Numerical Methods for Economics
Keywords |
Classification |
Keyword |
CNAEF |
Mathematics |
Instance: 2020/2021 - 1S ![Requerida a integração com o Moodle Ícone do Moodle](/fep/pt/imagens/MoodleIcon)
Cycles of Study/Courses
Acronym |
No. of Students |
Study Plan |
Curricular Years |
Credits UCN |
Credits ECTS |
Contact hours |
Total Time |
ME |
35 |
Bologna Syllabus |
1 |
- |
7,5 |
56 |
202,5 |
Teaching language
Portuguese and english
Objectives
This course deals with numerical methods for the solution of economic problems using a computer.
Emphasis will be on intuition and applicability conditions of methods and not on their deductibility and computer implementation.
The objectives of the course are:
- to provide students with the numerical and computational techniques necessary for the implementation and resolution of economic problems in a computer;
- to provide students with the tools required to run economical and financial simulations;
- for students to acquire awareness of the potential of this approach to solve large dimensional problems (or problems without a closed solution) as well as to point out the limitations of finite precision arithmetic.
Learning outcomes and competences
- Solve economic models by using computational numerical methods.
- Analyse economic models to identify the mathematical building blocks behind the model.
- Test for the most adequate numerical methods to tackle the mathematical building blocks from the economic models.
- Build algorithms to solve economic models.
- Adapt existing computer codes to solve new problems.
- Test computationally and discuss shock effects on the economic problems.
- Develop critical capacities in the analysis of data and simulations results.
- Summarize the advantages and limitations of finite precision arithmetic.
Working method
B-learning
Program
- Introduction to MATLAB /OCTAVE.
- Data analysis: economic data, finantial markets.
- Finite precision arithmetic.
- Linear Systems of equations: supply-demand models, IS-LM model, Mundell-Fleming model.
- Systems of nonlinear equations: AS-AD model.
- Eigenvalues and eigenvectors: dynamic IS-LM and AS-AD, duopoly, stability of dynamic systems.
- Interpolation and least squares: compound interest rate.
- Optimization: portfolio optimization.
- Difference and differential equations: discrete dynamics of supply and demand models, with and without rational expectations, Solow and Ramsey-Cass-Koopmans models.
- Stochastic simulation, Cramér–Lundberg (risk analysis).
Mandatory literature
Afonso, Óscar João Atanázio;
Computational economics. ISBN: 978-1-138-85966-1
Moler, Cleve B.;
Numerical computing with MATLAB. ISBN: 0-89871-560-1
Complementary Bibliography
Hendrick, David A.;
Computational economics. ISBN: 0-691-12549-X
Judd, Kenneth L;
Numerical methods in economics. ISBN: 0-262-10071-1
Teaching methods and learning activities
The course is organized in lab sessions, based on modules. The teaching methodology in each module is structured as follows:
- description of the problem to solve;
- identification with explanation of the appropriate numerical methods for their resolution;
- examples of application in economics;
- exercises and simulation (sedimentation and knowledge exploitation).
Software
Jupyter
OCTAVE
MATLAB
Evaluation Type
Distributed evaluation without final exam
Assessment Components
Designation |
Weight (%) |
Teste |
30,00 |
Trabalho laboratorial |
70,00 |
Total: |
100,00 |
Amount of time allocated to each course unit
Designation |
Time (hours) |
Estudo autónomo |
72,00 |
Frequência das aulas |
30,00 |
Trabalho laboratorial |
12,00 |
Apresentação/discussão de um trabalho científico |
6,00 |
Elaboração de relatório/dissertação/tese |
40,50 |
Trabalho escrito |
42,00 |
Total: |
202,50 |
Eligibility for exams
Evaluation will be based on the achievement of:
- 2 projects held during the semester;
- 2 short assessments.
Calculation formula of final grade
35% P1 + 35% P2 + 15% SA1 + 15% SA2 where: P - Project and SA - Short-Assessment.