In the Name of Allah

Transcription

1 In the Name of Allah Sharif University of Technology Department of Economics Advanced Macroeconomics 2 (PhD)- Spring 2018 Instructor: Seyed Ali Madanizadeh Sessions: Sat and Mon 8:00-9:30 TA: Roodabeh Amiran madanizadeh AT gsme DOT sharif DOT edu Office Hours: by appointment TA s s: roodabe.amiran AT gmail DOT com Description The course is the Second PhD-Level course in Macroeconomics. It is centered on four main topics: Dynamic Macroeconomic Analysis, Monetary Economics, Optimal Taxation, and Financial Macroeconomics. This course is more technical rather than conceptual. You learn classic papers and typical techniques used in Macroeconomic modeling. Prerequisites Macroeconomics 1,2 (Master) Required textbooks: 1. Galí, J., (2008) Monetary Policy, Inflation, and the Business Cycle 2. Walsh, C., (2010) Monetary Theory and Policy 3. Sargent, Recursive Macroeconomics Theory Course Website: Course Telegram Communication: We post the materials and the announcements on the course website. Also we you the announcements. Please, frequently check your s the course website for any upcoming events.

2 Grading: Problem sets: 30% Project: 10% Presentation 5% Midterm: 25% Final exam: 30% Problem Sets: You should work in groups but hand in your own homework. You should collaborate on the problem sets, readings,. No copying permitted! In case of copying, both persons get zero for the whole problem set. No extensions! In case of truly exceptional emergency issues, you must inform me with a valid explanation before the deadline. If you want your problem sets re-graded, you must read our solutions first and then make your request to your TA within ONE WEEK upon the return of your problem set. If you type your solutions, you receive 10% extra points on each pset. All the graphs in the problem sets should be plotted by the computer. Homeworks should be very neat and clean. Your final answers should be in boxes. Otherwise they re subject to redoing. Exams: Midterm exam would be on 1397/1/23 at 8:00AM and Final exam would be on 1397/4/?? at 9:00AM. Exams will consist of problems similar to your problem sets which include the reading articles as well.

3 Project: You should answer to a macro question about Iran s economy. You work in your group and come up with a question until 1397/02/30 after consulting with me. Then you can start working on your model, estimating it and running simulations. The project is due 1397/4/16. You should have a written report. It is a group project and only one report and a presentation is expected from each group. Presentation and write-up: 1) You pick a paper from the pre-determined list. 2) You present it in one of the departmental lunch seminars on Tuesdays. 3) You write a 2 page summary for it in Farsi.

4 Course Outline: The topics we cover are as below: Introduction and review (2) o RBC (1) o Facts about Money (1) Money (14) o Money Demand (MIU and CIA) (2) o New Keynesian models (8) o Menu costs and sticky prices (4) Taxation (6) o Capital taxation (2) o Optimal Tax(2) o Time consistency (1) o Taxation and inequality(1) Financial Macro (8) o Investment and Adjustments costs (3) o Incomplete Financial Markets (4) o OLG (1)

5 Reading List: (* I teach, $ You should read in detail, & You should read the introduction only, # Optional) 1. Review a. RBC and Neoclassical Growth Models (review) (1 session) * Gal ı (Monetary Policy, Inflation, and the Business Cycle, Chapters 2) * Cooley and Prescott (1995 in Frontiers of Business Cycle Research edited by Cooley) Economic Growth and Business Cycles $ Chari, Kehoe, McGrattan Are structural VARs with long-run restrictions useful in developing business cycle theory? (Student Presentation, Group 4) $ RBC Models - A Toy Example by Ozdagli 2006 $ Martin Ellison lecture notes chapter 1,2 b. Facts about Money (review) (1 session) $ Benati, U.K. Monetary Regimes and Macroeconomic Stylized Facts (Student Presentation, Group 1) $ Benati 2007, Long-Run Evidence on Money Growth and Inflation (Student Presentation, Group 1) $ Uhlig Teles, Is Quantity Theory Still Alive (Student Presentation, Group 2) $ Teles Zhou, A stable money demand: Looking for the right Monetary Aggregate (Student Presentation, Group 2) $ Alvarez, Lucas, Weber, Interest Rates and Inflation (Student Presentation, Group 3) $ Walsh's "Monetary Theory and Policy" Chapter 1 2. Monetary Economics (10 sessions) a. Money in Utility Models(MIU) (1) Walsh's "Monetary Theory and Policy" Chapter 2 Lucas (2000), Inflation and Welfare b. Cash in Advance Models(CIA) and Shopping Time Models (1) Walsh's "Monetary Theory and Policy" Chapter 3 $ Cooley and Hansen 1989: The inflations Tax in a Real Business Cycle Model c. Nominal rigidities (time-dependent models) (3) * Gal ı (Monetary Policy, Inflation, and the Business Cycle, Chapters 3) $ Walsh, C., (2010) Monetary Theory and Policy, Chapter 6 $ Handbook of Monetary Economics chapter 7: DSGE Models for Monetary Policy Analysis

