The course will provide an introduction to optimization techniques and illustrate how they are used in economic theory and estimation. The focus will be on deterministic systems, but we will cover both static and dynamic, and both continuous and discrete time models. Topics are divided into three modules that will receive equal weight:
Module 1: Static nonlinear optimization & optimal control
Module 2: Discrete time dynamic programming
Module 3: Applications of the Bellman equation
Prerequisites: A sufficiently strong quantitative background.
Topics that will be covered are;
* Static constrained nonlinear optimization (Lagrange multiplier, implicit function, envelope theorem, comparative statics, Kuhn-Tucker conditions)
* Continuous time dynamic optimization using optimal control (optimal control, Hamiltonian, calculus of variation, maximum principle, state-space diagram)
* Discrete time dynamic programming - theory (Bellman equation, Euler equation, Blackwell's theorem)
* Dynamic programming applications: the life cycle model of consumption, optimal growth, random walk in consumption, productivity estimation, labor search and matching
Articles and literature
Is also included in other courses
- Master of Economics (Major 2: Research in Economics) 60 ects.
- Master in de economische wetenschappen (Major 2: Research in Economics) 60 ects.
- Master of Advanced Studies in Economics 60 ects.
- Preparatory Programme: Master of Advanced Studies in Economics 33 ects.
Sydsaeter, et al. Further Mathematics for Economic Analysis (2nd Edition), 2009, Prentice Hall
Chiang, (1992), Elements of Dynamic Optimization,
and online notes
Determination of grades:
* The grades are determined by the course holder(s) (titularis), as announced via Toledo and the examination schedule. The result is computed and expressed as a whole number on a scale of 20.
* The final score is a weighted score: 3 homeworks during the year, each counting for 1/10 of total + written exam, closed book, counting for 7/10
* Term of deliverance and deadline will be determined by the lecturer and communicated via Toledo.
Evaluation third examination period:
* During an academic year, the student has 2 chances to participate to the exam: a first time during the first or second examination period, according to the course schedule, and a second time during the third examination period.
* The characteristics of the evaluation of the third examination period are similar to those of the first or the second examination period.
* The homeworks must be handed in again. If wanted, the student can make eventual corrections/updates before. The grade will be determined and calculated as in the first/second examination period.