Table Of Content“This book is a welcome addition to the literature on economic dynamics.
Its clear writing style and the emphasis on coding using MATLAB® make
it a compelling text for introducing undergraduate economics students
to stability issues, cycles, and growth. The emphasis on both standard
models like the Solow growth model and less standard ones such as
the Goodwin growth cycle appeal to a broad spectrum of economists
in the profession, and the highly competent authors have put years of
experience with the material into a highly accessible textbook. I highly
recommend the book to anyone willing to incorporate numerical methods
into macroeconomic courses.”
Daniele Tavani, Associate Professor, Colorado State University
AN INTRODUCTION TO
ECONOMIC DYNAMICS
An Introduction to Economic Dynamics provides a framework for students
to appreciate and understand the basic intuition behind economic models
and to experiment with those models using simulation techniques in
MATLAB®.
This book goes beyond the often-limited scope of other texts on
economic models, which have largely focused on elucidating static
equilibrium models. Comparative static analysis inhibits students from
asking how the equilibrium position is achieved from an initial out-of-
equilibrium position and limits their understanding of the dynamics that
underlie such analysis. In this textbook, readers are introduced to ten
well-established macroeconomic models – including Keynesian multiplier
models, Samuelson’s multiplier and Solow’s growth model – and guided
through the dynamical systems behind each model. Every chapter begins
with an overview of the economic problem which the model is designed
to help solve followed by an explanation of the mathematics of the model.
Solutions are provided using simulation and visualisation techniques in
MATLAB®, which are interwoven organically with the analysis and are
introduced in a step-by-step fashion to guide the reader along the way.
Appendices provide an introduction to MATLAB® along with all the
necessary codes.
The book is ideally suited for courses in economic dynamics,
macroeconomic modelling and computational economics, as well as for
students of finance, mathematics and engineering who are interested in
economic models.
Srinivas Raghavendra is an Associate Professor in Economics at the Azim
Premji University, Bangalore, India and with the Department of Economics
at the University of Galway in Ireland.
Petri T. Piiroinen is an Associate Professor in Nonlinear Mechanics at
Chalmers University of Technology, Göteborg, Sweden.
Routledge Advanced Texts in Economics and Finance
32 The Economics of Transition
Developing and Reforming Emerging Economies
Edited by Ichiro Iwasaki
33 Applied Spatial Statistics and Econometrics
Data Analysis in R
Edited by Katarzyna Kopczewska
34 Spatial Microeconometrics
Giuseppe Arbia, Giuseppe Espa and Diego Giuliani
35 Financial Risk Management and Derivative Instruments
Michael Dempsey
36 The Essentials of Machine Learning in Finance and Accounting
Edited by Mohammad Zoynul Abedin, M. Kabir Hassan, Petr Hajek
and Mohammed Mohi Uddin
37 Financial Economics and Econometrics
Nikiforos T. Laopodis
38 Applied Welfare Economics, Second Edition
Cost-Benefit Analysis of Projects and Policies
Massimo Florio and Chiara Pancotti
39 An Introduction to Economic Dynamics
Modelling, Analysis and Simulation
Srinivas Raghavendra and Petri T. Piiroinen
For more information about this series, please visit: www.routledge.com/
Routledge-Advanced-Texts-in-Economics-and-Finance/book-series/SE0757
AN INTRODUCTION TO
ECONOMIC
DYNAMICS
Modelling, Analysis and Simulation
S R I N I V A S R A G H A V E N D R A
A N D P E T R I T . P I I R O I N E N
Designed cover image: © Getty Images / Sono Creative
First published 2023
by Routledge
4 Park Square, Milton Park, Abingdon, Oxon OX14 4RN
and by Routledge
605 Third Avenue, New York, NY 10158
Routledge is an imprint of the Taylor & Francis Group, an informa business
© 2023 Srinivas Raghavendra and Petri T. Piiroinen
The right of Srinivas Raghavendra and Petri T. Piiroinen to be identified as
authors of this work has been asserted in accordance with sections 77 and 78
of the Copyright, Designs and Patents Act 1988.
All rights reserved. No part of this book may be reprinted or reproduced or
utilised in any form or by any electronic, mechanical, or other means, now
known or hereafter invented, including photocopying and recording, or in any
information storage or retrieval system, without permission in writing from
the publishers.
Trademark notice: Product or corporate names may be trademarks or
registered trademarks, and are used only for identification and explanation
without intent to infringe.
All permissions have been sought to the best of our knowledge where
necessary.
For MATLAB and Simulink product information, please contact:
The MathWorks, Inc. 3 Apple Hill Drive Natick, MA, 01760-2098 USA Tel:
508-647-7000 Fax: 508-647-7001 E-mail: [email protected]
British Library Cataloguing-in-Publication Data
A catalogue record for this book is available from the British Library
ISBN: 978-0-367-34190-9 (hbk)
ISBN: 978-0-367-34189-3 (pbk)
ISBN: 978-0-429-32440-6 (ebk)
DOI: 10.4324/9780429324406
Typeset in Times New Roman
by Apex CoVantage, LLC
To our parents
CONTENTS
Preface xiii
CHAPTER 1 INTRODUCTION TO ECONOMIC DYNAMICS 1
1.1 A short primer on MATLAB® 5
CHAPTER 2 THE COBWEB MODEL 15
2.1 Economic problem 15
2.2 Modelling 19
2.3 Analysis, simulation and visualisation 21
2.3.1 Cobweb plots 26
2.4 Concluding remarks, extensions and challenges 29
CHAPTER 3 EXPECTATION DYNAMICS IN THE COBWEB MODEL 33
3.1 Economic problem 33
3.2 Modelling 35
3.3 Analysis, simulation and visualisation 36
3.3.1 Cobweb plots 42
3.4 Concluding remarks, extensions and challenges 44
CHAPTER 4 KEYNESIAN MULTIPLIER MODEL 47
4.1 Economic problem 47
4.2 Modelling 50
4.3 Analysis, simulation and visualisation 54
4.4 Concluding remarks, extensions and challenges 57
CHAPTER 5 THE IS/LM MODEL 61
5.1 Economic problem 61
5.2 Modelling 63
5.3 Analysis, simulation and visualisation 67
5.4 Remarks, extensions and challenges 74
IX
