Econ 304a: Spring 2015: preliminary

Transcription

1 Econ 304a: Spring 2015: preliminary Instructor Times: TA TBA Blake LeBaron Sachar 204, Class Times: Monday/Wednesday 2-3:30 Office hours: Monday TBA Course Description This is the second semester macroeconomics course for IBS Ph.D students. This course is designed for first year Ph.D. students who have completed Econ 303a. The course will cover various topics from macroeconomics with an emphasis on modern tools used to approach different macroeconomic problems. Specific topics covered will include: DSGE models, microeconomic approaches to nominal rigidities, monetary models, asset markets, investment and credit markets, banking and intermediation. Along the way we will look into some of the debates surrounding macro economic methodologies. Prerequisites Econ 303a and Econ301a, or consent of instructor. It is assumed that students are familiar with basic techniques of dynamic optimization such as dynamic programming. Calculus, basic statistics, and linear algebra are also necessary. Required Readings These are available in the bookstore. 1. Wickens, Macroeconomic Theory, 2nd edition, Gali, Monetary Policy, Inflation, and the Business Cycle, Miao, Economic Dynamics in Discrete Time, Lecture notes Page 1 of 6

2 Tortorice lecture notes, (Many of these notes have been modified by LeBaron, adding lots of errors. They are now referred to as the DT/L notes.) Background Readings These books may be useful as background readings on several topics: 1. Romer, Advanced Macroeconomics. 2. Adda and Cooper, Dynamic Economics. 3. Cochrane, Asset Pricing. 4. Obstfeld and Rogoff, Foundations of International Macroeconomics. 5. Ljungqvist and Sargent, Recursive Macroeconomic Theory. 6. Woodford, Interest and Prices, 2003, Princeton University Press. 7. Walsh, Monetary Theory and Policy, 1998, MIT Press. Optional readings Various undergraduate books might be useful such as those by Barro, Mankiw, and Williamson. Grading Grading will be based on a one midterm (30%), a final (40%), and problem sets (30%). Disability If you are a student with a documented disability on record at Brandeis University and wish to have a reasonable accommodation made for you in this class, please see me immediately. Academic Honesty You are expected to be honest in all of your academic work. The University policy on academic honesty is distributed annually as section 5 of the Rights and Responsibilities handbook. Instances of alleged dishonesty will be forwarded to the Office of Campus Life for possible referral to the Student Judicial System. Potential sanctions include failure in the course and suspension from the University. If you have any questions please see me. Course Outline (B is a background reading.) 1. Business cycle facts (review from 303) DT notes section 1, Romer, 4.1 Hodrick/Prescott, 1997, Postwar US business cycles: An empirical investigation, Journal of Money Credit and Banking. Baxter and King, 1999, Measuring business cycles: Approximate band pass filters for economic time series, Review of Economics and Statistics, v81, Harvey and Trimbur, 2008, Trend estimation and the Hodrick-Prescott filter, Journal of the Japanese Statistical Society, 38: Page 2 of 6

3 Ravn and Uhlig, 1997, On adjusting the HP-filter for the frequency of observations, Tilburg University. Williamson, HP filters and potential output, Williamson Blog, Thursday, July 12, Macroeconomic methodology and a little history of thought Wickens, chapter 1 Sims, 1996, Macroeconomics and methodology, Journal of Economic Perspectives, V10, Lucas, 1976, Econometric policy evaluation: A critique, Carnegie Rochester Conference Series on Public Policy, vol 1, Kirman, 1992, Whom or what does the representative agent represent? Journal of Economic Perspectives, 6, Woodford, 1999, Revolution and evolution in twentieth-century macroeconomics. 3. Basic dynamics review (on your own) 1. Core model: Wickens chapter 2 2. Dynamic programming, Wickens appendix 4. Real business cycle modeling 1. A basic analytic model DT 2, Romer , Wickens , Miao 14.2 Barro and King,1984, Time-separable preferences and intertemporal-substitution models of business cycles, Quarterly Journal of Economics, 99: King, Plosser, and Rebelo, 1988, Production, growth, and business cycles I: The basic neoclassical model, Journal of Monetary Economics, 21: Campbell, 1994, Inspecting the mechanism: An analytical approach to the stochastic growth model, Journal of Monetary Economics, 33: Toolkit: Solving RBC models DT 3-4, Miao 14.2, Romer Uhlig, 1997, A toolkit for analyzing dynamic stochastic models easily, Tilburg, CEPR. 3. Toolkit: Dynare and computational modeling DT 5 Griffoli, Dynare Users Guide, WebBeta.pdf. Barillas et al., 2010, Practicing Dynare, New York University. 4. Extensions DT 6 Miao 14.3 King and Rebelo, 1999, Resuscitating real business cycles, in Handbook of Macroeconomics, Taylor and Woodford (ads.), vol 1, , Elsevier. 5. Some questions/objections DT 7 Basu et al., 2006, Are technology improvements contractionary?, American Economic Review, 96: Gali, 1999, Technology, employment, and the business cycle: Do technology shocks explain aggregate fluctuations, American Economic Review, 89: Rotemberg and Woodford, 1996, Real business cycle models and the forecastable movements in Output, Hours, and Consumption, American Economic Review, 86: Cogley and Nason, 1995, Output dynamics in real-business cycle models, American Economic Review, 85: Monetary economics 1. Basic monetary models 1. Overview and history DT 7, Wickens, (B) Friedman and Schwartz, 1963, A Monetary History of the United States, Princeton University Press. 2. Cash in advance DT 7, Wickens 8.4 (B) Clower, 1967, A reconsideration of the microfoundations of monetary theory, Western Economic Journal Page 3 of 6

