Bridging the Gap between Economic Modelling and Simulation: A Simple Dynamic Aggregate Demand-Aggregate Supply Model with Matlab

• Type: Article in International Scientific Journal
• Date: 2018

Authors

Gaspar, JM (Author) FEP

Journal

Title: Journal of Applied Mathematics

Vol. 2018

Pages: 1-13

ISSN: 1110-757X

Publisher: Hindawi

Indexing

Scopus - 3 Citations

Other information

Authenticus ID: P-00N-XKS

DOI: 10.1155/2018/3193068

Abstract (EN): This paper aims to connect the bridge between analytical results and the use of the computer for numerical simulations in economics. We address the analytical properties of a simple dynamic aggregate demand and aggregate supply (AD-AS) model and solve it numerically. The model undergoes a bifurcation as its steady state smoothly interchanges stability depending on the relationship between the impact of real interest rate on demand for liquidity and how fast agents revise their expectations on inflation. Using code embedded into a unique function in Matlab, we plot the numerical solutions of the model and simulate different dynamic adjustments using different parameter values. The same function also accommodates the analysis of the impacts of fiscal and monetary policy and supply side shocks on the steady state and the transition dynamics of the model. © 2018 José M. Gaspar.

Language: English

Type (Professor's evaluation): Scientific