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.

Recommended

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.