6 $ Bils, Mark and Peter J. Klenow Some evidence on the importance of sticky prices. Journal of Political Economy 112: d. Central Banking (Taylor Rule and New-Keynesian models, Central Banks and optimal monetary policy) (5) * Gal ı (Monetary Policy, Inflation, and the Business Cycle, Chapters 4 6) $ Walsh, C., (2010) Monetary Theory and Policy, Chapter 7 e. Menu Cost models (state-dependent models) (6) * Caplin-Spulber (1987 QJE) Menu Costs and the Neutrality of Money * Caplin-Leahy (1997 Econometrica) Aggregation and Optimization with State- Dependent Pricing * Golosov-Lucas (2007 JPE) Menu Costs and Phillips Curves $ Blanchard, O. J., & Kiyotaki, N. (1987). Monopolistic competition and the effects of aggregate demand. The American Economic Review, * Christiano, Eichenbaum, and Evans (2005 JPE) Nominal Rigidities and the Dynamic Effects of a Shock to Monetary Policy $ Alvarez et all (2011), From Hyperinflation to Stable Prices: Argentina's evidence on menu cost models $ Wulfsberg (2011) Price adjustments and inflation - evidence from Norwegian consumer price data $Kehoe & Midrigan (2015) Prices are sticky after all $ Benedict (2016) On What States Do Prices Depend? Answers from Ecuador $ Taylor (2016) The Staying Power of Staggered Wage and Price Setting models in Macroeconomics # Alvarez, Lippi (2012) Price Setting With Menu Cost for Multi-Product Firms # Malmendiery & Nagel (2013) Learning from Inflation Experiences Others & Velde (2009 JPE) Chronicle of a Deflation Unforetold & Gal ı (1999 AER) Technology, Employment, and the Business Cycle: Do Technology Shocks Explain Aggregate Fluctuations? & Christiano, Eichenbaum, and Rebelo (2011 JPE) When is the Government Spending Multiplier Large? # Werning (2012), Managing a Liquidity Trap: Monetary and Fiscal Policy 3. Optimal Taxation [NGM with taxes, Ramsey, optimal taxation, tax smoothing] (6 sessions) a. Capital Taxation

7 * Alvarez Notes 8, 10 $ Ljungqvist and Sargent (Recursive Macroeconomic Theory, Chapters 11-12) $ Chamley, Christophe Optimal taxation of capital income in general equilibrium with infinite lives, Econometrica 54: b. Optimal Taxation and Time Consistency * Lucas, Robert E., Jr. and Nancy L. Stokey Optimal fiscal and monetary policy in an economy without capital, Journal of Monetary Economics 12: & Easterly, William, and Sergio Rebelo Fiscal policy and economic growth: an empirical investigation, Journal of Monetary Economics 32: # Aiyagari, S. Rao, et. al Optimal taxation without state-contingent debt. Journal of Political Economy 110: $ Martin Uribe, 2017 Is the Monetarist Arithmetic Unpleasant? c. Mirrlees Taxation * Diamond (1998): Optimal income taxation * Saez (2001): Using elasticities to derive optimal tax rates $ Bernard Salanie (2003) book Ch3 and 4 4. Financial Macroeconomics (8 sessions) a. Investment and Adjustments costs (3) * Shimer Notes b. Incomplete Financial Markets (4) * Alvarez Notes * Aiyagari, S. Rao. (1994). Uninsured idiosyncratic risk and aggregate saving. Quarterly Journal of Economics 109: $ Quadrini (2011), Financial Frictions in Macroeconomic Fluctuations * Jermann and Quadrini (2010) Macroeconomic Effects of Financial Shocks $ Freixas, X., & Rochet, J. C. (1997). Microeconomics of banking (Vol. 2). c. Overlapping Generations Models (1 sessions) * Samuelson (1958 JPE) An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money $ Diamond (1965 AER) National Debt in a Neoclassical Growth Model * Blanchard (1985 JPE) Debts, Deficits, and Finite Horizons $ Woodford (1990 AER) Public Debt as Private Liquidity 5. Growth [R&D and LBD, Firm Dynamics] (5 sessions) $ Grossman and Helpman (QJE 1991), "Quality Ladders and Product Cycles" * Klette and Kortum Innovating firms and aggregate innovation, Journal of Political Economy, 112:

8 $ Stokey, Nancy R&D and economic growth, Review of Economic Studies, 62: * Young 1991: "LBD and the effects of International Trade" $ Young 1993: "Invention and bounded LBD" * Arkolakis (2015), A Unified Theory of Firm Selectin and Growth