• Table of Contents
    • Abstract
    • Keywords
    • Article
      • The Euler equation
      • Existence, necessity and sufficiency
      • Dynamic analysis
      • Binding constraints
      • Continuous time
      • Generalized Euler equations
      • Uncertainty
      • Testing and estimation
    • See Also
    • Bibliography
    • How to cite this article

Euler equations

Jonathan A. Parker
From The New Palgrave Dictionary of Economics, Second Edition, 2008
Edited by Steven N. Durlauf and Lawrence E. Blume
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Abstract

An Euler equation is a difference or differential equation that is an intertemporal first-order condition for a dynamic choice problem. It describes the evolution of economic variables along an optimal path. It is a necessary but not sufficient condition for a candidate optimal path, and so is useful for partially characterizing the theoretical implications of a range of models for dynamic behaviour. In models with uncertainty, expectational Euler equations are conditions on moments, and thus directly provide a basis for testing models and estimating model parameters using observed dynamic behaviour.
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Keywords

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Article

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How to cite this article

Parker, Jonathan A. "Euler equations." The New Palgrave Dictionary of Economics. Second Edition. Eds. Steven N. Durlauf and Lawrence E. Blume. Palgrave Macmillan, 2008. The New Palgrave Dictionary of Economics Online. Palgrave Macmillan. 17 November 2017 <http://www.dictionaryofeconomics.com/article?id=pde2008_E000287> doi:10.1057/9780230226203.0504

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