Optimal Control Theory for Undergraduates
37 Pages Posted: 27 Jan 2007
Dynamic optimization is widely used in financial economics, macroeconomics and resource economics. This is accounting for some friction between the undergraduate and graduate teaching of economics because most undergraduate programs still concentrate on static economic analysis. This paper shows how, with the help of the Microsoft Excel Solver tool, the principles of dynamic economics can be taught to students with minimal knowledge of calculus. As it is assumed that the reader has no prior knowledge of optimal control theory, some attention is paid to the main concepts of dynamic optimization.
Keywords: Ramsey model, User cost, Optimal control theory, Dynamic programming, Excel
JEL Classification: A22, C61, D91, D92, Q00
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