\ (.l. 'St -= Q-l Y

- ~ee p.5tj

Vec-!oy AlAtor~(es~joV\ s.. fbliCtf J:Ul1ctitms

~(,dZ)b-liIvt+e. (IS) 'I/ltv (10)
 vecfov
hctt"re9 "'eSS i0'Y1
(VAfl.) Fot'IV1.

1"V1.eVl, i1tu. evolution of w refVlCliVlinfl voviable--s DVe ol£teftVl'Vled t0rvu9 h. 'ftv...

tollOlN"~ "pollC!.f FLWlc:nOVls"

( c" G" ") Tt n:l

 C[a

2) Divisible Laboy

~ All tfldivilituo)s ove eMployed

C"" tJ-t; \') tOYlswV\t)

~ IV1dividutJ~ COntiYllAously C<oIjU5t hot

~ ~ 1<()tQ, e;tll 'InclividucJs o..ve -the. sa IV] e. eve fVJ ageVlt VlDY ks the SCt/Vle Vlumbe( of
. LJ 0ou~.
'V

0·0 in ClV1 t<~c tv'lodeA} eve"1 a0enf c-wooses hot

~ witVl {,tV1 1 tec~ nolo5Y:J g(eo"tev (efurflg to Wovkl~ wilt pYDviciL
aVl IflceV1+1ve, -Iv wovk (VI()(e. \t1ours.

H
Not~ FlucfvtatiOn<5 In ll0qveljate hOlA(J \!Iovked in ttu. eCOYlDMY are d,()e,. tv
LMOJJ¥g IYl botVi \ #" of- lrlb~fs peopet c,woo£..L tv work CinteVlSive. rvIQyq,'n)
(1\1) .
:tt of peop-U.. eVlteri~ $. Il?utVl(~ +0 wOt!'<' wrc..e
Cex t-e tI15 I v e, (VIC! v"f); 1\ )

 Let H t ::0­ -toM VlOl1 rr workevt Ci e,. ®~ '" V< hti)

h,,::. Clve~ hours li'JOvv...eet

Nt': :;t Of incLividua.Qg at vvOy~

<>dl
\V'V
c4tC;h'vi f1( ~ ..Y.

Nt

B) HGlflseV\ (l.:tg,.): JY\divlsible L-abOl'" etVl()l tW- ~v.s;()ess Ctrv1e

AJ Ind.ivisib/e, LaboY' Vs Vivis-ible- ~bt1Y'

1} TV]cfi\/i~ible L.abov

..., l'iH-/o du.e -Iv t> Nt. rotWi tCttCtv\' Ah

~c kW.. MoM IS r'\O()- ~onvex:'11vt ?

(;e..) i'vIodJ,). ~ Kyclltl,Vlcl &< Prescott CICl~z.)

~ OH WV\e t!Aa t
1) 11\oi \;icWcJ s ('em eitVJef - set :If of hours (i,e E 'n~o<f V I'lot ev(!,,"'! HH
\ IN()ik. ().
'~_) is e{)1p'/)lfP~
Vlot LNDl"k at all I
en ~\.{ are. UVlCllole. tv tNol"k On inrev(V1eot",tlf e n{.AyVJl:7el" of! VtovuJ

~c fY\Ost peoptt- ~ worK hAll -nP/le...

not VV Of If.. 0+ tU I

-~ 1niS pc<pev sltJows ttwt OVl eC{;(IDflt1y V'j/ ·''ldivi';/ble,.. LaboV" exViibits V(}'('-!
. h ~
\.()X~ .flv\cfvtCthDn~ In hours wOY v~e..ol (~ati.;e, to prvc!Ucrivirvr
~

9tCI 0.( Ylon-eOY\ve.xi+vt

.
(ot(,u,{ P~Pef gGDW SI"\tl.l\ t'(uc.flIl&ln(>V1)

~ JlI\ aVl 12.l2>e" MoiUt, H'/1 CVtoo~ Q. pmb of wDvki"j g a. l~tteV'y

de.h?fMI(1~S vJAet~ev" tCu HH a.cfua,(.(~ (;v'oyK~

bfflCL all HH s o.rQ iW- So.Me =) tVtey all cWoo.l'e the Sa(Vle (Xoh of WOYki~ 9
bvtt +W. 0 utco f\II e 0 f ttu. lotte'1 Ctvill be oJffe re VI. t.
,
1-1' I P
I 1 r----~

~WI~ 'flO I
I
i
, __
I
I
~I

I ,
/ j---­
1_ p /em -10
I
I J
I
I I I ­
-10 0 +10 0
-10 +10

Pm 17 O"st'. h...
T"teLilS"ive. MoV'8 it'\ ~J. DiVl,?!ble LctQO(.· ""V\. .
--" Inolivic:{,lAe<AS Me .fre-e. tv actjtAst eonnfllJ{JUS', ttu.. .:J:h0.P, VtuJ.-{rJ vvovv.eci

EJ<tenSi\le. M'U6~1\ =) t"Vldivigible t-tlboY"

-7 No if\ctivicluai~ eV1tev7~ / [ec(Vi~ ervJplolfNv~r

-" h; i'MpDYr~iI\,t fb( o(?Kplain3 rv S af bo~ M,'cro J, MaCrO (eve{

~ b. Ht c;<.lAe -tv 4 Nt; rtttWr *'-alii b. ht"

20'[· < 5S'/'

~ Most peop-{t e'li"tJev -woY-1.<- -tU.1I h'ML

NOvi - COYlV€ >eiNeS .
~ Vlot wovk a.t o.ll ..)y
c.Mic;(,.. i'M 100Ue" al?;1i l-f fo,l
i,) N()l'1Co()ve'(i~ "}- ?rVctV' htt. -h\M.l~''''''~ M-OotV .

FIYst <fa\.( of week; ~ rL. f

Lote r Cr1 : (vtP.. t
~

lVlis jVIe(tvls, TVlcti violu aJ. fOtc e.s ('Onve)( Prvcl" m o.t .f;'tst; avtr;/.. tiM. III
'o~O,vle.. CO(l CCi,V€,.,

Mal.( be, ~c- of "WIH M lAp" t/lVIJ,., be.fo-{e.--W~l~ f)(vc;Lu.c,tl Ve..

