Economic Dynamics

ECO 4008

This course illustrates the role of the time factor in economic analysis. It starts with the application of exponential and logarithmic functions to exponential growth, the rate of growth, optimal timing, etc. Integration techniques are covered in their relevance to the time behavior of economic variables such as capital stock, investment, and national income. Differential equations are applied to the study of the Domar growth model, the Solow growth model, and the dynamics of the market price. Difference equations are used in studying the Cobweb model, the multiplier-accelerator model, the augmented Phillips curve, etc. The last topic on dynamic optimization, involving the calculus of variations and optimal control theory, discusses capital stock, investment, aggregate consumption, and taxation as dependent on the optimal time path of national income. Other illustrations include natural resource wealth maximization, utility theory, production theory, and the firm making optimal decisions in time. This course builds on previous knowledge acquired in Quantitative Methods in Economics and dwells on the substantive command of microeconomic and macroeconomic concepts and models as well as rigorous mathematical tools for solving applied economic problems. Regular preparation is needed including homework or other assignments and preparing for the test after each module is covered.