Today, the most pressing challenges for public economics are of macroeconomic nature: pensions, debt, income distribution, and fiscal sustainability. All these problems are compounded by the phenomenon of demographic transition and aging. This graduate textbook addresses these issues with the help of state-of-the-art macroeconomic tools that are based on a sound microfoundation and rooted in empirical evidence. Different from the standard partial-equilibrium analysis in traditional textbooks on public economics, the concept of general equilibrium helps to account for compensating or amplifying side-effects of economic policy. GAUSS and MATLAB computer code as well as teaching material (slides) are available as downloads from the author's homepage.

Modern business cycle theory and growth theory uses stochastic dynamic general equilibrium models. In order to solve these models, economists need to use many mathematical tools. This book presents various methods in order to compute the dynamics of general equilibrium models. In part I, the representative-agent stochastic growth model is solved with the help of value function iteration, linear and linear quadratic approximation methods, parameterised expectations and projection methods. In order to apply these methods, fundamentals from numerical analysis are reviewed in detail. In particular, the book discusses issues that are often neglected in existing work on computational methods, e.g. how to find a good initial value.

In part II, the authors discuss methods in order to solve heterogeneous-agent economies. In such economies, the distribution of the individual state variables is endogenous. This part of the book also serves as an introduction to the modern theory of distribution economics. Applications include the dynamics of the income distribution over the business cycle or the overlapping-generations model.

In an accompanying home page to this book, computer codes to all applications can be downloaded.

Der Einfluss wirtschaftspolitischer Massnahmen auf das Zusammenspiel der Groessen Wachstum, Umwelt und Bevoelkerung wird im neoklassischen Wachstumsmodell untersucht. Ausgehend von der Tatsache, dass die Anzahl der Kinder sowie die Hoehe der Ersparnisse endogene Groessen des Entscheidungskalkuls der Haushalte sind, wird aufgezeigt, wie die wirtschaftliche Entwicklung eines Landes auf zwei unterschiedlichen Wegen durch seine Fiskalpolitik beeinflusst wird. Zum einen andern sich die Anreize fur Investitionstatigkeiten, zum anderen reagiert das Bevoelkerungswachstum auf eine Veranderung der mit der Erziehung der Kinder verbundenen Einkommensverluste. Als Ergebnis dieser Analyse wird die Notwendigkeit demonstriert, in Entwicklungslandern Fiskalpolitik mit bevoelkerungs- und umweltpolitischen Massnahmen zu kombinieren.