4 , 6:1-8. (B) Lucas, 1980, Equilibrium in a pure currency economy, in Models of Monetary Economics, ed Karaken and Wallace. 3. Money in the utility function DT 7, Wickens 8.5 (B) Sidrausky, 1967, Rational choice and patterns of growth in a monetary economy, American Economic Review, 57: Empirical evidence Wickens Inflation DT8, Wickens 8.10 (B) Cagan, 1956, The monetary dynamics of hyperinflation, in Studies in the Quantity Theory of Money, M. Friedman (ed.), , University of Chicago Press. 6. Optimal inflation and the Friedman rule DT 9, Wickens 8.11 (B) Friedman, 1969, The optimum quantity of money, in The Optimum Quantity of Money and Other Essays, Aldine. 6. New-Keynesian (NK) models 1. Empirical evidence on prices and wages Wickens 9.1/ The New Keynesian framework 1. The classical (flex price) macro model DT 10, and Gali, chapter 2 2. The basic sticky price New Keynesian model DT 11, Gali 3, Miao 19.1, 19.2, Wickens 9.4, Comparisons to old Keynesian models, Wickens Monetary policy in NK models 1. Central bank interest rules DT 12, Gali 4 2. Discretion versus commitment DT 12, Gali 5, Miao Policy making in the US and Eurozone with modern NK/DSGE models Wickens 14.8, Miao 19.4 (B) Smets and Wouters, 2003, An estimated dynamic stochastic general equilibrium model of the Euro Area, Journal of the European Economic Association, 1: Sbordone, Tambalotti, Rao and Walsh, 2010, Policy analysis using DSGE models: An introduction, FRBNY Economic Policy Review. 7. Asset pricing and macroeconomics 1. Complete markets, contingent claims, and stochastic discount factors Wickens 11.5, Risk sharing and complete markets Wickens The equity premium puzzle and some solutions Kocherlakota, The equity premium: It's still a puzzle, Journal of Economic Literature, 34, Wickens 12.1/12.2 Page 4 of 6

5 (B) Cochrane, Asset Pricing, chapter 21. (B) Cornell, The Equity Risk Premium, Wiley, The bond market and term structure modeling, Wickens Toolkit: Recursive preferences Miao, (B) Backus, Routledge, Zin, 2004, Exotic preferences for macroeconomists, in NBER Macroeconomic Annual, vol 19, Gertler and Rogoff eds., MIT Press. 6. More equity premium solutions Miao, Epstein/Zin preferences 2. Long run risks (B) Bansal and Yaron, 2004, Risks for the long run: A potential resolution of asset pricing puzzles, Journal of Finance, 59: (B) Bansal et al.,2014, Volatility, the macroeconomy and asset prices, forthcoming Journal of Finance. 3. Preference shocks Albuquerque, Eichenbaum, and Rebelo, 2012, Valuation risk and asset pricing, Boston University. Greenwald, Lettau, Ludvigson, 2014, Origins of stock market fluctuations, NYU. 8. Credit channels and business cycles 1. Credit rationing Stiglitz and Weis, 1981, Credit rationing in markets with imperfect information, American Economic Review, 71: Shock amplification and cycles Kiyotaki and Moore, 1997, Credit cycles, Journal of Political Economy, 105(2): (B) Bernanke, Gertler, and Gilchrist, 1999, The financial accelerator in a quantitative business cycle framework, Handbook of Macroeconomics, vol 1, Taylor and Woodford (ed), , Elsevier. 9. Inflation topics 1. Price setting and financial conditions Gilchrist, Schoenle, Sim, and Zakrajsek, 2013, Inflation dynamics during the financial crisis, Brandeis University. 2. Inflation and government debt Hilscher et al, 2014, ), Inflating away the public debt? An empirical assessment, Brandeis University. 10. Banking and intermediation 1. Financial crises and banks Wickens (B) Gorton, 2012, Misunderstanding Financial Crises, Oxford University Press. (B) Reinhart and Rogoff, 2009, This Time is Different: Eight Centuries of Financial Folly, Princeton University Press. 2. The banking industry Wickens Bank runs Wickens 15.5 Diamond and Dybvig, 1990, Bank runs, deposit insurance, and liquidity, Journal of Political Economy, 90: Modern macroeconomics after the great recession: discussion Wickens 14.8 Kocherlakota, 2010, Modern macroeconomic models and tools for economic policy, Federal Reserve Bank of Minneapolis. Macroeconomics after the Financial Crisis, 2010, Journal of Economic Perspectives, 24. De Grauwe, 2010, The scientific foundation of dynamic stochastic general equilibrium models, Public Choice, 144: Page 5 of 6

6 Howitt, P, 2011, What have central bankers learned from modern macroeconomic theory?, Journal of Macroeconomics, 34: Networks and endogenous coordination (we will probably not get here) Acemoglu et al., 2012, The network origins of aggregate fluctuations, Econometrica, 80(5), La'O, 2013, A traffic jam theory of recessions, Columbia University. Bigio and La'O, Financial frictions in production networks, Columbia University. Oberfield, 2013, Business networks, production chains, and productivity: A theory of input-output architecture, Federal Reserve Bank of Chicago. Page 6 of 6