Real Business Cycle Model: Household's Problem

[@JDEconomics]

Hello Everyone! I hope you are enjoying the free DSGE course. Please leave your comments/feedback! ✅ You can buy the DO File Along with the slides and paper (maths solved) at: jdeconomicstore.com/b/dsgemodelstata ✅ Download for Free the PDF With Dynamic Equations, and see the course outline at: www.jdeconomics.com/dsge-models ☕If you would like to show your appreciation and make a donation: 💳 www.paypal.com/paypalme/JDEconomics?locale.x=en_US Best Regards, Juan D.

[@pawansaroj6553]

I think there is calculation mistake, discount factor is multiplied only with objective function so this should not be canceled

[@bartoyeah4226]

what a legend! thanks

[@JDEconomics]

Great!

[@solomonyemidi3203]

Systematic and clear presentation. I can't wait for the rest. More grease to your elbow

[@JDEconomics]

Thanks Solomon! I am posting today the Firm’s maximization problem. Feel free to share the video with your close ones! That helps me a lot. Best regards, JD

[@benjaminmibaam3037]

Very clear and simple. Your channel has been very helpful.

[@JDEconomics]

Thanks Benjamin!! Make sure to check the full course. In my website you have the outline. Regards! JD

[@zhangjockie6784]

thanks！it is really helpful！！I will follow your channel it’s great!

[@JDEconomics]

Thanks!

[@M.AnkithReddy]

This is amazing!!

[@JDEconomics]

Thanks a lot for your positive feedback! Feel free to subscribe to my channel and share my channel with your network! Best, Juan

[@theeconomist368]

I've found it easy to understand after watching this lecture. Many thanks. But what if we've more than 2 variables in the objective function.... !?

[@JDEconomics]

Hi! Thanks! I am glad you liked the video. Make sure you watch the whole series. You can also buy the material if you are interested. It included a paper I wrote with all the details. Answering your question, the objective function just refers to the things that derive utility to the households. In this case: consumption and leisure. But you can have more things. Like MIU (money in the utility function) models, where families get utility from holding money. You just need to maximize those variables in the same way you did with the others. Regards, JD

[@BMMEcon]

Hi @JDEconomics why don't you bring the expectation into the FOC for k_t+1? When lambda and beta are t+1, the future values of the FOC are unknown, so an expectation should be present, no? If the expectation was present, you would not be able to calculate the Euler formula as you did, and we would have to rely on covariance of marginal utility of consumption and the rental rate of capital.

[@JDEconomics]

Hi! Thanks for your message. I’ll take a look into the video. Please proceed as you consider appropriate. Kind regards, JD

[@ruqayyahahmadsani5838]

hi, thank you for this. Please what's your suggestion on how to apply this in macro economics perspective that is looking at oil price and fiscal cyclicality.

[@JDEconomics]

I suggest you take this course in my website. It’s in Dynare, but I have added oil in the rbc model. jdeconomicstore.com/b/dsge-dynare-course . Right now you can get it at a promotional price. Regards, JD

[@ruqayyahahmadsani5838]

@@JDEconomics Thank you very much for replying. Just paid for the course.

[@johnbricker5896]

I am relatively new to this area of econometrics and I was wondering why in the Lagrangian K_t+1 is being maximized along with C_t and H_t. I understand why the first two are as the representative agent selects how much they want to consume and work but should K_t+1 be implied by C_t and H_t?

[@JDEconomics]

Hi! Thats because families also decide how much to invest in physical capital (e.g., machinery, equipment). The derivative with respect to capital helps determine the marginal productivity of capital, which represents the additional output generated by investing one more unit of capital. Households maximize consumption, leisure and accumulate capital. I hope that helps. Regards

[@alkakumari3042]

Hi, can you explain how beta and lambda(t) got into multiplication at timestamp 14 min. 42 secs. where you equate the equation with zero... So if we transfer them on the other side it is supposed to be lambda (t) - beta, isn't it?

[@JDEconomics]

The whole term is negative. I left the (-)before the lambda but could have gone before the Beta. That minus sign affects the whole term. Idk if that explains ur question. Regards

[@ItalianDash]

My new religion is known as JD Economics youtube channel

[@JDEconomics]

Thanks! I hope you are enjoying the channel. Regards, JD