Economic Model Coding

This lecture covers a practical exercise session on coding economic models, focusing on implementing equations, variables, and constraints in MATLAB. The instructor guides students through solving problems related to wage responses, dividends, interest rates, and state variables. Discussions include the importance of economic intuition in model interpretation, the distinction between state and control variables, and the implications of closed economies. Students are encouraged to provide economic narratives in their answers and to consider the impact of shocks on model outcomes. The session also addresses common coding issues, such as function conflicts in MATLAB and the normalization of variables. The instructor emphasizes the need for precision in coding while allowing for simplifying assumptions to facilitate model implementation.

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A dividend is a distribution of profits by a corporation to its shareholders. When a corporation earns a profit or surplus, it is able to pay a portion of the profit as a dividend to shareholders. Any amount not distributed is taken to be re-invested in the business (called retained earnings). The current year profit as well as the retained earnings of previous years are available for distribution; a corporation is usually prohibited from paying a dividend out of its capital.

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