AMA, Lecture #5: The rational expectations permanent income hypothesis (PIH)
Overview:
• A first economic model: The Permanent Income Hypothesis (PIH) under rational expectations
• An example of how the Lagrangian approach can be applied to intertemporal problems and the economic interpretation of the results
• An example of how the solution can be written as a dynamic system in the state space
• The Blanchard-Kahn conditions (Blanchard and Kahn 1980)
by Prof. Burda
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