Difference Equations |

The discrete-time counterpart to differential equations. The section begins with an overview of first-order linear difference equations in deterministic environments. The analysis is then extended to cover linear stochastic equations with rational expectations, including both first-order and second-order equations. Later material (not in the text yet and not covered in class) looks at nonlinear equations and some applications to chaos theory in economic modeling. |

The problem set for this section can be found
here
(parts of this problem set will be due at different dates TBA in class). |

Methodological Texts |

Blanchard, Olivier J. (1979): "Backward
and Forward Solutions for Economies with Rational Expectations." American
Economic Review, Papers and Proceedings, 69(2):114-118. |

Taylor, J. (1977): "Conditions for
Unique Solutions in Stochastic Models with Rational Expectations."
Econometrica,
45:1377-85. |

Applications in Articles |

Yet to be identified . . . . . |