(!;

'" Que.~ 0. te.d1V10lo~~ Cbl),lcJ. Il1etVc.£ Il1d;vicilAOt.{S tv !rIovk a. lot (J'V /IIOt ~t clil

-1 9r-na MOSt at tW. voviaHOYl "IVI \-1 is due hJ I\l-,

~
-te-,;S <;,uppovtq, Moclell'j of RI3C vy fnoi vi sible la0ov:
 '" ='; (VlU.ti CoppoY!lAI'lH., eo~t rot WOYIu'''B /oYl& cHswrlU
~ {/?>s li1it l'f to vIOYV- OYJII.( tl l-1 cd f do. '1

(5{ uf£, tf;u.iv' .eVInce -nMR- eVldolrJ(Vl(? V\t ctr lei~l)(e.-

(not Viorl.<-otall),

*- :. \fo.seVl qJW,(V}e.& tW. NOV\;... convexi -h.1 IS 0. prvpefty of vef'eyenc£ q, 'rf) ttu.. te<S-t.
Df "e>deVlsive. lY1M0 1() " C\;~ €><plQin ~~ Rtll-ll'Me.. \.N'orkeY~ aye. po.lcl (VlOve 'lttaYl
rost-ti'~ wo\,kerS,

/ lNcvk ~ h... "" /.1 0 > 0

~Ylot- vvoY'V_~ ~ ::0 0

He. ecvVl efttool£ aVl'l :t:t of nou"-S rW1Be. he (ikf,S =='? C'cYlnnu()uS

6\,Vlo\ it M()S"t be ',vi '1Vu ['ov1vel<ih.j

rf UVl bOlAVI cJ-.

---I-----+~O'+- __ ht
~
No SollttiOVl
~
-ro Make it bOlAV'lcUet by O-HlAI"1i nB 'rnCOf\o1e I's liMitecl

\-It

-+--t---f---+-+--+--~hoC

~ ~ \lOIot'11 ~ iYl 'ta!ioll;:>ie ;~ ~is pO\Yl'\" i'SVl't- (11 tf,u. ~e{-.

 AS~~CV1P nOYl s ~

1') HOl<SeVIOlcLs ?lye iolevltical

- to HH live, irAl,,,",teL'1 ?) on ~closed iYlteyval [0 7 11
li.,~) 1}Jeve is 0 ~il'1gle .flY(VJ Cid£.V1h'cuL hrMS>
~v) CObb-DoutjlttU Prod" FVJ (fec-!AVlol"8 lof ('I7YISt(~'I(I+)

~(Zt,kt,ht;) = i\k~h.~el -:=) CR5 (1)

~
1\ ==- 0 (under perte£..t )
CC' lYI P€:litioY1
kt OCCl<MLAICHecl C'c..pit-cvl
Zt; ::: YOVldoVVl glr-lOCk -;::-) -fDllow~ Q. r+ocV1cl~hc proceSS,

v) . ~\Ad.ge,t eoY1strvt~n,t:

IoCt +
,=-7C..J
~t ~\f\Itl-\t+ V"t-Kt 1 (2.-)

Ou,-tptA\" (~i0i:b'I!(~O( I,:)e &7flsw\uetl ~nveS1t'd

wheYe (!t ~ eO Yl 5l.AMpfiOvl

\;t == ,Y"!VestMent

VOl) wwof Motion fay tkl- i:'a.prt-a,L gt00V-

Et-t' = (1-d)k t -r l-tJ

O~ ~ ~ :1

c.oY1<;{rhamR. fVlt(h1:

:C"~U\) = YE("Zt;) + En:....,) 1Vu. .;+oc k Df (' apitQ;L 1'5 Olrmed loy HHs, w"o wJI CCl.pIW se~i C£.- tv ttu tl'lVl
(PirST c<u-lo-'{eqr<!~SJve p<liWS )
TedttVlO \0'0'( ~Vtocl.<. is CW()IVU d. tv follow tl -Arst - 0 rde~ MClvkov pafC(?SS

g" obel('s #U lavV of (\I10HoYl

-Z--j;+-\-::::---O-Z-t -+-~t-t"""'ll C"· (I. b (4-) C (
_....
[ 1 ../"t") ~ -nn1re "'ppW Ov\ '1 d. ;:=./ Y '" -t") 0- VJa<f~
tJ.,jer€,. £'"t Or€.- iio{ C"f' PI5..L~. F =') 'V--- iid('l-Y, 6;)
 erg

I LX)

r
HH rv1Ct )(iMiz,u -tW eiCpec.ted-.Jltl1lAe

;;~ t ~tu(Ct,
D.c.(6L:t
1<)
of otscouVlteGt
!
(,1e-h'vv..L uti1lht:

fA.t"eye 0 ;:; diS eOUVlt ~tvy

it ;:; L~isu(e

)<) 1h..e- e Vlc{OW J\I1('Vl t Df -h\(1.!IL IS' (lOffVItJi-zet;{ -tv be OVI e,

I if; + k" =0 1] -;') At ==' 1- ht

)(c) un IHv( FUV\ctl PYl :

[lA LC, -f t ) ::: lora c.t -T- A\og "iJ

wlIleye. A ~ 0

I'n ttu.. interval

[0,1 J

C.OVlVllK·I~ .-

1'1'<1",,,\
o hI> 1
L--y---.J
he cetYl ehoc1(" eiitne.. .
h. or 0

Eo.cV1. period; '3 COMy'\Iloetitie-s Dye tn:;toltd - O~+PIA+- eOfl/lMoo/t-y

LCtbov

(lClpil-cJ

t<LL) A~eVlt5' Ove, OtsS(,{C\I\.l~ to tallow rcUl(1'(lcJ. QXP"CttAh"OVl g/

(incw.w. Vi;:7 1tJ~)
1'WL( u~e ttll Mailab-&. Info L(,{P tv pef1Dol t) tv mk.e- tXeo's-{OV1S

in pCl/lod t.
l<;~i~) ~IYt..ee no (?xteo'laN'[ec, ==:) -\W, corvlpetltil1t ~q(,(I;"'(1rJrvl 1<; Peueto optlMtt.£ I
Thg SDGloJ.. planne r'S probleM ,'s
Mo.-x U :: E z:t,..o ~i;, lACe, 1- ht;}

L;, t. e h1t - e
f ( z\, k t , ltlt) = ? t k't
t[
oCt + lit fU\,k t , h.t )
kt+\ = (1-6) kt + ~t
"l t+l == -0 'l.t + ~t"-t-I

ko,"Zo ayt 0IVt-Vl

o ~ 6 f 1
Cv r-/ l~ot (0, 61.)

