ECON 5068: Investment, Finance and Asset Prices
Investment, Finance and Asset Prices
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ECON 5068: Investment, Finance and Asset Prices
MatLab code for the Investment-Q model
Specifics
Profits is given as,
Πt = K
α
t α > 0
where, Kt denotes and α is the elasticity of the profit function with respect to capital.
The adjustment cost function os given as,
ACt =
φ
2
I2t
Dividends are defined as,
Πt − ACt − It
The firm discounts future dividends using the discount factor β < 1.
nest period capital is given as,
Kt+1 = (1− δ)Kt + It
where, δ is the depreciation rate.
The file is called investment code.m.
It has the same structure as the cake eating problem.
If you write the filename in the command window you will get the solution.
I have solved the problem by using specific values for the parameters. It will
be beneficial if you would play around with different values to see how optimal
investment changes.