BGSE Macroeconomics I

Transcription

1 BGSE Macroeconomics I Prof. Keith Kuester Winter term, 2015/16 Outline: This first part of the PhD macro sequence is aimed at introducing students to basic techniques, concepts, and workhorse models in dynamic macroeconomics. We start by discussing the neoclassical growth model without uncertainty. The model serves to introduce dynamic programming techniques and useful economic concepts. Then, we introduce risk. We will focus on complete financial markets, and study their implications for asset pricing. Having done this, we turn to cyclical fluctuations and the cost of business cycles. The course then introduces equilibrium unemployment theory. Next, the course introduces business cycles, discussing both tools and specific applications. In particular, we use what has become known as the New Keynesian model to discuss monetary and fiscal policy. If time remains, the course closes with a discussion of topics related to the global and financial crisis. Required Reading: Dirk Krueger (2013): Macroeconomic Theory, notes (on ecampus). Per Krusell (2014): Real Macroeconomic Theory, notes (on ecampus). Jordi Galí (2008): Monetary Policy, Inflation and the Business Cycle. An Introduction to the New Keynesian Framework, Princeton University Press. The (roughly) first half of the course uses Macroeconomic Theory, the second half Jordi Galí s book. Additional readings may be provided as the course progresses. Additional readings may be assigned as the course progresses. Sooner or later, you may also find the following books useful: Stokey, Lucas, Prescott, Recursive Methods in Economic Dynamics, HUP (1989). Ljungqvist, Sargent, Recursive Macroeconomic Theory 3rd edition, MIT Press (2012) (LS). Cahuc, Zylberberg, Labor Economics, MIT Press (2001). 1

2 Overview Part 1: Foundations A first dynamic economy (Krueger, Ch. 2). Wright (1987) Neoclassical growth model in discrete time (Krueger, Ch. 3,LS Ch ). An introduction to dynamic programming (Krueger Ch. 4/5, SLP Ch. 3-4). Growth: (Krusell: Ch. 2.5, Ch. 9). Krusell et al. (2000) Hornstein et al. (2005) Buera, Kaboski, Rogerson, Skill-biased structural change Models with risk: Complete Markets (Krueger chapter 6/7, LS Ch. 8) and aggregation Chatterjee (1994) Chang et al. (2013) Consumption asset pricing (Krueger chapter 6, LS chapter 13,14). Equilibrium unemployment (LS, Ch. 26) Part 2: Business cycles Real business cycles and beyond (Krueger chapter 6, LS chapter 12) King and Rebelo (1999) Chari et al. (2007). Shimer (2009). Gali (1999). Fiscal policy in the RBC model (LS Ch. 11) Ricardian equivalence (Krueger chapter 8.2, LS Ch 10) Baxter and King (1993) Classical monetary model (Galí chapter 2) and the costs of inflation. Lucas (2000), Ireland (2009). Sargent (1982), Fischer et al. (2002) Schmitt-Grohé and Uribe (2010). Basic New Keynesian model (Galí chapter 3) Monetary policy design (Galí chapter 4) Clarida et al. (2000) Discretion vs. Commitment (Galí, chapter 5, LS chapter 23/24): Kydland and Prescott (1977). 2

3 Barro and Gordon (1983). Fiscal and monetary interaction (LS Ch. 26) Leeper (1991), Bergin (2000). Simplified exposition: Leeper (2011). Sims (2013). Monetary and/or fiscal stabilization? Clarida et al. (2000). Galí and Monacelli (2008). Eggertsson (2011). Galí and Monacelli (2008). Eggertsson and Krugman (2012) 3

4 Literatur Barro, R. J. and Gordon, D. B. (1983), Rules, discretion and reputation in a model of monetary policy, Journal of Monetary Economics, 12(1), pp Baxter, M. and King, R. G. (1993), Fiscal Policy in General Equilibrium, American Economic Review, 83(3), pp Bergin, P. R. (2000), Fiscal solvency and price level determination in a monetary union, Journal of Monetary Economics, 45(1), pp Chang, Y., Kim, S.-B., and Schorfheide, F. (2013), Labor-Market Heterogeneity, Aggregation, and the Policy-(In)variance of DSGE Model Parameters, Journal of the European Economic Association, 11, pp Chari, V. V., Kehoe, P. J., and McGrattan, E. R. (2007), Business Cycle Accounting, Econometrica, Econometric Society, 75(3), pp Chatterjee, S. (1994), Transitional dynamics and the distribution of wealth in a neoclassical growth model, Journal of Public Economics, 54(1), pp Clarida, R., Galí, J., and Gertler, M. (2000), Monetary Policy Rules And Macroeconomic Stability: Evidence And Some Theory, The Quarterly Journal of Economics, 115(1), pp Eggertsson, G. B. (2011), What Fiscal Policy is Effective at Zero Interest Rates? in: NBER Macroeconomics Annual 2010, Volume 25, NBER Chapters, National Bureau of Economic Research, Inc, pp Eggertsson, G. B. and Krugman, P. (2012), Debt, Deleveraging, and the Liquidity Trap: A Fisher-Minsky-Koo Approach, The Quarterly Journal of Economics, 127(3), pp Fischer, S., Sahay, R., and Vegh, C. A. (2002), Modern Hyper- and High Inflations, Journal of Economic Literature, 40(3), pp Gali, J. (1999), Technology, Employment, and the Business Cycle: Do Technology Shocks Explain Aggregate Fluctuations? American Economic Review, 89(1), pp Galí, J. and Monacelli, T. (2008), Optimal monetary and fiscal policy in a currency union, Journal of International Economics, 76(1), pp Hornstein, A., Krusell, P., and Violante, G. L. (2005), The Effects of Technical Change on Labor Market Inequalities, in: P. Aghion and S. Durlauf (eds.), Handbook of Economic Growth, Handbook of Economic Growth, volume 1, chapter 20, Elsevier, pp

