ABSTRACT
This appendix presents an overview of economic models covering both macro- and microeconomic topics, exploring the numerical techniques required to solve static and dynamic models. The computational approach to economics is a growing field. Without this skill it is not possible to simulate policy effects in today's complex economic models. However, there is a gap between the usual preparation in economics and the computational tools. In microeconomics, the supply-demand model is required to understand the determination of the price and of the quantity of a good sold on the market. The mechanism depends on the interaction of two different groups: buyers and sellers. The set-up of the typical IS-LM model specifies relationships among aggregate variables. Such a simple model can be used to study the effect of changes either in policy variables or in the specification of the interaction between endogenous variables.
