Introduction
Now onto the course proper. Chapter 3 of Godley and Lavoie introduces us to SIM and SIMEX, two simple (hence the name) models of a closed macroeconomy. The interesting features of this model are detailed in the handout below, and we'll spend a lot of time this week talking through all the features of the model and solving for it with pencil and paper.
Length: 1.5 hours
Click the link below to download slides, handouts, and homeworks, and get links to further reading.
Slides
Handout
Lecture5_handout.pdf EC6012_L5_numerical_example.pdf
EC6012_L5_numerical_example.pdf
Homework
See section 3.1 of the handout. What happens when theta rises from 20% to 30%? Work out the model with this new value for periods 2 and 3, and give an economic intuition for your answers. Post your groups' work to your blogs in 6 days' time.
Further Reading
Godley and Lavoie, chapter 4
Taylor, 2004, chapter 3.