14.451 | Fall 2009 | Graduate
Dynamic Optimization Methods with Applications

Readings

Textbooks

Required

[SLP] = Stokey, Nancy L., and Robert E. Lucas, Jr., with Edward C. Prescott. Recursive Methods in Economic Dynamics. Cambridge, MA: Harvard University Press, 1989. ISBN: 9780674750968.

[Acemoglu] = Acemoglu, Daron. Introduction to Modern Economic Growth. Princeton, NJ: Princeton University Press, 2008. ISBN: 9780691132921.

Chiang, Alpha C. Elements of Dynamic Optimization. Long Grove, IL: Waveland Press, 1999. ISBN: 9781577660965.

Luenberger, David. Optimization by Vector Space Methods. New York, NY: Wiley-Interscience, 1997. ISBN: 9780471181170. First published in 1969 by John Wiley and Sons, Inc.

Kamien, Morton I., and Nancy L. Schwartz. Dynamic Optimization: The Calculus of Variations and Optimal Control in Economics and Management. 2nd ed. San Diego, CA: Elsevier, 1991. ISBN: 9780444016096.

Readings by Session

SES # TOPICS READINGS
1-7 Discrete time: deterministic models

Vector spaces

[SLP] chapter 3.

The principle of optimality

[SLP] chapter 4.1
[Acemoglu] sections 6.2 to 6.3.

Concavity and differentiability of the value function

[SLP] section 4.2.

Euler equations

[SLP] section 4.5

Deterministic dynamics

[SLP] chapter 6.

Models with constant returns to scale

[SLP] section 4.3.

Nonstationary models

[Acemoglu] section 6.7.

8-9 Discrete time: stochastic models

Stochastic dynamic programming

[SLP] sections 9.1 to 9.2.
[Acemoglu] section 16.2.

Stochastic Euler equations

[SLP] section 9.5.
[Acemoglu] section 16.3.

Stochastic dynamics

[SLP] section 9.6, chapters 11 and 12.

10-12 Continuous time

Calculus of variations

[Acemoglu] section 7.1.

The maximum principle

[Acemoglu] sections 7.2 to 7.3.

Discounted infinite-horizon optimal control

[Acemoglu] section 7.5.

Saddle-path stability

[Acemoglu] section 7.8.

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Fall 2009
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