Topics in Macroeconomics I: Information, Beliefs and Coordination in Macroeconomics

Transcription

1 : Information, Beliefs and Coordination in Macroeconomics Academic Year Master of Research in Economics, Finance and Management 1. Description of the subject Topics in Macroeconomics I Code: Total credits: 3 ECTS Workload: 75 hours Term: 1st Type of subject: Elective Department of Economics and Business Teaching team: Edouard Schaal 2. Teaching guide Objective: The purpose of this course is to study informational frictions and the formation of beliefs in macroeconomics. The topics covered include news shocks, uncertainty-driven business cycles, sentiments, coordination games with heterogeneous beliefs (global games), bayesian learning, dispersed information in DSGE models, forecasting the forecast of others, etc. A first objective is to learn the tools that are used in this literature. A second objective is to provide exposure to the main economic questions related to information frictions in macroeconomics with a particular focus on business cycles. I. News shocks Theory - Beaudry, P., & Portier, F. (2004). An exploration into Pigou's theory of cycles. Journal of monetary Economics, 51(6), Beaudry, P., & Portier, F. (2007). When can changes in expectations cause business cycle fluctuations in neo-classical settings?. Journal of Economic Theory, 135(1), Jaimovich, N., & Rebelo, S. (2009). Can News about the Future Drive the Business Cycle?. American Economic Review, 99(4), Lorenzoni, G. (2009). A theory of demand shocks. The American economic review, 99(5),

2 - Krusell, P., & McKay, A. (2010). News shocks and business cycles. Economic Quarterly, (4Q), Empirical evaluation - Barsky, R. B., & Sims, E. R. (2011). News shocks and business cycles. Journal of monetary Economics, 58(3), Forni, M., Gambetti, L., & Sala, L. (2014). No news in business cycles. The Economic Journal, 124(581), II. Uncertainty-driven cycles Theory - Bloom, N. (2009). The impact of uncertainty shocks. Econometrica, 77(3), Bloom, N., Floetotto, M., Jaimovich, N., Saporta-Eksten, I., & Terry, S. J. (2016). Really Uncertain Business Cycles. - Gilchrist, S., Sim, J. W., & Zakrajšek, E. (2014). Uncertainty, financial frictions, and investment dynamics (No. w20038). National Bureau of Economic Research. - Arellano, C., Bai, Y., & Kehoe, P. (2016). Financial Markets and Fluctuations in Uncertainty. Working paper. - Fajgelbaum, P., Schaal, E., & Taschereau-Dumouchel, M. (2017). Uncertainty traps. The Quarterly Journal of Economics, qjx Benhabib, J., Liu, X., & Wang, P. (2016). Endogenous information acquisition and countercyclical uncertainty. Journal of Economic Theory, 165, Senga, T. (2014). A new look at uncertainty shocks: Imperfect information and misallocation. Working paper. Empirical evaluation - Bachmann, R., Elstner, S., & Sims, E. R. (2013). Uncertainty and economic activity: Evidence from business survey data. American Economic Journal: Macroeconomics, 5(2), Bachmann, R., & Bayer, C. (2013). Wait-and-See business cycles?. Journal of Monetary Economics, 60(6), Measurement - Bloom, N. (2014). Fluctuations in uncertainty. The Journal of Economic Perspectives, 28(2), Jurado, K., Ludvigson, S. C., & Ng, S. (2015). Measuring uncertainty. The American Economic Review, 105(3), Rossi, B., & Sekhposyan, T. (2015). Macroeconomic uncertainty indices based on nowcast and forecast error distributions. The American Economic Review, 105(5), Baker, S. R., Bloom, N., & Davis, S. J. (2016). Measuring economic policy uncertainty. The Quarterly Journal of Economics, 131(4),

3 III. Sentiments and sunspots - Azariadis, C. (1981). Self-fulfilling prophecies. Journal of Economic theory, 25(3), Cass, D., & Shell, K. (1983). Do sunspots matter?. Journal of political economy, 91(2), Benhabib, J., & Farmer, R. E. (1994). Indeterminacy and increasing returns. Journal of Economic Theory, 63(1), Wen, Y. (1998). Capacity utilization under increasing returns to scale. Journal of Economic theory, 81(1), Benhabib, J., & Farmer, R. E. (1999). Indeterminacy and sunspots in macroeconomics. Handbook of macroeconomics, 1, Diamond, P. A. (1982). Aggregate demand management in search equilibrium. Journal of political Economy, 90(5), Howitt, P., & McAfee, R. P. (1992). Animal spirits. The American Economic Review, Angeletos, G. M., & La'O, J. (2013). Sentiments. Econometrica, 81(2), Benhabib, J., Wang, P., & Wen, Y. (2015). Sentiments and aggregate demand fluctuations. Econometrica, 83(2), IV. Global games - Carlsson, H., & Van Damme, E. (1993). Global games and equilibrium selection. Econometrica: Journal of the Econometric Society, Morris, S., & Shin, H. S. (1998). Unique equilibrium in a model of self-fulfilling currency attacks. American Economic Review, Morris, S., & Shin, H. S. (2001). Global games: Theory and applications. - Frankel, D., & Pauzner, A. (2000). Resolving indeterminacy in dynamic settings: the role of shocks. The Quarterly Journal of Economics, 115(1), Angeletos, G. M., & Werning, I. (2006). Crises and Prices: Information Aggregation, Multiplicity, and Volatility. American Economic Review, 96(5), Angeletos, G. M., Hellwig, C., & Pavan, A. (2007). Dynamic global games of regime change: Learning, multiplicity, and the timing of attacks. Econometrica, 75(3), Weinstein, J., & Yildiz, M. (2007). A structure theorem for rationalizability with application to robust predictions of refinements. Econometrica, 75(2), Angeletos, G. M., & Lian, C. (2016). Incomplete information in macroeconomics: Accommodating frictions in coordination. Handbook of Macroeconomics, 2, Goldstein, I., & Pauzner, A. (2005). Demand deposit contracts and the probability of bank runs. the Journal of Finance, 60(3), Schaal, E., & Taschereau-Dumouchel, M. (2015). Coordinating business cycles. V. Applications of heterogeneous beliefs - Amador, M., & Weill, P. O. (2010). Learning from prices: Public communication and welfare. Journal of Political Economy, 118(5), Morris, S., & Shin, H. S. (2002). Social Value of Public Information. American Economic Review, 92(5),