1Vlt~ probleNl eoV\ be S'olveet 'oy us"n9 DvnClM;C fUlUqrn/VIy\lf, '1j t-ecvwdqpes

~
13>ellMClVl(S equtlh'orr~

= ere)
~{; Gt +It ~ Zt kf h~-9 + (1-~)kt

2.1.+1 = )' Zt + 'V-I;f-l

2) Atl eCofloMy wft1..1 IVldivigilole. /.A.~oY"
AS(;UMptiOYl S :

't,) Actdi~ ~ CH~vli"lptioY) ofinc!lvi~i ble.' \aboV' tv iW- above ~tvcV1astic

qrvlNttA (V1ootet ~

/J. Not (eflnts 'odJ'u&t(\'1ev1t tt10Y19 tGe exteVlsille, fV1c<rB in.

ll,) Utilitv ru(lctiov\

LJJ . r<ep((?seVlmtive GtgeVlt LM1\ ICVlply ,'iVl+evtel\1poV''''' elQ$ticitV ()t

gC.t kI' fitu tiOVJ
~
AVl 0lasncity of rubShJ-unoV\ ~w \eisuve,. jn otiffNevlt pef)'octJ

.!:!J
1vrted-R 1'1 pOlo!
1~,~ ~ elasncity of'" ~u0rlitutlOv1 is IYlfi (\ ire g inciepeVldeVlt )k
-+----"'--~~~4 " AC1-!rt.,) _ A(1-ho)..{t;. => logci-l?Jt
""-- loqc i + (1-1j,) A (1-h 17) +
~., 1-1 0
i~i) The eonsuNlptioVl possibilities set is vermc+.eol. tv be.- "Conve)("

. 'IVlctividua,tg caV\ '\ WDik tu.\\ tiM.(. ~o: lD9 Ct 1- A 109 (1-ho)
~ \110+ 8~~:~1t oJI :J.i ", 1 loq C-t + AX(1)o
H'H '5 p'DoleM can ,veach (\. Compen hie equ'd i kmlJrvl.

'W) A LoHeY"( dete(lVIine-6" ~ethe( OV not tW. H H actucJ.lr wov kS.

~
t> lol-terie--s)
iVle (lew COMr11odify bel'rt3 trv.cU.ol IS 0.. Contm:::! ~"" tVu.. h'pl/J t. HH
'thCtt COfVll'V\its tW H H tv wovk h o ~ pcvb, otJ-I:
.~

.. ", ,-'iHI--t· qe,ts ptl.iol Wtleii1er" it INOY~$ ot' not.

- Firm 1'5 ?1OcluC.i"j f1All er1l1plOl.(Mevlt /nSlAmVlUtD fir1e ~/oYkeyS
 ";rnu? tf Cile, of ~ ~QmMoc;tj1jei 1l:rz;LctwI... IS .l.,o' Cas tnrtv.-iXoove. (VI()ol.J)
~

tW-v'/, tW.. eofl~l.uIiJPtlOY1 prob ge-t wi'J I be noV!, ep-nllex.

:;y
To tonve"i fy tVJe, COY1SUMphOfl prob. .let:
by CVlOosiVlB lotteYl'e~ yotvlev tltlc<V1 VII'
(.-. Lott-9 qtttlrttVlre,e.s -t{1\().t tW tOY1\VfVlpii?Jv1 pro!? S'et- (Nit I be,. ~OYlVe.x.) .
. ~ .tW,.. UMJ.,-(;.S
""dOte.. alW li\:JtiVIV1 a\\oct\..hJv1S Me. S
v) All HHs D.ve -lOlev'/ticM leX" ?\t'1te,,) tw-Rl(t;tca..~e,.·

cveVi tt1.0~V1 <eve~ OYle e-liiooSe.S *u saMe GCi; ,

'\'W. OUTCOV1t1e. ~ of eavltt loHeyy \.NJ11 b~ dtffeveVlt ; oC.,..
-------- -------- ~ f1
~ lr _
ifO-fOJ 'Vt!1J.'WJ.:J (J( '~-liDYJ of'~ ••
o 0 !?~(,h HH vvi1\ otlffev el< post.

<:Je-t :::- -fi-ac.HoYl o'r'rw- c.on·t1V11hlt'V! o-P JiH I/vll( wovk. 6" ¥Uve.sl will VlOt

(b"l c(iv j·etittg '\(M COrl ti nUll /VI of t:{~ eVlf$ I nw :2 ~L(b~e.ts"

b. Lottev"Y ~evves tv Make -!noliviet<AtU5 bett-evoff

v/c It \ncY'eu5e~ tW.- vVlOI'W avoHab--&

~

{}'Ill( (00 __. 0)

If lotte/le..s we-ve. VlOt o.voilable. '=") HH li'IOUlolj\ ,be. able tctCMQ?J~ not Wf/YK
\ (00=1)
A (\'\oetU or
woYk h. *'
,. (()l'l.\i 11 IAU 1"1 of A90 Vl rs 'f ( 10) ~
[OJ\J dE [011J
 qq

V'l} HH'S Utillit.f:

j'-u-(-c-t,':""'oe-i;-)-=-l-Oe-c.-t-+-A-oC'--c-,0-9-(1 ---ho-'i CC( )
11'
V\\,j E"xp~c.ted.. Utility OVI peviocl t; 0

cX?t, [I09C~ -t- A109 C1-~Q)J + :1-oe t) [lD~C-t + t)Joqc1)1

~~ + oCiA tD9C1-~) v
ioqC't ~ ~t
v~~i,) Tecvlnolo9Y COYlstmint:
f ( It J k,.)/t,) = 'It k~ i-\:e

-vX') Tee vJn 0 lOB\{ rkock I'r CWW'\.Lol tb fOllow cA -Arst - orclev (vtavkov prOCJ?JJ

C; C/;f\'\L as L~t-t, ': : "'6 i't + £'t-t"'J f'./ i ~ot ( o} 6(.," )

o\iviS' m -",
Co. 'ooY
CeI.'"t .

x"~) Law of MOrlOYl tOy ~pil-t<t ~tvcv...

Ik t +, = (1-cS)k t + Lt 7
~iA. o{' 11 H :

1t1e- 12eprMevttahve. ~Vlt IS ProbleM;

MCAl< Eo to ~1; [109 e~ + A oC l09 (1- k o)] C/z)
c; ..t. tC'l~,~] ht-) -= t:t k~ h:-
e

C-t+ ~-t- ~ f'Cz",kt,ht-J ~+att v, ~ Kt; g Zt;

kt +! C1-b) kt + i~ oecls iOYl v..' cCj; J ....

" f; J
-
Itt
 [01

Vt- i ~ oOi ~
C1 - .it)' -; h.
oc,i- o

LA(Ct,oC-t;) = logc-t; + AoCt I09(1-Mc )

C
t + A -h~-t) lo~ (1-.no)
-;;; log C

Let B::: ~ A 1°9 (1- t-to)

ho

(Ilf )

o. \V1IS uti li1L.t fv,. ($ lineal in leisLAve.

