Spring
2008
Ananth Seshadri
Economics 714
Advanced
Macroeconomics (Part 1)
Objective: The first half of Economics 714 aims to continue to build your knowledge of quantitative and theoretical macroeconomics. The course will emphasize the tools of dynamic programming and various applications of it. The applications will include economic growth, business cycles, incomplete markets, technological change, and human capital investment, to name a few.
Final: March 12.
Office Hours: 1-3 on Tuesday.
TA: The TA for the course is Kyoung
Jin Choi. His e-mail id is kchoi6@wisc.edu.
Grading: Grades will be based on the final exam and a few (3)
homework assignments. These assignments will together constitute 15% of the
grade, with the rest being determined by the Final.
Homework Assignments: Periodically, problems
will be assigned. These also serve as a guide to what you could expect in the
Final and the prelim. The TA will go over the solutions to some of the assigned
problems during the discussion section.
We will essentially go
through discrete time dynamic programming. We shall hopefully cover both the
deterministic and stochastic cases. Stokey and Lucas
(Recursive Methods in Economic Dynamics) contains all the essential results,
but it is a hard read for a beginner. So, we shall rely more on lecture notes.
These notes are self-contained and will be distributed in class.
Cooley, Thomas F. and Edward C. Prescott, 1995,
"Economic Growth and Business Cycles," 1-38 in Cooley, Thomas F.
(ed.) Frontiers of Business Cycle
Research,
Lucas, Robert E., Jr. 1977, "Understanding
Business Cycles," reprinted as pp215-239 of Lucas, Robert E., Jr., Studies
in Business Cycle Theory, 1982,
Prescott, Edward C., 1986, "Theory Ahead of
Business Cycle Measurement," 11-44 in Real Business Cycles, Real Exchange Rates and Actual Policies, Carnegie Rochester Conference Series
on Public Policy No. 25, K. Brunner and A. Meltzer (eds.).
2A. More on Calibration
(This topic will not be covered in class, but you may want to glance through these papers)
Hansen, Lars Peter and James J. Heckman, "The Empirical Foundations of Calibration," Journal of Economic Perspectives Winter, 87-105.
Kydland, Finn E. and Edward C. Prescott, 1996,
"The Computational Experiment: An
Econometric Tool," Journal of Economic Perspectives Winter, 69-85.
3. The Labor Market (1 lecture)
Hansen,
Hansen,
Hopenhayn, Hugo and Rogerson,
Richard. “Job
Turnover and Policy Evaluation: A General Equilibrium Analysis,” Journal of
Political Economy; v101 n5 October 1993, pp. 915-38.
Aiyagari, Rao
S. “Uninsured Idiosyncratic Risk and Aggregate Savings,” Quarterly Journal of Economics, (1994): 659-684.
Atkeson, Andrew
and Robert E. Lucas, Jr., "On Efficient Distribution with Private
Information", Review of Economic Studies, vol. 59 (July) 1993,
pp.427-453.
5.
Human Capital Investment (1 Lecture)
Glomm and Ravikumar,
“Public vs. Private Investment in Human Capital: Endogenous
Growth and
Income Inequality,” Journal
of Political Economy, 1992;
Lucas, R. (1988). "On the Mechanics of Economic
Development," Journal of Monetary Economics, 22(1):3-42.
6. Inequality,
Stratification and Growth (1 Lecture)
Bénabou, Roland (1996) “Heterogeneity, Stratification, and Growth:
Macroeconomic Implications of Community Structure and School Finance,” The American Economic
Review, Vol.
86, No. 3. (Jun., 1996), pp. 584-609.
Durlauf, S. (1992) “A Theory of Persistent Inequality,” JEG 1(1),
75–94.
Fernández, R. and
R. Rogerson (1996), “Income Distribution, Communities and the Quality of
Public Education” The Quarterly Journal of Economics, 135-164.