Starts by looking at the advances in macroeconomics that have been made since A. W. Phillips's 1958 Economica paper and his physical economic model (made of piping and valves) designed to teach students the complexities of macroeconomics. Two developments have contributed to these advances: first, macroeconomics is now based on the optimizing decision of individual agents who have formed expectations about an uncertain future, and emphasizes the use of Euler equations and dynamic programming to analyse the dynamic properties of economies; second, there has been a huge increase in the computational power available for studying model economies. The following two sections of the chapter are general discussions on the structure of (dynamic) economics models and the use of computational techniques. Lastly, an outline is given of the structure of the book.
Keywords: computational economics; dynamic economics models; dynamic economies; dynamic programming; Euler equations; macroeconomics
Chapter. 5525 words.
Subjects: Macroeconomics and Monetary Economics
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