~
1Vt1~ IcYlplie-& ,~ B((;(.sh'c~ of IYltefte(lllporcJ.. ~(..{Os-\i-\v.nC}YI (Of l.eisLlv€. ?- of)

4 & '\(\ot~IJeVlc{e,Vltt of +w'willi"1ness of <lflcf/vloWa.1~ -tv

~ubs-nh.tte- leisUie.- across -H(\'I.(,

'-.
 (02

a1p~OV1\l, 1'61
DJ ~ol(,(+ioV\ Md~oci & eo.libfllnOYl

~
'tWYI/ it's v'\Ot posSib-C.e. +0 ~olue aV1lA,L'1ticMt~ .fof decisiOYl Jules.
~
~~ t-\-o.vtUVl lJ.W Ctppro\(:, Ma:t,'oYI tv e~+iMa:te pa(~{(\Ilete(" volues +'or- ~
I·,
"h'Me se,rie.-r; MOdV) tollolrli~ KyollaVlcl &. P(e~cott)s (i1eittoololoB~

b().~eO. OYl ~roLN+1A lD'oseNo.tiOYlS g, Micro gtvtolie.s .

. ~

1VI.f,Vl
J
i-trs pDssiw -tv ob+ctin expll'c.it, etecJSIoY1 ruler +&r ~Je.. apprvxiMCtf-t.-
.}J
ee (IY/(;Mi€ S.

13'f e><rreSSI'~ (-;r) tlMo.. (13) as 'DynaMIC OpnMi Zo.h'£/Yl Probl~M$'

~ - gtate., V,: Zt, Kt
- oltciSIOYl 1/,: tt, lttt
~
-
SfeaolLi 9~ -te, :
~

At L.j, -=- 'SV-. ~ v vt

h-t =- II\. vt
k~ ==- k 'l1t
.(;,... I-Jo~
€,cOYJOtVI,'€J

gl.Atl ~t'e.a.c;tl.f ~taf'e. h, to . . eco,nOM w etivi~i ~ la't:1O'(' :

Itt == (1-e), P-+J>
\ 3( f'-t~) + e( P-t~~)

~~t€- ~~te k toY' ecO'f\Ot'A'1

h "" C1-e)(p-t~)

]t(f'-tb -eb)
 parameter definition value

e Capital's share in 0.36

production

c5 Rate of depreciation 0.025 (annual

of capital rate = 0.10) --101.
fJ Discount factor 0.99 (steady-
state annual real
interest rate = 4)
A (if) 'I-tu vl1liht m) From 2 (households' ~ :> 9-\eo.ot.( Stlittt h -+ 1;
="
i 1'\ ctivic;i "Ie Io.bo.,..
u(c, ,I,) = logc, + A logl, take leisure 2/3,
work 1/3 of ti me) oQ.se
y\ j"
'vl()~ F
' .
o;,st.
....... 2
Rate of tech 0.95
persistence !
'i~ '" III;!. (1-Y, 61,.)
,
ho Hours worked 0.53 f.<
/ , I
~ I"

Results
• Hansen reports seasonally adjusted, logged, and detrended
data in the table. The first two columns are U.s. data, and the
other four are results from his models.
Quarterly u.s time series Economy wi divisible Economy wi indivisble
55.3-84.1 labor labor
Series S.D.sin % Correlations S.D.sin % Correlations S.D.sin %; Correlations i
with output with output with output;
,
------"
Y ~
Output 1.00 ~.16) 1.00 Cf5) 1.00
(GNP) (.00) ..l\ (.21) (.00)
Consumption
Co
It 1.29 .85 .42
(.06)
.89
(.03)
'f' .51
(.08)
.87
(:04)
Invesbnent 8.60 .92 4.24 .99 5.71 .99
~ (.51) (.00) (.70) (.00)
Capital Stock 0.63 0.04 .36 .06 .47 .05
(non-res.) Ie. \ (.07) (.07) \ (.10) (.07)

C~~ ~ ~
Hours h. .76 .' .98 .98
(Non-ag.) ,\.(.DS)"· (.01) .16) (.01)

--
y -
l\,
Productivity
(Output/Hrs)
1.18 .42 .68
(.08)
.98
·(.01)
.50
(.07)
.87
(.03)

I.'r -tW. do:\~ WUe, 10 eel =; S.O :: MQOYl of, olevi~.:I1O'f\g frO(lll h€Vlol.
 104-

[) The, i'(\d.ivi~i~le Lal?ov eC0'f10 fVI Lj c{iSpJaVs lor-gel"" tluc+vtail"OV1g, iftCt Vl

k ctiviq,ib\e. Jabov elUr\OMy.,

~L) rV1d.ivi~i,b\e lCAbov' Increase-s- ti1e volatilit~ of' itJe. stvcktlstic. q(OlN~

(V1octe.A.ft,v a 0iveVl <3tocltlostlc process -for' -tkL tect..lVIolo~y "hoe-k,

[SD)
h'v) The 'Ind.ivi~·lb\e ModeA ge()emte~ St~h1ctafo. oevlo"tlovH tltJat ave
c.losey- tv tL1e. obseyved Vo.lue.6.

l.v) The fllA(/tlAl\:tiOV"\~ in Most vo.v1o.lole£ oye lorBey'" foY'" ifle ac.tlAM ecofJol'1Y
t("OVl w( -me.. ·Inctiv)~ib\e. lo.~o( eC0r10My.

(th'IS is likely oue to (V1easvyeMeV\1" eyyoy)

\/) lnoivi4ible labov' 0enea;\fe-s 0. h'gn\y procyclico..A. Cl\JGt~ rote Cprvcluctiviht;

[)A'de u.~. o.o:ro. <lVtowg 1110.t w~S aye. anl~ MDcU~tellf Pl'Vtyc,{j~

VL) 1ltu. Most Biql'lifico.rl.t d.isc.CJve~ :

fu QMt of'6, h r-elo.t1ve-ro ,1(~) IS vef\j C<iffev(;7nt ~"" oivisible- [abCi ....

.& Illoivit;i/XL lobo'"

Mtldl;/;

~ ~ ~ ,__;_'.~_i:_'d:_}~_e_1L_a_'o _(_I_T_V1-'-;- -'-~-'~-'2-.~_bO_t'---,---\

;_~ - =-~-"-';'-'-:A",-"C_'-~- =1'4-' --1

V"l~) Acco(.(()'ti(l~ tOy'" tht Ia.rg e 6 ( l1ol.ll~. '\ (Zttio VICl5 betVl 0 p.-v~lefVI in equili\.vviuf\I1
~mducnvlhJ
BV.f>lne~S Cl(cle. i'ht0i'1 ~

\-wwevef, we. WOlA.let expe(..t tiu.. 'WlC::tivic;ib\e lo.wf lVIocLtA 's \'"0.110 to k;1e. hi';} ~eY'

o/c,.. "Inc;l.ivisible. Io.bof 'IMplies tltlo.t all fluCtlACtnOV1$ oewv'" ot- tht l'xteVlsive.. f'VlctYB'Vl.,
 l05

