The substantially revised fourth edition of a widely used text,
offering both an introduction to recursive methods and advanced
material, mixing tools and sample applications.
Recursive methods provide powerful ways to pose and solve problems in
dynamic macroeconomics. Recursive Macroeconomic Theory offers both an
introduction to recursive methods and more advanced material. Only
practice in solving diverse problems fully conveys the advantages of the
recursive approach, so the book provides many applications. This fourth
edition features two new chapters and substantial revisions to other
chapters that demonstrate the power of recursive methods.
One new chapter applies the recursive approach to Ramsey taxation and
sharply characterizes the time inconsistency of optimal policies. These
insights are used in other chapters to simplify recursive formulations
of Ramsey plans and credible government policies. The second new chapter
explores the mechanics of matching models and identifies a common
channel through which productivity shocks are magnified across a variety
of matching models. Other chapters have been extended and refined. For
example, there is new material on heterogeneous beliefs in both complete
and incomplete markets models; and there is a deeper account of forces
that shape aggregate labor supply elasticities in lifecycle models.
The book is suitable for first- and second-year graduate courses in
macroeconomics. Most chapters conclude with exercises; many exercises
and examples use Matlab or Python computer programming languages.
