Lectures on by Søren Johansen Department of Economics ...

THE DSGE MODEL
The Cobb-Douglas production function is Y t = A t Kt ( t H t ) 1
labor-augmenting technological progress'.
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where is `gross rate of
Utility function E t [ P 1
i=0 i (log C t+i H t+i )] is maximized with respect to fC t ; H t g 1 t=0
subject to
First order conditions
log(A t ) = (1 ) log A + log(A t 1 ) + " t ; jj < 1
Y t = C t + I t
K t+1 = (1 )K t + I t
C t H t = (1
)Y t
1 = E t [ C t
C t+1
( Y t+1
K t+1
+ 1
)]