F) eellcwsioV\~
-t.,) !hIS IS OV1 eqy.ili\?viuM iVloet~ -\'ho.t exl1ibits L/.VleMp\o'((\1eVlt f/LAc+utl..nOflS
',1'1 f(?SpOVlSe tv oqgveeo.:re. bVJockS o..~ 'I-lH s aye, .ftJ(ceol to ~ntev J< ex'l;-
-\ill€" lobof force in (espoYlSe tv tecVJV10 lo~'( g~OCY..s,

GC) 1"'he, el()~tivit'f of Q(,{:b~titvd10Yl o/vJ leisuYe 'In oliHeve Vlt pevioo.s toY'"
t\tle Dggfego.te econoMi I~ inf1Vlite, &. "!V1o.epeV\(}eV\t of titL eLa5htiht

of ~ubS+ihttiOV1 i Mplied ~y Hrl'S V1i\I~ FlI\s)

Wtlere.aS 0e-toV'e, It \I'i~S c;lt.pe-Vlt:kV\t oY1 +hL~"\l"I .. ' u-l1\1lvt f.n s _

\,1
v
l\tlis feothey' enoble,g +{;u. econ(J(\l\Y +-0 e><lrliloi+ IOI¥ flLtchAatiOfl~ 'IVI k t
v£lcdive- 1-v Hu.c-kc~J;oYl~ f'n productlvHl.f~)

t~\,) fVlod.e \$ Ir/lth crlvi~il?le lobDY no.ve be.tVl. LM1Successtui o.,t e"pl(;(IV'iV\~
t\tlis -Peo.tnev of ~5. tiMe !!.evle& do.-m..

~v) A ('/lodel -Mat lAlIolNg toy o.O:jUstrvl€t'\t o.\oVlB both tVle hlteVl£ilie. t
Qdevtc;lve. (Y\or~"lns LNoulol. \tutue () 5000. 6\rio.nce. tof s\ll.cce.:isndl~

COYJ B-oY\1i ns -ttu. oo:w.,

v) No\'\- Cot'\veKiHe-S fV\0-~ Ot "IGYlPOftaVlt -tvy Q)<pla.ini(\9 t\t1e volO-tHin, of h~

'(e lative tb prodtlActiV\~ (~) eveV\ vW\0V\ HHs oJe. (elo-~vel"1 l-tVlv-hlli6lj ~
c;lAl?stihAte teiSLl.(~ OCOSS tiMe
~

lnts MQ.Kes "f ?9ss",l?le ~f o-n eqi,\iWv'iVi\ll (Yloete.l to Qxltl1vit

~ luchAAtloYlg, 'In eMp\t~MeV\.t
c) ChwiSiiarto J. £.. ~heV\bttIMV1 L.lqQZ)
"CLtl'Yertt l2l3t ~€-S g.. Ag~(e9o.;re. wboY-,.v!ovket FI~ctu£tHOYI~"

-I.tet Y\.t" ~ nOLO'''S WDyKecl

N 'Tot-tAl lrtOI).V'~ wDvke.cl

Q :.

='-/ ~)(is\i~ ~6c Mod-e-Ag pfeo.ict ~ tWtovrelah'OVl ~ cJ,tj

-::;;") Ac~ co((tla:\ioYl ~ 0

~ 1hL. &la~slco1. &. V-e({l'1e,s-iOv\ MoMS" £'VU1ofe. 1W- ~SSL<{VjpriOY1 t£-to,t

w~ {).McJ., vtt; ore srnble

1Vt.L onl~ iYVlpuJSe..s 0e(lemhnB fluc-hAClt1oY1S

IYl o.9qregate emplol.( Ment (he.- ~tocl.1t:t$tic..
Ghift in HP. j".

l ~ '\VIe- h'cYl€t <:;;evie.-S

/
()c
t)Y1 V'tt 8< ~t- ().vt YVloc(.().ecl a~ fk.t, ICltertttf'ioV\ .oF

~"'CVto.l~C lo.boY dJ.""()N<r/.. tu,vt '1' " tixf~ l"bCff ~up('ly

~ iJ"e~
'. ("edict" s~ 1"'(. co((elah'On ~w "'. IJ 1'1.
 [09

--,) NittA diffefeV\t iMpvdseS SlrJi.ftiY1~: ~ la~ot c.uppl\( t· /;abOf:cf;vvl,~ Fns ;)

ft1~(e, ts VlO pVi0Y'j l'eNOn {Ov Vii; to be co((el~teol. In (J.I1Y Vlia~ w/ WI;

CClVldidettes -tot rlJClA ~lt1ott.<-~ (f1Cluctt

1) fj, w)( rate,
;2) rVlYlOvo.tiOV\S tv '\i-v. monel{ ~uppll(

'3) demo~f7Aphic .6 labo\'" force-

-tOws (JY1 iC1,~ 4) S'VltJC,!;t$ tv qovt gpeVld;~.

~l 0etiro; PD$". gVtDCk.? 'v qovt' ~peV!ti<j{~ ~') Ght:(t lo.bor guppll.( o(..(two.rd.

~
v;,. cOCV1ln~itlivtj MP,- (vfo te['~Y101o~~ glttot-k) lNnl qeVl~t(.,. a
If\e~. conelanoVl ~w Y'lt- J. Wi> 'In RBC.
 [;to

A) 1. P(l)totypiea-t f<ec MorJ.eJ.S

As,.. nAp
I ,
., ...... ,
1->' I'M' (l
rt11A l
II vO '.1
v"Of l£,t'1
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T"l l V
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rtle-asulf, hi", (ra*'e( *,OtVl ~ I W~ )
(ew--

