Economics 560a: Computational Economics

Optional Texts:

• Judd, K. (1998) Numerical Methods in Economics MIT Press.
  
• Amman, H. Kendrick, D. and Rust, J. (1996) Handbook of Computational Economics Elsevier, North Holland.
• Ljungqvist, L. and T. J. Sargent (2000) Recursive Macroeconomic Theory
• Ramon Marimon and Andrew Scott (editors) (1999)Computational Methods for the Study of Dynamic Economies Oxford University Press.
• M. Miranda and P.L. Fackler (2000, forthcoming) Applied Computational Economics
• Jerome Adda and Russell Cooper (2000, forthcoming) Dynamic Programming: Theory and Applications
• Nancy Stokey and Robert Lucas Jr. (1989) Recursive Methods in Economic Dynamics Harvard University Press.
• Dimitri Bertsekas (1995) Dynamic Programming and Optimal Control Athena Scientific.
• Martin L. Puterman (1994) Markov Decision Processes: Discrete Stochastic Dynamic Programming Wiley.

Related Computational Economics Courses on the Web

• Computational Economic Dynamics (Mario Miranda, Ohio State University)
• Dynamic Programming Course (Russell Cooper, Boston University)
• Matlab Programs accompanying Torben Mark Pedersen's book Understanding Business Cycles University of Copenhagen.

Lecture for Sept 7: Course Overview

Lecture for Sept 12: Computing Basics

• Overview of Computing in the Economics Department
• Introduction to Unix and Linux
• Tutorials on Editors
• Tutorials on Programming Languages
• Other Useful Software and Web Sites

Lecture for Sept 14: Review of Basic Decision Theory

• John Rust (2000) Intro to decision theory and stochastic decision processes (slides, ps format) (slides, pdf format)

Lectures for Sept 19-21th: Dynamic Programming and the Principle of Optimality

• John Rust (1996) ``Numerical Dynamic Programming in Economics'' chapter 14 in H. Amman, D. Kendrick and J. Rust (eds.) Handbook of Computational Economics Elsevier, North Holland.
• Manuel Santos (1999) ``Numerical Solutions of Dynamic Economic Models'' chapter 5 in J.B. Taylor and M. Woodford Handbook of Macroeconomics Volume 1A, Elsevier, North Holland.
• Dimitri Bertsekas (1995) Dynamic Programming and Optimal Control Athena Scientific.
• Lars Ljungqvist and Thomas Sargent (2000) chapters 2 and 3 ``Dynamic Programming'' and ``Practical Dynamic Programming'' from Recursive Macroeconomic Theory MIT Press.
• Mario Miranda and Paul Fackler (2000, forthcoming) ``Discrete-Time, Discrete State Models'' chapter 7 in Applied Computational Economics
• Russell Cooper (2000) Introduction to Dynamic Programming
• Nancy Stokey and Robert Lucas Jr. (1989) Recursive Methods in Economic Dynamics Harvard University Press.
• Martin L. Puterman (1994) Markov Decision Processes: Discrete Stochastic Dynamic Programming Wiley.
• Larry Epstein and Stan Zin (1989) "Substitution, Risk Aversion, and the Temporal Behavior of Asset Prices" Econometrica 58 937-970.

Lectures for September 26-28: Incorporating Econometric Unobservables into DP Models

• Zvi Eckstein and Kenneth Wolpin (1989) "The Specification and Estimation of Dynamic Stochastic Discrete Choice Models," Journal of Human Resources, 24 562-98.
• John Rust (1994) Structural Estimation of Markov Decision Processes in R. Engle and D. McFadden (eds.) Handbook of Econometrics, North Holland: Amsterdam.

