Cambridge An Introduction To Economic Dynamics 2001

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Mã tài liệu: 201589

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This is a short book. It aims to get across the essential elements of dynamics that are used in modern treatments of the subject. More significantly, it aims to do this through the means of examples. Some of these examples are purely algebraic. But many others consider economic models: both microeconomic and macroeconomic. Macroeconomics is replete with dynamic models – some simple and others quite complex. But this is not true of microeconomics. Microeconomics is still very largely static, with the exception of the cobweb model. In this book we have considered the dynamics of demand and supply and the dynamics of the firm. In terms of the firm we deal only with advertising, diffusion models and the dynamic theory of oligopoly. The macroeconomic models we consider follow the traditional development of the subject matter. The Keynesian fixed-price model is considered first, followed by the IS-LM model. But we also consider the Dornbusch model of the open economy. This model in particular allows us to show how rational expectations enter model construction. It also illustrates the concept of a saddle-point solution to a dynamic model. Other topics of importance are also dealt with such as inflation and unemployment and the fiscal criteria of the Maastricht Treaty. The final chapter (chapter 10) provides an introduction to modern ideas of bifurcation and chaos.

Every student now has access to a spreadsheet. In many colleges and universities, students are trained in the use of the spreadsheet. Often, however, this is for setting out economic data and graphing it. Occasionally a regression equation is undertaken. Rarely is a simple dynamic model set up and investigated. This is what this book is about. I have deliberately set a constraint on the material covered that it must be capable of being investigated on a spreadsheet and that no additional technical software needs to be invoked. This is not as limiting as it may first appear. It may be thought that this restricts our investigation only to discrete models. This is not in fact true. By utilizing Euler’s approximation, we can investigate quite readily continuous dynamic models. In this book we shall invoke Euler’s approximation frequently.

There is a second reason for limiting myself to spreadsheets. Economics, like many subjects, can be more fully appreciated by setting out a problem and manipulating it experimentally. Experimentation is at the heart of this book. But such experimentation is based only on the reader setting up the model themselves on their computer. I have found that students like setting models up from scratch. When they get things wrong they must check their model specification relative to the theory. So they read the theory with a more focused ixmind. They have a reason for getting it right! This is quite a different approach from having a complete model all ready set up. There is a value in such models, but for learning model construction, and for appreciating the properties of a model, there is no better substitute than setting it up from scratch. Of course, there is a cost to this. The models must be relatively simple. I feel this is a cost worth bearing. Complex models may take account of more variables and more interrelationships in the economic system under investigation, but sometimes knowing why a result is the way it is becomes obscured. All one can say is that it is the output of the model. Furthermore, it is not clear what the model assumes unless you were involved in its construction. Listing these assumptions is dry and a turn-off, and such models are best considered by postgraduates and researchers. This book is aimed specifically at undergraduates. It is assumed that the reader will actually set up the model on a spreadsheet and then experiment with it.

Throughout, we have kept things simple. Even some advanced concepts are illustrated by means of simple examples. In doing this special emphasis has been placed on graphically illustrating dynamics. This is where the spreadsheet has been extensively used. Computing large amounts of data points (sometimes 2,000) allows some complex trajectories to be illustrated in the X-Y plane. Seeing how these graphs change when parameter values are altered or when the initial condition is altered is very interactive.This book is aimed at undergraduates who are pursuing economics either as a single honours subject or as a joint degree. It presupposes familiarity with first-year economics and for some topics a second- or third-year level. It also presupposes a basic familiarity with Excel or an equivalent spreadsheet. It is intended as an accompaniment to all basic economics courses, but it is especially useful to courses in quantitative economics.

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Cambridge An Introduction To Economic Dynamics 2001

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