~~) AIIOfrJ\''1 for .noneoflve"iHu 1(1 LoboV' S'/,{ppl~ C'o-t l-ttlrlUVI terns)
~~~) Govt 'S lf1coypom-teol In'ID t(u. aVl(1L~SI~
'LIJ) ONlpliCAtllf) [1Abllc g.. fMVlxte .;;pevl{;:!I'1l9 nave. lcltn.n caJ.. effRctg, 0Yl
H H's (\J\U

v) HI-t MQ,xi""iu .~ €Kpec;,t-et:l value of cli~co(,A.nted. IlfitJMe

!(vI",~ tt. Eo Ib' [kc t + ~ V (N- rl,lJ 11_

~eve., Nt ~ \;i rvle <i'VI~ow(V\eV' t of HH ~ o p~s.rca,lat"

Ct ::: COYlSLAMptiOY'

V (N-'(\Jo) ::;. hAvl cti()Y\ 0 f leis\J(€..

"( ::: C\. pos. rco..\O\V"
v ':::

,.j~) CMsWVlptiCM rs. veLat-ect -tv pt1vate. g.. publiC {!{7YlSLIfYIph'M

[c~ ~ 0: + oC q*- l (2)

e-MU€- oC is ().. pan:l Mete I"'" -ItICtt 00vevns +Cu ti9t1 f>. (\1~~Ylifuctt

of +(,u.. C<~v1vaJ; ve Ot fV\U

ci P I). «~spe(.+ tv aJ t; .,

"3t> is an VtV1COl'1ttO\lt\~ ~tz;C/Vlus+ic.. proc..e..H =') gmt€- v.

VOlli) run(i\ioYl of leisu rf,; VeN - Vl~)

Oivisil-AL Lo.~Oy : [ V CN- Vlb-) :::: ~(N-V1b) \it (1)

1
C~)
l'Vl{;iiv iSiW Lc< q,r- : \ v eN - V't;) - N-V't 1 'it
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&
UUU((l, ~ ~ ;rV1cavl~i ble [0.'001 ~flect.Q -1itIic, a.s~lA,MpHOYl •
'-----"~.-.- - -'i'~'-'~- --....._--./
\aYJov suppl~ \~ ii'lc{ivi)ibtt..

lno.i 1I1ctuoJ. elA.~ e;fuev - lNovk 'JOYVlot- po~, ~ of' hov.(S .

~ Vlot v/ovk. at- ~Il
LJ
V, J Ii

> Po-re+v-opliM..&J. Alloccdloy\ of ct J..

letfvYL
(N-Vl ...)

l (Ie,) H'H OWJo~"\otte-vie.5"· rothe.. . ttwlV' V1t; -=0) S'uppoit Povl!fv.

Cobb- D0<1la~

G~ =

~',() T.eV("VlO!O~~ has w +JMt- ~evie.s ,yep(€seVlmtiOYi

1~b -:: L t -1 el<pc At) {

WAeft,. At = ~e"';cJ.l1 uncovvelateol. hc;l..£.,peV1c;ll.Y\t

t ~,;~.cl (A., 6,J

~
f,O.

xj \<esourrL CoYJSt!1AIY1t.

Ie: ~..\-
+ qt; + Kt.. , . c:. Yt- + (1- S) kt;
"---',. 'v-------'
I (;-;r)

CdY1luM0'v>l ; fl"€Sh..t-"'~ _ OlA~p"d'

 !12.

~c) ~ of f\1OnOYl 1OV-

kqb :: (1-()) ~g
11

(pI L 1.

~ov(t>J. PItMmi~ ProbleM

h'C$tl {'u~tHv.te. (2.) a...cl (5") 1nto (-q.)

.. ~
c: == 1<': (l:~V1t,)1-6 + C1-~)kt - k t +, - qt
(/0"" - ceq!;" '= k~ (~tVld-e + (1-,Ok t - kt-+I - t3t
Ct- = k: ~!; V11;)H~ -I- (1 -6) k t - kt-t-, + (oC-1) q-t-
~

~. t. a low Of MOti oYI fo{" Cd..

o}/ cI;vl~i~ LaM
v(· ') . . . . . illdivl'~I~ lC<~OV'"

_ _- - - - - - - 3
l,J,Ievt- Y-(Y1t)~)kt+l, g~) A-t") ::= k IV\1;e k~ el<p(-6At) + ellpC- At)(1-b)kt

- kt 1-' + (oC-1) gt1

+ '(VCN-Vl..,)
co t
@ == Eo L ~ ~ "It;
\- e"o
is\;>eyoVlet ~ plcH1Yle(~ probleM ;;:.) It tJlltn b~ d's'(09 tl rd..eJ,
vIf
o 0
1/. ,j/ ......

~)CP (-A+) (1-1) kt - kt +1 + (li-~)~t]

I
J
QDlUhOY1 ex-I'sfs WtltV\ ~ -:::. S :::. 1
Ix
V C•) f S CJ1'vtVl by (~ )
\1

oC::. 1
 l1 if

ConcluSion S ;
. ~l
v

1) He, toUYlet/I ghocA,<3 0 t govt tpevWtr~ t-r'att1e'l 'twa VI nc:Vi no to Vlf J i l7iOC t"J}

CalML fluc-\vtoJiOn~ M ag9Y~a.tl.- US ouf-pl;{,t. .~

~
Cqn~ctlCk +0 e)C,'Sh~ flee +ktc-n'e..s assWVlI'''j ~t only t.eVV1VlOI05L(
~l..tovV...s ttffeur ~ ~~(e~ Me.. OlA.~vd,

1Vu.-st. S~cN...1j VLC<-Vt. aY\ flVlpetc"t On ~ MOdLA ~1fV1', Let f +0 t-u[m'1 o Lt>jy
t!M.cI. iiu.'1 L?ontYi wt!.- w tt p(JSih've,. t?oYVt-ltJvh~ ~IN hout''Q vvo-rk.LoL

J..- prod~c..f.vfht
as aLlo~~
.f&.t ,l1oUvlsibil'flrfS 1''1 /I)I!J(J-duft(
z) r;ho0v...~ ot qovt ~p~vtol;~ al~ 0 '~iSflC<\f Cl.59{tcdt IClboy -fVlMk£+- flucAutt~
(elCtsl-i"i 1Z-t3C- MOel.(J.S) f'[ucMc(:h'l/110 if) a~9(eCt,te. :e""plDl{M.L4I\..-t !Aye,

affeMuL Io..t OYl MPt.- )

.g) J"-/Yvctud~ Y'\OY\coflvelCi -\1'e.& ',n laboY" ~uppl~ li1Cls alfVloSt no ,'01 P~(;t OVl

~ MOcUJ.'S prvoli'Ch'OYl wY VlIS frrw0"1 Co«e,[aHOYI.

\:·\olt'evev} intrvetl..0~ qovr mtv ~ i!M£tUjsiS Gc --0) does 'fed-tAU
«Vll~ Df to'fYe-\A.hon.
~

