This paper aims to connect the bridge between analytical results and the use of the computer for numerical simulations in\neconomics. We address the analytical properties of a simple dynamic aggregate demand and aggregate supply (AD-AS) model\nand solve it numerically. The model undergoes a bifurcation as its steady state smoothly interchanges stability depending on the\nrelationship between the impact of real interest rate on demand for liquidity and how fast agents revise their expectations on\ninflation. Using code embedded into a unique function in Matlab, we plot the numerical solutions of the model and simulate\ndifferent dynamic adjustments using different parameter values. The same function also accommodates the analysis of the impacts\nof fiscal and monetary policy and supply side shocks on the steady state and the transition dynamics of the model
Loading....