The Discounted Euler Equation: A Note
نویسندگان
چکیده
We present a simple model with income risk and borrowing constraints which yields a “discounted Euler equation.” This feature of the model mutes the extent to which news about far future real interest rates (i.e., forward guidance) affects current outcomes. We show that this simple model approximates the outcomes of a rich model with uninsurable income risk and borrowing constraints in response to a forward guidance shock. The model is simple enough to be easily incorporated into simple New Keynesian models. We illustrate this with an application to the zero lower bound. JEL Classification: E40, E50, E21 ∗We thank Susanto Basu, Gauti Eggertsson, Marc Giannoni, Fatih Guvenen, Nobuhiro Kiyotaki, Benjamin Moll, Michael Peters, Oistein Roisland, Greg Thwaites, Aleh Tsyvinski, Nicolas Werquin and seminar participants at various institutions for valuable comments and discussions. We thank the National Science Foundation (grant SES-1056107) for financial support.
منابع مشابه
Aerodynamic Design Optimization Using Genetic Algorithm (RESEARCH NOTE)
An efficient formulation for the robust shape optimization of aerodynamic objects is introduced in this paper. The formulation has three essential features. First, an Euler solver based on a second-order Godunov scheme is used for the flow calculations. Second, a genetic algorithm with binary number encoding is implemented for the optimization procedure. The third ingredient of the procedure is...
متن کاملA Version of the Euler Equation in Discounted Markov Decision Processes
This paper deals with Markov decision processes MDPs on Euclidean spaces with an infinite horizon. An approach to study this kind of MDPs is using the dynamic programming technique DP . Then the optimal value function is characterized through the value iteration functions. The paper provides conditions that guarantee the convergence of maximizers of the value iteration functions to the optimal ...
متن کاملDiscounted Markov control processes induced by deterministic systems
This paper deals with Markov Control Processes (MCPs) on Euclidean spaces with an infinite horizon and a discounted total cost. Firstly, MCPs which result from the deterministic controlled systems will be analyzed. For such MCPs, conditions that permit to establish the equation known in the literature of Economy as Euler’s Equation (EE) will be given. There will be also presented an example of ...
متن کاملAdomian Decomposition Method On Nonlinear Singular Cauchy Problem of Euler-Poisson- Darbuox equation
n this paper, we apply Picard’s Iteration Method followed by Adomian Decomposition Method to solve a nonlinear Singular Cauchy Problem of Euler- Poisson- Darboux Equation. The solution of the problem is much simplified and shorter to arriving at the solution as compared to the technique applied by Carroll and Showalter (1976)in the solution of Singular Cauchy Problem.
متن کاملNumerical Solution of Weakly Singular Ito-Volterra Integral Equations via Operational Matrix Method based on Euler Polynomials
Introduction Many problems which appear in different sciences such as physics, engineering, biology, applied mathematics and different branches can be modeled by using deterministic integral equations. Weakly singular integral equation is one of the principle type of integral equations which was introduced by Abel for the first time. These problems are often dependent on a noise source which a...
متن کامل