Neoclassical Growth Model: Theory & MATLAB

Name: Neoclassical Growth Model: Theory & MATLAB
Rating: 4.8 (7 reviews)

Modern Macroeconomics, Economic Growth, MATLAB

Created byAlberto Ramirez de Aguilar

Last updated 10/2025

English

English [Auto],

What you'll learn

Understand the fundamentals and the economic intuition of the Neoclassical Growth Model
Learn MATLAB basics and how the computer works
Learn the recursive approach and the theory behind it
Learn two ways of solving the Neoclassical Growth Model in MATLAB: Brute Force and Recursive

Course content

10 sections • 29 lectures • 12h 35m total length

Introduction to Macroeconomic Models25:15
Introduction to Macroeconomic Models

A Simple Static Model38:08
In this lecture, we discuss a "simple" model called the static model, that aims to capture an interaction between households and firms. I set up the problem that each agent solves and discuss how to solve each problem using first-order conditions.
Competitive Equilibrium31:03
We continue the analysis of the static model, now introducing the competitive equilibrium concept. Furthermore, we discuss how to solve for this equilibrium and talk about some of the economic intuition behind it.
Welfare Implications of Equilibrium16:35
In this lecture, we discuss the welfare implications of equilibrium.
Static Model

Finding the Equilibrium Conditions17:42
This lecture modifies the static model we discussed before and sets up everything so we can then proceed to solve the model in MATLAB.
Solving the Static Model in MATLAB41:58
In this lecture, we learn how to solve the static model in MATLAB, alongside other MATLAB functions and syntax. You can find the codes I use in this lecture in the attached ZIP file.
Solving a Modified Version of the Static Model in MATLAB

Introduction to the Intertemporal Consumption Model39:56
This video introduces the intertemporal consumption model.
Finding the Equilibrium: Part 120:10
In this lecture, we discuss how to find the equilibrium of the model, in particular we discuss the Euler Equation.
Finding the Equilibrium: Part 210:02
In this video, we describe the equilibrium and discuss some welfare properties about it.
Intertemporal Consumption Model

The Kaldor Facts (Motivating the Neoclassical Growth Model)14:57
In this lecture, we discuss the Kaldor Facts, which serve as a motivation for the Neoclassical Growth Model.
The Neoclassical Growth Model: Firms27:09
We discuss the main ingredients of the model, and we analyze the problem that firms solve.
The Neoclassical Growth Model: Households38:22
In this lecture, we discuss the problem of the households and how to solve it.
The Neoclassical Growth Model: Equilibrium25:00
Derive a competitive, sequential equilibrium for the neoclassical growth model, linking consumption, labor, and tomorrow capital to prices; examine the steady state and convergence dynamics.
The First Welfare Theorem20:24
We discuss the welfare implications of the neoclassical growth model.
The Neoclassical Growth Model

Introduction to the Recursive Representation42:02
We discuss how to move from the sequential to the recursive formulation of the Neoclassical Growth Model. We also discuss some definitions and notation regarding this approach.
A Transportation Problem34:40
We study a different model, a transportation problem, to illustrate how the recursive approach works.
Other Examples19:57
In this lecture, we discuss a modification to the Neoclassical Growth Model that illustrates how to think about models in a recursive manner and how to distinguish between state and control variables.
The Recursive Approach

Introduction to Value Function Iteration18:37
Explore solving the neoclassical growth model with value function iteration, deriving the value and policy functions from the Bellman operator and fixed-point convergence, and prepare for Matlab application.
Numerical Implementation of VFI13:10
Before delving into MATLAB, we discuss how to think about the VFI Algorithm numerically.
VFI in MATLAB: Part 117:55
We study how to implement the VFI Algorithm in MATLAB.
VFI in MATLAB: Part 224:16
We study how to implement the VFI Algorithm in MATLAB.
Simulating the Neoclassical Growth Model32:28
Policy Function Iteration16:18
Value Function Iteration

Requirements

Economics: Intermediate Microeconomics
Programming: Some basic knowledge of programming is preferred, but everything program-oriented is self-contained

Description

Have you ever wondered how economists build models to explain growth, productivity, and living standards over time? The Neoclassical Growth Model is one of the fundamental frameworks in modern macroeconomics, and understanding it will give you powerful insights into how economies work and why some countries grow faster than others. This course is designed for students who are curious about economics but may not have advanced technical knowledge yet.

We start from the very basics—what a model is and why economists use them. You will learn how households, firms, and markets interact, and how equilibrium outcomes are determined. From there, we gradually move to dynamic models, exploring how consumption, savings, and investment decisions shape long-run economic growth. At every stage, intuition is emphasized alongside the mathematics, so you don’t just learn equations—you understand the economic forces behind them.

But this course goes further. Theory is only half the story: you will also learn how to implement these models in MATLAB, one of the most widely used programming tools in economics. You will learn essential programming skills, numerical methods, and how to solve and simulate models on your own computer. No prior experience with MATLAB is required; we will build up the tools step by step.

By the end of the course, you will not only understand the Neoclassical Growth Model and its applications, but also have the ability to use MATLAB to solve similar problems, preparing you for more advanced studies, research projects, or policy applications. Whether you are an undergraduate student exploring economics for the first time, a graduate student needing a refresher, or simply someone interested in how growth works, this course will give you both knowledge and practical skills that you can build on.

To get the most out of this course, you should already be comfortable with intermediate microeconomics concepts such as utility maximization, firm behavior, and equilibrium analysis. A solid grasp of calculus—including derivatives, optimization, and basic functions—is also necessary, since these tools are essential for understanding how the models work. Finally, while no prior experience in MATLAB is required, it will help if you have some basic exposure to programming logic (loops, functions, or simple coding ideas) in any language, as this will make the transition to MATLAB smoother. With these foundations, you will be ready to follow the material and apply the techniques we develop together.

Who this course is for:

Economics enthusiasts with curiosity on computational implementation of models

Neoclassical Growth Model: Theory & MATLAB

What you'll learn

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Course content

Introduction1 lecture • 25min

A First Glance at Equilibrium: Static Model3 lectures • 1hr 26min

Introduction to Numerical Calculus and MATLAB3 lectures • 1hr 42min

Solving the Static Model in MATLAB2 lectures • 1hr

Intertemporal Consumption Model3 lectures • 1hr 10min

The Neoclassical Growth Model5 lectures • 2hr 6min

Solving the Neoclassical Growth Model Using Brute Force2 lectures • 58min

The Recursive Approach3 lectures • 1hr 37min

The Neoclassical Growth Model and the Value Function Iteration Algorithm6 lectures • 2hr 3min

Conclusion: Thinking Critically About the Model1 lecture • 10min

Requirements

Description

Who this course is for: