Seminar session 1: The Howard policy improvement algorithm

Howard’s policy improvement algorithm is a simple technique to solve dynamic optimization problems. Its strength lies in the fact, first, that the iterative process can be started with any initial guess of the policy function of the problem, and, second, that Howard’s algorithm leads to the optimal policy function in one step. Put together, it

Lecture 2: Mathematical preliminaries

This lecture lays down the mathematical foundations for solving dynamic programming problems. First, we clarify that value function iteration is best understood as convergence of functions that requires appropriate spaces and appropriate operators. As convergence of functions is to be measured as distance between functions, we need a metric vector space–a space the elements of

Lecture 1: Introduction

This lecture is the introduction to the series entitled ‘Lectures in Recursive Economic Dynamics’. We lay down the agenda for the subsequent lectures, and, first of all, examine the basic characteristics of dynamic economic problems. Then we solve the elementary cake-eating problem, a variant of the seminal model by Brock and Mirman (1972), in finite

Lectures in Recursive Economic Dynamics

In this series of online lectures, we perform a close reading of Nancy L. Stokey and Robert E. Lucas’ seminal textbook entitled Recursive methods in economic dynamics (Harvard University Press, 1989). In this book, Stokey and Lucas with the support of Edward C. Prescott invent and establish the formal language of modern dynamic macroeconomics, which