[')Jevev'~le~s, alLowi"'5 .Q;;y (lDYI(lot1vtxi-h'e,) In la ~(~V(ppll{ J.. IY)'kC'auc-l~

qovt Wltv t("u. QVLCtl\.{sts I'Mpt1>VeS 4W. MOcLd's ptrfz:Jr(YtA.Vl.C,Il Vj/

r-esp.evt- tv M volaH I ~ of Vl t velOth\.;e. tv lft-

Ylt-
 It.?

~\c.L '\W. V'e,su\-r .{}O(\l\ ChYiStiCtVlO av.ol EicltJeV1baUM Cltiqz.); }, :;: o.otb
O{:t)

~\flU l-tz;tvt~ {Lq815) CtlSUCll\..t-S +w.. teC'lrlVlolD~t{ ~ Iitock'~ a&~V1'J

0- 1l7AVlSieVlt e-ffec.:'f OYl &-4:;; Z" ~ )' 2-1;-1 -+- fhHI ~

V'JAe(e-M 0lrvJ'Stl'Q.V10 ~vtot. elvhtvtbtH~M (tetqZ-) as£wv!L' ~t

<\WIt e£fu.-t ts pel/lll.BW1eV\t, '\lILU~e} +W.. \otNtQ.(,/\P~
~ubShktiov\ effee-+ of 0. SVtOvv- tv tec.V1nol(}s~ t~ COYlSid..tyo.bl1
NlU0 nih eol t'vr Hot vL~v'\ Cl q ~) (Vl()r;W.,
 11 b
.5 '3 oq
Ch.8 : MATLAB on RBC

di A Pr-o+oi'{p" Mod-tl\ . ~. ~

-') SIMi\QY -tv ?r-eScott (ICig~)

~ep(~et1~iive A9tVlt
I ('1\0-)( Eo ~Q (3t LA (C t ,1-Ylt;)] (1)

Wit.ere nt ;;; Lobo)'"

Inst(AlIltt\rttOI,(S Utiliil.t Functi (}V\

G( Ct , 1- n to-) = oC k Ct + (1-OC) k (1- V\~) 1

(2-)

~wc~asnc T~~~o~~vs~oc~

-? is OSSUM£.c( to follovv tW.. AI«1) pmc..e.ss

[Zt+1 = PLt + ~HJ C'3)

WvlH€- q,HI "" NCO, 6'b"-)

\l
V

"rOC: c-(; : 00
-= ",A.'
y (4-)
Cot )'l-'
nt : ( 1-00) =// A. t(1-s)e Zt k&tV\t-6 C8)
(1-Ylt) /
/"
kH1 :
0 :=.
~ 6t f.
},.t+1
Ge- e
Zt 9-' 1-&
kt+1 Vl t + , + (1-6)J f (b) "
 111

Ct ::: Ct + 1 ::: C

kt :::- kt-t, -:;;

k
Vl t ;
Vlt+1 = V\
..
.... .....
..~.

'It ::: Zt~1 -: 1

0
e"l :::: 1
.•. , 1 ~ • ,.

00(1-1' \) = 1
(be) C

2.) 41A\::Isti lute,. Cb) /ntv (4)

1-

(bt ~) ( e~~e-, n ~ 1-$)

HJ

Jt ::::

1
(3
- e~:9"'1-c'i
~t-l

3) Fro (V\ (2.) ;

1

C + k = (;J
e k. .
e 1-&
Y\ -+ (1-,n k
c -= (kG' n1- fY - b k..
'---"(\_1~)f)
....

~
e~ ::::
1 (:t)
"
1-0<: = of) (1-e) (}f' (~)
1- n. C

~
1 :::: e(~~fH + 1-S Ul)

(,\'10\f'1Y] :
C - n-
1
&tj@ -b k (10;
C, k, n
 , .
nt'M: . -.

roc;

(' :=. e .:i.

k

Y , C, k '-)
VI. (;kVe. UVlVvVlOWY]

LNe n.e;.oI. tv VvVlO"" tfA.t. valu,e "r\" f;~t,

-t
~) rtttio (;-OfVl Ot.{y kVlv(,oIled'¥- Obou.i r:

-to\.tVlvt
.,..;\\~
GJ
K.

~m~ [~e{ 1 . (11)

I*~iil
(12)

I~r } = Y:..
e
y
~
Clg)

[c
y
= '1-~k
I (/'f-)

i
(b
:: f"@:C H )

[f ==- .1.- (1-8)

(b . ~
r
g) Lo(,!v - Li flea¥"
,
i zed. . . ,.,..
"

"FroM C/.i-J
00
C .- A

--- etJ
~ ~) = A
T~
~t-A)

-\
I'
Ct; " == .)t At;

j- 2~ -
A

At ] (15)

- D- (1-e) k&v'1.A e [AC1-e) k!1y1eJ kt

t 1"

-e[\C1-e)k& vie] ~t -t- [;\C1-e1k&v)"fJ] Z-t

:;,
o
= ~- ~ r (At'" e k.... it ~

Let l 4>1 = ~+ 1~n)-1

__ _-_.---------- --
j
I ~~
~_. ...

= ep, (;\. ... e kt ... z.)l.. (1.)

 1'20

1-

frOM U?); A == ~ A (e~~ke-lvrE/ -t 1- ~)

Ai;,\/\ ~ ~ (e k 6
-
1 1 e
n - + 1-d) ~~~:c0 -
+ ~;( [e (e-1") ke -2 A- e] k' ~t+,-k\
)c k /

+ ~lc[e(,-e) kEHr\"eJ ~(V1~+I-V\)

A Y\.
1

+ ~"k [e ke-l~-eJ~0t+;C)

= ~ [e ~~r + 1-.s 1
;\t+l + ~ [e (e-1) ~rl J k t+,

+ ~[e(1-.1~r] "<+1 + ~ [e(\:.fJ 4T1

e-1
~) 'I
e
~ FrOM (13)

1./
V

/\ " A A
~ At +1 + (3(e-1Jf k t +1 + ~(1-e)'('nt+l + fJ'('2 t + ,
 A A A /I A

/\" = At;t-I -+ (b (e -1) r kt-tl -t ~ (1-fj) r <1'1 A t +, + (2) (1-e) rep, e ~t-tl
A A
+ ~ (1-e) '{' 4>1 'It-tl + (br It+1 cP.
_.. _~ 0

- (1 + ~(1-e) r4>11 ,At:-I-l + ~r[(e-1) + (1 -e~47)l kt + 1

+ ~f [1 + (1-€)) <pJ ~+I-

~r(1-e) (cPo-1) kt~, + ~r[1+ (1-e)4'1l Zt-tl

./

v -
ll.b

A
~ lAQ~t1-tute, (I b") I n~ (l<1) to eli,vti ('-(Ate" V\t"

kt,t-t, ~ k + (r+1-cS1ifr,t -+ C1-G~ (j/, (Atte~,t-tiJ 4- '/?f; - CCt

=- k + [(\r-t1-S) k + (1-17) 'Y~~J kt + LY + (1-e)YcP Jit 1
1\ , ['\\
-;- (1-e") yA. At :,_'1 Crt ')
Y'1 \ ~ )
\\ A
~ -+Af;

k L,,, = k 4- [c 4- 0-~) y<1>,l).t 4- f,:'~m. + e)~ ~t (1 -

+ Y, [ 1 + (1-,17,,) 1\).1 Zt /k~ v(';) ._-