4 - Woodford, M. (2003). Imperfect Common Knowledge and the Effects of Monetary Policy. Knowledge, Information, and Expectations in Modern Macroeconomics: In Honor of Edmund S. Phelps, Angeletos, G. M., & Jennifer, L. O. (2009). Incomplete information, higher-order beliefs and price inertia. Journal of Monetary Economics, 56, S19-S37. - Angeletos, G. M., & La o, J. (2010). Noisy business cycles. NBER Macroeconomics Annual, 24(1), Angeletos, G. M., & Lian, C. (2016). Forward guidance without common knowledge (No. w22785). National Bureau of Economic Research. - Albagli, E., Hellwig, C., & Tsyvinski, A. (2011). A theory of asset pricing based on heterogeneous information (No. w17548). National Bureau of Economic Research. - David, J. M., Hopenhayn, H. A., & Venkateswaran, V. (2016). Information, misallocation, and aggregate productivity. The Quarterly Journal of Economics, 131(2), VI. Forecasting the forecast of others - Townsend, R. M. (1983). Forecasting the forecasts of others. Journal of Political Economy, 91(4), Futia, C. A. (1981). Rational expectations in stationary linear models. Econometrica: Journal of the Econometric Society, Hansen, L. P., & Sargent, T. J. (1981). Linear rational expectations models for dynamically interrelated variables. Rational expectations and econometric practice, 1, Whiteman, C. H. (1983). Linear rational expectations models: a user's guide. U of Minnesota Press. - Sargent, T. J. (1991). Equilibrium with signal extraction from endogenous variables. Journal of Economic Dynamics and Control, 15(2), Kasa, K. (2000). Forecasting the forecasts of others in the frequency domain. Review of Economic Dynamics, 3(4), Rondina, G., & Walker, T. B. (2012). Information equilibria in dynamic economies with dispersed information. Working paper, UC San Diego. - Huo, Z., & Takayama, N. (2015). Rational expectations models with higher order beliefs. Yale mimeo. - Acharya, S. (2013). Dispersed beliefs and aggregate demand management. University of Maryland mimeo. VII. Information acquisition and rational inattention - Grossman, S. J., & Stiglitz, J. E. (1980). On the impossibility of informationally efficient markets. The American economic review, 70(3), Hellwig, C., & Veldkamp, L. (2009). Knowing what others know: Coordination motives in information acquisition. The Review of Economic Studies, 76(1), Van Nieuwerburgh, S., & Veldkamp, L. (2009). Information immobility and the home bias puzzle. The Journal of Finance, 64(3), Reis, R. (2006). Inattentive producers. The Review of Economic Studies, 73(3),

5 - Sims, C. A. (2003). Implications of rational inattention. Journal of monetary Economics, 50(3), Sims, C. A. (2006). Rational inattention: Beyond the linear-quadratic case. The American economic review, 96(2), Sims, C. A. (2005). Rational inattention: a research agenda (No. 2005, 34). Discussion paper Series 1/Volkswirtschaftliches Forschungszentrum der Deutschen Bundesbank. - Maćkowiak, B., & Wiederholt, M. (2009). Optimal sticky prices under rational inattention. The American Economic Review, 99(3), Matejka, F., & McKay, A. (2014). Rational inattention to discrete choices: A new foundation for the multinomial logit model. The American Economic Review, 105(1), VIII. Social learning, herding and delays - Banerjee, A. V. (1992). A simple model of herd behavior. The Quarterly Journal of Economics, 107(3), Bikhchandani, S., Hirshleifer, D., & Welch, I. (1992). A theory of fads, fashion, custom, and cultural change as informational cascades. Journal of political Economy, 100(5), Chamley, C., & Gale, D. (1994). Information revelation and strategic delay in a model of investment. Econometrica: Journal of the Econometric Society, Caplin, A., & Leahy, J. (1993). Sectoral shocks, learning, and aggregate fluctuations. The Review of Economic Studies, 60(4), Zeira, J. (1994). Informational cycles. The Review of Economic Studies, 61(1), Assessment and Grading System Grading: Final grade = Problem sets + presentation Plan for the course: In each lecture, I will usually introduce the topic myself and the seminal papers on the question. I will then ask students to present a more recent paper related to the subject and applying/extending the tools seen in class or criticizing the approach. Problem sets/assignments I will try to assign 2-3 problem sets that apply methods seen in class. 5