Economics 512 A, Autumn 2011
ADVANCED MACRO-ECONOMIC THEORY-SELECTED TOPICS

Office: Savery 338
Office Phone: 206 543-6197
yuchin@u.washington.edu
Instructor Home Page

Instructor: Yu-chin Chen
Time/Location: T 3:30-6:20 SAV 140
Office Hours: Fridays afternoon (sign up online here)

Announcements:

* Syllabus

Reference books:

The material covered in the course will draw from many sources, including handouts, lecture notes, journal articles, and selected chapters from various textbooks.

Below is the list of chapters from different texts that we will rely on specifically for the 1st part of the course.

1. Chs. 1-5, DeJong and Dave, Structural Macroeconometrics, Princeton University Press, 2007
2. Chs 6 & 8 from Blanchard, O. and S. Fischer, Lectures on Macroeconomics, MIT Press, 1989.
3. Ch. 5 from Walsh, C. Monetary Theory and Policy, The MIT Press; 2nd edition, 2003
4. Chs 2 & 3 from Gali, J. Monetary Policy, Inflation, and the Business Cycle: An Introduction to the New Keynesian Framework, Princeton Press, 2008
5. Ch 4 & Ch. 9 from Wichens, M., Macroeconomic Theory: A Dynamic General Equilibrium Approach, Princeton Press 2008

Other useful references that you may want to have access to:

* Canova, Methods for Applied Macroeconomic Research, Princeton University Press, 2007
* Farmer, The Macroeconomics of Self Fulfilling Prophecies, 2nd Edition, MIT Press, 1999
* Ljungvist and Sargent, Recursive Macroeconomic Theory, 2nd Edition, MIT Press, 2004
* Obstfeld and Rogoff, Foundations of International Macroeconomics, The MIT Press, 1996
* Stokey, N., R. Lucas, and E. Prescott, Recursive Methods in Economic Dynamics, Harvard Press, 1989
* Woodford, Interest and Prices, Princeton University Press, 2003

Course Schedule and Lecture Notes

(I will be updating the schedule regularly; please check for updates)
* Notes will be hand out in class OR posted after each lecture

 

Date Topics
Notes

Assignments

 
Oct 4 Introduction to Busines Cycles: Facts and Modeling Approaches      
Oct 11 Nominal Rigidity: Dynamics of price adjustments Read BK, Calvo handouts; look at PS3 from 502  
Oct 18 Efficiency Wage & State contingent price adjustment models    
Oct 25 DSGE 1: Basic RBC    
Nov 1 Solution techniques   PS1, programs from class: ex1, ex2, tauchen.m, ex3  
Nov 3 (Th) (Rescheduled): Student presentations      
Nov 22 New Keynesian DSGE      
Nov 29 Heterogenous Agent Model with incomplete markets   PS2  
Dec 1 (Th) (Rescheduled) Student presentations      
Dec 6 Other Topics: Learning, Asset pricing      

 

Reading List

A link to the old Econ 502 Reading List

(* indicates required readings; for copy right reasons, the links below are password protected and only accessible to students registered for the course.)

I. MONETARY THEORIES OF THE BUSINESS CYCLE

II. DYNAMIC MODELS OF PRICE ADJUSTMENT

III. An Introduction to DSGE Models

A. General Methods

* DeJong & Dave, Chs. 2 & 5

* Good overview: Ozer Karagedikli, Troy Matheson, Christie Smith, and Shaun P. Vahey (2007)

- Campbell, J. (1994). Inspecting the Mechanism: An Analytical Approach to the Stochastic Growth Model. Journal of Monetary Economics 33, 463-506.

- Klein, P. (2000). Using the Generalized Schur Form to Solve a Multivariate Linear Rational Expectations Model. Journal of Economic Dynamics and Control 24, 1405-
1423

- Uhlig, H. (1999) A Toolkit for Analyzing Non-Linear Dynamic Stochastic Models Easily

- Sims, C. (2001). Solving Linear Rational Expectations Models. Computational Economics 20, 1-20.

* Christiano's Notes on Solving Dynamic General Equilibrium Models Using Log Linear Approximation

* Computing 1st and 2nd Order Approximation with DYNARE by one of the makers of Dynare

* Barillas, F. , R. Colacito, S. Kitao, C. Matthes, T. Sargent and Y. Shin (2007). "Practicing DYNARE"; Data for "Practicing Dynare"

B. REAL BUSINESS CYCLE THEORY

* Gali Ch. 2

King, Robert G. & Rebelo, Sergio T., 1999. "Resuscitating real business cycles," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics.

Frontiers of business cycle research. Edited by T. Cooley. Princeton University Press, 1995. Chapters 1 and 2.

Rebelo, Sergio T., "Real Business Cycle Models: Past, Present and Future." Scandinavian Journal of Economics, Vol. 107, No. 2, pp. 217-238, June 2005.

Kydland, Finn E & Prescott, Edward C, 1996. "The Computational Experiment: An Econometric Tool," Journal of Economic Perspectives, vol. 10(1), pages 69-85.

Stock, James H. & Watson, Mark W., 1999. "Business cycle fluctuations in us macroeconomic time series," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics.

C. New Keynesian GE Models

* Gali Ch. 3

Gali J. (2001). New Perspectives on Monetary Policy, Inflation, and the Business Cycle.

Gali J. and M. Gertler (2008). Macroeconomic Modeling for Monetary Policy Evaluation., Journal of Economic Perspectives vol. 21 (4), 25-45

IV. Introduction to Heterogenous Agent Models

Algan, Y., O. Allais, W. J. Den Haan, and P. Rendahl, 2010. “Solving and Simulating Models with Heterogeneous Agents and Aggregate Uncertainty,” in K. Judd and F. Kubler and K. Schmedders (ed.) Handbook of Computational Economics, Forthcoming

Krusell, Per and Anthony Smith, \Income and Wealth Heterogeneity in the Macroeconomy," Journal of Political Economy, 1998, 106, 867-896

IV. Imperfect Information in Macroeconomics

Woodford, Michael, “Imperfect Common Knowledge and the Effects of Monetary Policy,” in P. Aghion, R. Frydman, J. Stiglitz, and M. Woodford, eds., Knowledge, Information and Expectations in Modern Macroeconomics, Princeton: Princeton University Press, 2003.

Morris, Stephen, and Hyun Song Shin, (2006) “Inertia of Forward-Looking Expectations,” American Economic Review 96(2): 152-157

Fukunaga, Ichiro, (2007) “Imperfect Common Knowledge, Staggered Price Setting, and the Effects of Monetary Policy,” Journal of Money, Credit and Banking 39: 1711-1739 (2007).

Bacchetta, Philippe, and Eric van Wincoop,(2006) “Can Information Heterogeneity Explain the Exchange Rate Determination Puzzle?” American Economic Review 96: 552-576 (2006)