Solving Rational Expectations Models Using Excel

Abstract

Simple problems of discrete-time optimal control can be solved using a standard spreadsheet software. The employed-solution method of backward iteration is intuitively understandable, does not require any programming skills, and is easy to implement so that it is suitable for classroom exercises with rational-expectations models. The author explains the method in general and shows how the basic models of neoclassical growth and real business cycles are solved using Microsoft Excel.

Keywords:

• economic growth
• Excel
• real business cycles