Theories and simulations in dynamic General Equilibrium approach with Markov chains

• Grant number: 13/17828-1
• Support Opportunities: Regular Research Grants
• Start date: November 01, 2013
• End date: October 31, 2015
• Field of knowledge: Applied Social Sciences - Economics - Quantitative Methods Applied to Economics
• Principal Investigator: Ricardo Luis Chaves Feijó
• Grantee: Ricardo Luis Chaves Feijó
• Host Institution: Faculdade de Economia, Administração e Contabilidade de Ribeirão Preto (FEARP). Universidade de São Paulo (USP). Ribeirão Preto , SP, Brazil

Abstract

We propose a study of the theoretical approach of general equilibrium in dynamic economies that follows a process of evolution commanding by Markov chains. The study will seek a new theoretical treatment of the dynamic general equilibrium. The idea of dynamic Markov economies is one of the simplest ways to model the sequencial effects in changes in exogenous variables; assuming that it entails a specific process in the transitions between one state and another. Nevertheless, this line of modeling is still at the beginning and urges, in the literature, the investigation of general equilibrium models in stochastic economies with assumptions most challenging as regarding the environment in which the process operates balancer. That's what it comes to this research proposal: to deepen this line of modeling. In addition to advancing on the specification of algorithms for numerical approximation of general equilibrium theorists, for incomplete markets, using new techniques without solving Euler equation and other innovations.The research refers to two interrelated goals: to develop methods of numerical approximation of the dynamic stochastic general equilibrium in financial markets and improve the mathematical structure, and set of assumptions on which the equilibrium is shown, in particular, the detailed topological analysis of the problem and investigating thoroughly the scope of alleged abstracts in which, in each model, the general equilibrium is shown. (AU)