Recursive Macroeconomic Theory

Recursive methods offer a powerful approach for characterizing and solvingcomplicated problems in dynamic macroeconomics. Recursive Macroeconomic Theoryprovides both an introduction to recursive methods and advanced material, mixing tools and sampleapplications. Only experience in solving practical problems fully conveys the power of the recursiveapproach, and the book provides many applications. This third edition offers substantial newmaterial, with three entirely new chapters and significant revisions to others. The new contentreflects recent developments in the field, further illustrating the power and pervasiveness ofrecursive methods. New chapters cover asset pricing empirics with possible resolutions to puzzles;analysis of credible government policy that entails state variables other than reputation; andfoundations of aggregate labor supply with time averaging replacing employment lotteries. Other newmaterial includes a multi-country analysis of taxation in a growth model, elaborations of the fiscaltheory of the price level, and age externalities in a matching model.

The book issuitable for both first- and second-year graduate courses in macroeconomics and monetary economics.Most chapters conclude with exercises. Many exercises and examples use Matlab programs, which arecited in a special index at the end of the book.