. . v / S:kllL y" ~) k.
- - -_. -

(V"+1-b)k+(1-e)yeep, == 'y@)Y+ ~)Y-~)YcS -t YcPo-yelPo

" ~ ev+ ~(~)I<-- (~{~)k6 + '1~,,-)'e<Po '
: :. '/(e -t (\)0 - e4lo) + (1-s)k
== 'I [e -\- (1 - e)¢"J + (1-S) k.
- --- - --
 122.
a a1
...--I\-----..,.....(::::-=:;:;;>''\,~
..2..
r' . / ""
~ 1\

fuVl) k kt +, == k + [c+(1- e)VcF1] ~t + Ly[e+(1-e)<po1 +C1-cOkJ kt; C2-0 )

+ Y [1 + (1-e) Q>11 "l.t
a~

Ihe(em'(e" &t 1 :::: v[e+ (1-e)cj)ol + (1-$) k -'" . .. ~ ..

02. =- C + (1-e)'1<P
1

Cl:; -= Y [1 + C1- e) ep11

Olf- = ~ I" ( 1- e) ( 4'0 - 1)

0. 5 == 1 + ~r(1-e)cP1

CAl. :::: ~ Y' [1 + (1 - e) '1'11

g1z1~m. Matrix forM

01
A 1\

~,1 ~1
U}~I
k 'kt 0. 1 kt~"
o /I /I
0.4- C<~ lAb At 0 0 AtTI -r
0 0 P 'lot; 0 o ·1 It-l"l
t
[~]~,
J\ 1\

AD y~ - A1 Y-e-t-I
+
~
1\

'If; -
1
A~ A 1 VH1
1\
+ A-1o [01~ q,.'t+1

-1
L.et A :::: Ao A 1
~ ~

A~'[n
-'\
'lot, "
==- AYt-t-I + l3 'Vtrl

r:--= A-
1
Y, ->- 1
A- B ..., 1 (21 )
 12,

A /I

kt-tl k-t;
A A -1
A- 1 At + A
At-t' (3 !"{--t"1

Ct+ 1 :It;

-1 ' -1 -1
Q Yt + 1 /\ Q Yt + A B'ttHI

A 1\

q" C{12. 'l'3 Kttl ct,. CiZl f{13 . kt

I 1\
A -1
({2.1 Ci-z/.. lz3' ).t-tl /\ qZ\ QZ2. 1..n A~ -t- A 13 'Vt-tl

q~1 Qj2. q33 lHI

Q'31 q,1 Q13 Ct
,.

~')
~u tiIli)'j-z) f1'llc( tW.. re,w,hcmsh,p .At; s.. 2-S'i-ti t a5.
7 1
/r

~ 0 0

rf /\ ::::;. ()
:\2- 0

0 a /\3

t;\ilt..e- A1 > 1 J
~\tw.Jc,t :::. 0
~------

( 11 ,
'\'11
kt;+, -+ q1L .A U1 -+ Q
l.z.3
'It"-tl\
)

"-
VVe. ~()'Yl LL~ -tv e,lif\ltlrl.9--te- A fYOM OLtV d.~nOMico-i. ~VS~e,IV1"
A 1\
'oIf wvd11 A (AS l?l \ineav t?oMbiflCtnOrl ot k Ovv"cl 'l..
t I\.,
~O~V1MlAS . e.lCoseVl€Ou.S
Gtztte. VOr1~u.e. ~+o-te. v(il""a~
 12Lf

-1
Le-t .A
..

A ...

cr1 (Ai; + e kt + 'It)

=
~, f[~~::) k, - ~ ltJ ~ ek: +Zt J.
- 4>, [~- tJ k + 0-t-)Z~J
t

[~:l =
 126

® ftAAt Lab
P()'fl'4Met'er VaLLte.s -0) Cotil?rafioYl
{\A~+lab

~ =- O.q~ bew. == o.q~;

e =- O.l.\- them :: 0.£+' ,

DC ::: 0.33 o.\pho. = 0.33;
2:J -- 0.02-5 delta = D.02.6 • ~

V\ ::: 0.2g V\ := D• 1.8' :J•

P -- O.g rho :::: o.~ .

:J

~, \l'1 ~ cP1 - 1 ?V1i 1 == 1/ (them - (vd (1-Vl))) ;

e-~)
1-1"

p. 12.\ cPo = e <1'1 ph,o ::. them * ph"li j

~teM.~ ~~te, VQ,llA.e&

'( =- J. - (1-5)
(b
r =- o/bew ) - (1 - oLe \m) ;

y ::: "Y yk - Y' /tlriem :J.

?II2' k e

kyl
:::.
~t kV1 ~ 'It< A (1/ (t0e~ -1)) ;

k --
~)n 'k -:::
kvHH'~ ;
.. a
. . . ~. .
"
,
y -- ~) v, y "= yv- '" v...

'\),11'1- ~ c.. :::: '1- ~k C- = Y- CdeltC(-1k) ;

 126.

~on5tylAc.+ Mamces Cp, 12.2.)

01 - / ( -rhet-a + (1 - th etTA) '" pn i 0) -+ (1 - ute IteL) :;!. k ;

~ Oz.::=. C + (1 - -theto.) )/< y ll:- pni 1- ;
tt~ _ Y ,.. (1 + (1-t'\t]etcA.) ~ pna) ;
ClIf::: beto.. '* Y'lI: (1-them) * (PV1IO -1) ;
9 o.!:j - 1. + be-to. * y" ~ (1- -them.) )I,- phi 1 ;
9 {).b ~ beto.. >I- Y'lf ( 1 + ( 1 -the-r-o..) * pV1i 1) ;

[k 0 0; Oct+ 05 0.,,; 0 0 p];

[ Oo.Cl
, Z 3, 0 1 0 ·
} 0 0 1 J ·)
o

C(,tlw.ltlti~ Mo.b1 X l p. I zz)

A == °IVW CAo) >F A, ).
£, = 0\ 'fly (A o) >/< [0', 0). 1 J.)

Ei~t'1 v{,\l\At. ~ /\~ 0

[V-,D]
II

/,Q.
= el~(A); -
[
O·o't '$

o
0
1.05"
0
0°
0,('
l
eio/Vl vec+ov
Q = iVlv(v)'
/

JOYdan VecolVlposifiOYl ~ fm(VJ (23)

DO = [AC1,1)- A[1,2)~(Q(1,1)/CX(1}2.)) A(1,3) -A(1,2.) 1< (QC1,,3)!CX(1,2.));;;

iespot1~
o d10 J;
ltvLplAtsel' FUncnoY\ ~) one -\1\V\£- i teG~notD~Y S'l--J oel-<.; £'~-tl

M =: ~e(oSC2,2.00)j (

fay ~ :::: 1: '200 f DO =. 10.'1 5

L 0
D.23 ]
O,g-
M (: , 1) = DD" ~ * [0; iJ ;
 I
y:=t/1;
plotCY);

C-hCttCi,) = [IX (1,1)/ Q (1,2.) Q(1 7 'S)/ Q(1,2.)] lie M (:) ~) ;

YLV1atni:= [p\.1i1l/.Ctl1em-C61C1,1)/Q.(1,2))) p\1d*(1-(G1(1~.3)/Q(1]2.)))J~""(:)L)- i

eli\O- .
J

. ,.'

., ,.. ..- ,

~ ~
~
~. ....
.' ,