Lectures for October 3-5: Machine Replacement with Empirical Applications

• John Rust (1996) Gauss Code to solve the Auto Replacement Problem from John Rust's Handbook of Econometrics chapter
• John Rust (1987) ``Optimal Replacement of GMC Bus Engines: An Empirical Model of Harold Zurcher'' Econometrica 55-5 999-1033.
• John Rust (1996) Nested Fixed Point Maximum Likelihood Algorithm
• John Rust and Geoffrey Rothwell (1997) ``On the Optimal Lifetime of Nuclear Power Plants'' Journal of Business and Economic Statistics 15-2 195-208.
• John Rust (1985) ``Stationary Equilibrium in a Market for Durable Assets'' Econometrica 53-4 783-806.
• John Rust (1986) ``When is it Optimal to Kill Off the Market for Used Durable Goods'' Econometrica 53-4 65-86.
• Dmitriy Stolyarov (2000) Turnover of Used Durables in a Stationary Equilibrium: Are Older Goods Traded More?
• Jerome Adda and Russell Cooper (1997) `` Balladurette and Juppette: A Discrete Analysis of Scrapping Subsidies'' NBER working papge 6048.
• Jerome Adda and Russell Cooper (2000) ``The Dynamics of Car Sales: A Discrete Choice Approach'' NBER Working paper 7785.
• Russell Cooper, John Haltiwanger and Laura Cooper (1996) ``Machine Replacement and the Business Cycle: Lumps and Bumps'' NBER working paper 5260.

Lectures for October 10-19: Computational Methods

• John Rust (1996) Continuous DP algorithms from John Rust's Handbook of Econometrics chapter
• John Rust (2000) lecture notes on Parametric Policy iteration Gauss code for computational experiments
• Hugo Benitez-Silva, George Hall, Gunter Hitsch, Giorgio Pauletto and John Rust (2000) ``A Comparison of Discrete and Parametric Approximation Methods for Continuous-State Dynamic Programming Problems'' ps pdf
• Hugo Benitez-Silva, George Hall, Gunter Hitsch, Giorgio Pauletto and John Rust (2000) ``A Comparison of Discrete and Parametric Approximation Methods for Continuous-State Dynamic Programming Problems'' (lecture slides, postscript file)
• John Rust (2000) lecture notes on numerical dynamic programming
• John Rust (2000) lecture notes on learning algorithms and "neuro dynamic programming"
• John Rust (2000) lecture notes on minimum weighted residual and projection methods for solving DP problems
• John Rust (2000) lecture notes on lagrange multiplier methods for solving DP problems
• John Rust (2000) lecture notes on using randomization to break the curse of dimensionality
• John Rust (1997) lecture notes on numerical comparisons of random, quasi random and deterministic solution methods for continuous state DP problems
• John Rust (1996) "Numerical Dynamic Programming in Economics" in H. Amman, D. Kendrick and J. Rust (eds.) Handbook of Computational Economics Elsevier, North Holland.
• Kenneth Judd (1998) "Numerical Methods in Economics MIT Press.
• Dimitri Bertsekas and John Tsitsiklis (1996) Neuro-Dynamic Programming Athena Scientific.
• John Rust (1997) "Using Randomization to Break the Curse of Dimensionality" Econometrica 65-3 487-516.
• John Rust (1997) "A Comparison of Policy Iteration Methods for Solving Continuous-State, Infinite-Horizon Markovian Decision Problems Using Random, Quasi-random, and Deterministic Discretizations" manuscript, Yale University.
• John Rust, Joseph Traub, and Henryk Wozniakowski (1999) "Is There a Curse of Dimesionality for Contraction Fixed Points in the Worst Case?" manuscript, Yale University.

Lectures for October 24-26: Empirical Applications: Optimal Inventory Models

• George Hall and John Rust (2000) ``An (S,s) Model of Commodity Price Speculation'' in
  Carnegie-Rochester Conference Series on Public Policy 52 171-214. postscript pdf
• George Hall and John Rust (1999) ``Econometric Methods for Endogenously Sampled Time Series:
  The Case of Commodity Price Speculation in the Steel Market'' postscript pdf
• George Hall and John Rust (2000) ``The (S,s) Rule is an Optimal Trading Strategy
  in a Class of Commodity Price Speculation Problems'' postscript pdf

Lectures for October 31-November 9: Empirical Applications: Solving the Life-Cycle Model

