The Fundamentals of Economic Dynamics and Policy Analyses : Learning through Numerical Examples. Part Ⅲ. Stochastic Dynamic General Equilibrium <Article>

The objective of this paper is to present a simple stochastic optimal growth model (Ramsey model), and calculate a stochastic dynamic general equilibrium (hereafter referred as a SDGE) of the model. (This part draws an example from Farmer (1999).) Then, we demonstrate how to simulate the movements of economic variables in the stochastic dynamic general equilibrium by using Matlab. The paper consists of 3 sections. A stochastic optimal growth model is presented in section 1. The stochastic dynamic general equilibrium of the model is calculated in section 2. The movements of economic variables in the stochastic dynamic general equilibrium are simulated by using Matlab in section 3.