5 Ireland, P. N. (2009), On the Welfare Cost of Inflation and the Recent Behavior of Money Demand, American Economic Review, 99(3), pp King, R. G. and Rebelo, S. T. (1999), Resuscitating real business cycles, in: J. B. Taylor and M. Woodford (eds.), Handbook of Macroeconomics, Handbook of Macroeconomics, Elsevier, volume 1, chapter 14, Elsevier, pp Krusell, P., Ohanian, L. E., Ríos-Rull, J.-V., and Violante, G. L. (2000), Capital-Skill Complementarity and Inequality: A Macroeconomic Analysis, Econometrica, 68(5), pp. pp Kydland, F. E. and Prescott, E. C. (1977), Rules Rather Than Discretion: The Inconsistency of Optimal Plans, Journal of Political Economy, University of Chicago Press, 85(3), pp Leeper, E. M. (1991), Equilibria under active and passive monetary and fiscal policies, Journal of Monetary Economics, 27(1), pp Leeper, E. M. (2011), Anchors Aweigh: How Fiscal Policy Can Undermine Good Monetary Policy, in: L. F. Céspedes, R. Chang, and D. Saravia (eds.), Monetary Policy under Financial Turbulence, Central Banking, Analysis, and Economic Policies Book Series, volume 16, chapter 11, Central Bank of Chile, pp Lucas, J., Robert E. (2000), Inflation and Welfare, Econometrica, 68(2), pp. pp Sargent, T. J. (1982), The Ends of Four Big Inflations, in: Inflation: Causes and Effects, NBER Chapters, National Bureau of Economic Research, pp Schmitt-Grohé, S. and Uribe, M. (2010), The Optimal Rate of Inflation, in: B. M. Friedman and M. Woodford (eds.), Handbook of Monetary Economics, Handbook of Monetary Economics, volume 3, chapter 13, Elsevier, pp Shimer, R. (2009), Convergence in Macroeconomics: The Labor Wedge, American Economic Journal: Macroeconomics, 1(1), pp. pp Sims, C. A. (2013), Paper Money, American Economic Review, 103(2), pp Wright, R. D. (1987), Market structure and competitive equilibrium in dynamic economic models, Journal of Economic Theory, 41(1), pp

6 Schedule winter term 2015/16 Wednesday, October 21: no lecture. Moved to October 29. Friday, October 23: lecture 1, Ch 01. Preliminaries. Wednesday, October 28: lecture 2, Ch 02 neoclassical growth model. Thursday, October 29: lecture 3, Ch 03 dynamic programming. Friday, October 30: : lecture 4, Ch 03 dynamic programming. Wednesday, November 4: exercise session (Problem set 1) Friday, November 6: no lecture. Moved to November 12. Wednesday, November 11: lecture 5, Ch 03 dynamic programming. Thursday, November 12: lecture 6, Ch 02 Economic Growth c td. Friday, November 13: lecture 7, Ch 02 Economic Growth c td. Monday, November 16: lecture 8, Ch 04 Complete markets. Wednesday, November 18: no lecture. Moved to November 16. Friday, November 20: no lecture. Moved to November 23. Monday, November 23: exercise session (Problem set 2) Wednesday, November 25: lecture 9, Ch 04 Complete markets c td. Friday, November 27: lecture 10, Ch 05 Consumption asset pricing. Wednesday, December 2: exercise session (Problem set 3). Inspite of dies academicus. Friday, December 4: lecture 11, Ch 06 Cost of business cycles. Wednesday, December 9: lecture 12, Ch 07 Equilibrium unemployment - Search models Friday, December 11: lecture 13, Ch 07 Unemployment c td Monday, December 14: lecture 14, Ch 08 Real business cycles. Wednesday, December 16: no course (mid-term exam on Thursday). Thursday, December 17: Use slot for the mid-term exam. lecture moved to Dec 14. Friday, December 18: lecture 15, Ch 08 Real business cycles c td. Monday, December 21: exercise session (Problem set 4). Winter break Friday, January 8: lecture 16, Ch 09 Classical money. Wednesday, January 13: lecture 17, Ch 10 Classical money c td Friday, January 15: lecture 18, Ch 11 Fiscal monetary interaction. Wednesday, January 20: exercise session (review mid-term exam and problem set 5). Friday, January 22: lecture 19, Ch 11 Nominal rigidities: the New Keynesian model Wednesday, January 27: lecture 20, Ch 11 New Keynesian model c td Friday, January 29: lecture 21, Ch 11 New Keynesian model: optimal monetary policy. 6

7 Wednesday, February 3: exercise session (Problem set 6). 7