• John Rust and Christopher Phelan (1997) "How Social Security and Medicare Affect Retirement Behavior in a World of Incomplete Markets" Econometrica 65-4 781-832.
• Eric French (2000) "The Effects of Health, Wealth, and Wages on Labor Supply and Retirement Behavior"
• Hamish Low (1999) "Self-insurance and unemployment benefit in a life-cycle model of labour supply and savings" (IFS working paper)
• Hugo Benitez-Silva (2000) ``A Dynamic Model of Labor Supply, Consumption/Savings, and Annuity Decisions under Uncertainty'' postscript pdf
• Hugo Benitez-Silva, Moshe Buchinsky and John Rust (2000) ``Dynamic Structural Models of Retirement and Disability'' postscript pdf
• John Rust, Gauss and C Code for solving the life-cycle consumption/savings and labor/leisure problem with endogenous Social Security old age and disability application decisions vi DP. link to code via anonymous ftp

Lectures for December: Compuational Mechanism Design

• Stephen Spear and Sanjay Srivastava (1987) "On Repeated Moral Hazard with Discounting" Review of Economic Studies
• Christopher Phelan and Robert Townsend (1991) "Computing Multi-Period, Information-Constrained Optima" Review of Economic Studies
• Hugo Hopenhayn and Rui Albuquerque (1997) "Optimal Dynamic Lending Contracts with Imperfect Enforceability" working paper, University of Rochester.
• Edward S. Prescott (1998) "Computing Moral Hazard Problems Using the Dantzig-Wolfe Decomposition Algorithm" working paper, Federal Reserve Bank of Richmond.

Lectures for December: Computational Game Theory and Markov Perfect Nash Equilibrium

• Ariel Pakes and Paul McGuire (2000) Stochastic Approximation for Dynamic Analysis: Markov Perfect Equilibrium and the 'Curse' of Dimensionality working paper, Harvard University.
• Ariel Pakes and Paul McGuire (1994) Computing Markov Perfect Nash Equilibria: Numerical Implications of a Dynamic Differentiated Product Model NBER working paper, also published in RAND Journal of Economics 25-4 555-589.
• Chaim Fershtman and Ariel Pakes (2000) A Dynamic Oligopoly with Collusion and Price Wars manuscript, also published in RAND Journal of Economics 31-2 207-236.

Lectures for January: Euler Equation Methods for Continuous Choice Models

• Lars Hansen and Kenneth Singleton (1982) "Generalized Instrumental Variables Estimation of Nonlinear Rational Expectations Models" Econometrica 50-5 1269-1286.
• B.S. Lee and Beth Ingram (1991) "Simulation Estimation of Time-Series Models" Journal of Econometrics, 47 197-205.
• Darrell Duffie and K.J. Singleton (1993) "Simulated Moments Estimation of Markov Models of Asset Prices" Econometrica 61-4 929-952.
• Gourieroux, C. and A. Monfort (1995) Simulation Based Econometric Methods Core Lecture Series, Core Foundation, Universite Catholique de Louvain.
• Ariel Pakes and David Pollard (1989) "Simulation and the Asymptotics of Optimization Estimators" Econometrica 57 1027-1057.
• A. Ronald Gallant and George Tauchen (1996) "Which Moments to Match?" Econometric Theory 12-4 657-681.
• A. Ronald Gallant and George Tauchen (1995) "EMM: A Program for Efficient Method of Moments Estimation" manuscript, Duke University.
• Ariel Pakes (1990) "Estimation of Dynamic Structural Models: Problems and Prospects Part II: Mixed Continuous-Discrete Models and Market Interactions" in C. Sims and J. Laffont (eds.) Advances in Econometrics: 6th World Congress Volume II Cambridge University Press.
• Finn Kydland and Edward Prescott (1982) "Time to Build and Aggregate Fluctuations" Econometrica 50-6 1345-1370.
• Sumru Altug (1989) "Time to Build and Aggregate Fluctuations: Some New Evidence" International Economic Review 30-4 889-920.