Economics 235, Spring 2013

Transcription

1 Economics 235, Spring 2013 Robert E. Hall and Pablo Kurlat 1 Hall My part of Economics 235 covers the modern macroeconomics of aggregate fluctuations in advanced economies. At the beginning of each class meeting, you will turn in two questions on the day s topic. During the discussion, you will be expected to ask at least one of your questions. You will also prepare a research proposal during the quarter and present it to the class at the end of the quarter. I will meet with you individually during the quarter to give advice about the proposal. The proposal may be in any branch of macro and may be a continuation, with substantial value added, of any similar work you did in the 23X sequence. We will begin with two interesting papers by young authors that cover many of the important topics in modern fluctuations theory. We will delve into them quite deeply and try to decide whether their ideas are relevant to observed fluctuations, especially the crisis that began in 2008 in most advanced economies, and the slump that followed the crisis. Both papers are complicated and challenging. 1

2 The papers Greg Kaplan and Guido Menzio, Shopping Externalities and Self-Fulfilling Unemployment Fluctuations, http: //web-facstaff.sas.upenn.edu/ gmenzio/linkies/km.pdf Sebastian Di Tella, Uncertainty Shocks and Balance Sheet Recessions, dl.dropbox.com /u/ / DiTellaJMPDec.pdf 2 Kurlat My part of the course will focus on theories of financial market imperfections. I will ask you to read some of the papers in advance of the class and come prepared to answer questions, but not every class. The reading list is quite long. We ll talk about (most of) the starred papers in class. The other are related papers that I found interesting and/or I d like to read but haven t. There will be two problem sets. Papers Costly State Verification * Robert M. Townsend. Optimal contracts and competitive markets with costly state verification. Journal of Economic Theory, 21(2): , October 1979 * Ben Bernanke and Mark Gertler. Agency costs, net worth, and business fluctuations. American Economic Review, 79(1):14 31, March 1989 Charles T. Carlstrom and Timothy S. Fuerst. Agency costs, net worth, and business fluctuations: A computable general equilibrium analysis. 2

3 The American Economic Review, 87(5): , 1997 Ben S. Bernanke, Mark Gertler, and Simon Gilchrist. The financial accelerator in a quantitative business cycle framework. In J. B. Taylor and M. Woodford, editors, Handbook of Macroeconomics, volume 1 of Handbook of Macroeconomics, chapter 21, pages Elsevier, September 1999 Collateral Constraints * Nobuhiro Kiyotaki and John Moore. Credit cycles. Journal of Political Economy, 105(2):211 48, April 1997 * John Geanakoplos. The leverage cycle. In Daron Acemoglu, Kenneth Rogoff, and Michael Woodford, editors, NBER Macroeconomics Annual, volume 24, pages University of Chicago Press, 2009 Michael Woodford. Public debt as private liquidity. American Economic Review, 80(2):382 88, May 1990 Nobuhiro Kiyotaki and John Moore. Liquidity, business cycles and monetary policy. kiyotaki/papers/km pdf, 2012 Marco Del Negro, Gauti Eggertsson, Andrea Ferrero, and Nobuhiro Kiyotaki. The great escape? A quantitative evaluation of the Fed s liquidity facilities. Staff Reports 520, Federal Reserve Bank of New York, 2011 Limited Commitment * Rui Albuquerque and Hugo A. Hopenhayn. Optimal lending contracts 3

4 and firm dynamics. Review of Economic Studies, 71(2): , Moral Hazard * Bengt Holmström and Jean Tirole. Private and public supply of liquidity. Journal of Political Economy, 106(1):1 40, February 1998 * Guido Lorenzoni. Inefficient credit booms. Review of Economic Studies, 75(3): , Yuliy Sannikov. A continuous-time version of the principal-agent problem. The Review of Economic Studies, 75(3): , 2008 Asymmetric Information * Charles Wilson. The nature of equilibrium in markets with adverse selection. The Bell Journal of Economics, 11(1): , 1980 * Joseph E Stiglitz and Andrew Weiss. Credit rationing in markets with imperfect information. American Economic Review, 71(3): , June 1981 * John G Riley. Credit rationing: A further remark. American Economic Review, 77(1):224 27, March 1987 * Veronica Guerrieri and Robert Shimer. Dynamic adverse selection: A theory of illiquidity, fire sales, and flight to quality. Working Paper 17876, National Bureau of Economic Research, March 2012 Pablo Kurlat. Lemons markets and the transmission of aggregate shocks. American Economic Review, forthcoming 4

5 Pablo Kurlat. Asset markets with heterogeneous information. Stanford University Working Paper, 2012 Albert S Kyle. Continuous auctions and insider trading. Econometrica, 53(6): , November 1985 Sanford J Grossman and Joseph E Stiglitz. On the impossibility of informationally efficient markets. American Economic Review, 70(3): , June 1980 Gary Gorton and George Pennacchi. Financial intermediaries and liquidity creation. Journal of Finance, 45(1):49 71, March 1990 Imperfect Intermediation * W. Diamond, Douglas and Philip H. Dybvig. Bank runs, deposit insurance, and liquidity. Journal of Political Economy, 91(3): , June 1983 * Charles J. Jacklin. Demand deposits, trading restrictions, and risk sharing. In Edward C. Prescott and Neil Wallace, editors, Contractual arrangements for intertemporal trade, pages University of Minnesota Press, 1987 * Douglas W. Diamond and Raghuram G. Rajan. Liquidity risk, liquidity creation, and financial fragility: A theory of banking. The journal of political economy, 109: , Students with documented disabilities Students who have a physical, psychological, or learning disability that may necessitate an academic accommodation or the use of auxiliary aids and ser- 5

6 vices in a class must initiate the request with the Student Disability Resource Center (SDRC), not with the instructor. The SDRC will evaluate the request along with the required documentation, recommend appropriate accommodations, and prepare a verification letter dated in the current academic term in which the request is being made. Students should contact the SDRC in the first week of the quarter as timely notice is needed to arrange for appropriate accommodations. The SDRC is located at 563 Salvatierra Walk. Also see 6