Economics 607 Core Macro I
Course Title: Seminar in Advanced Macroeconomic Theory
Instructor: Mark Thoma
Office: 471 PLC
Phone: 346-4673
Email: mthoma@uoregon.edu
Office Hours: T/Th 11:30 a.m.-12:30 p.m. and by appointment
Web Page: Core Macro Web Page
[http://economistsview.typepad.com/economics607coremacro/]
Texts: Recursive Macroeconomic Theory, 2nd edition, by Lars Ljungqvist and Thomas Sargent,; Advanced Macroeconomics, 4th edition, by David Romer; and Macroeconomic Theory, 2nd edition, by Thomas Sargent.
Tests: There will be a midterm and a final. The midterm will be given on Tuesday, November 1st, and the final exam is scheduled for Thursday, December 8th from 1:00 p.m. – 3:00 p.m. This is sometimes adjusted to spread the three first year Ph.D. course exams more uniformly over finals week. The final is comprehensive. No make-up exams will be given.
Homework: Homework is assigned periodically. Late homework will not be accepted.
Grading: Grades are based upon the following weights. Homework counts 15%, the midterm is worth 35%, and the final is worth 50%. Contingent upon certain minimum standards of performance, grades are based upon your relative standing in the course.
Brief Outline:
1. The Traditional Keynesian and Classical Models (Romer Ch. 6, Sargent Chapters 1 and 2)
a. The Classical Model
b. The Keynesian Model
c. Policy Effectiveness in the Short-Run and Long-Run
d. The Dornbusch exchange rate overshooting model
e. Alternative Assumptions about Wage and Price Rigidity
2. Output-Inflation Tradeoffs and the Phillips curve (Romer Ch. 6)
a. The expectations augmented Phillips curve
b. Sargent and Wallace: rational expectations, the natural rate hypothesis, market clearing, neutrality, and the Lucas Critique
c. Empirical applications: the St. Louis equation, later evidence, the behavior of real wages and other macro variables
3. Microeconomic Foundations (Romer Ch. 6)
a. A Model of Imperfect Competition and Price-Setting
b. Are Small Frictions Enough?
4. The Lucas Incomplete Information Model (Romer Ch. 6, Sargent Ch. 10, Ch. 16)
a. Signal Extraction (Sargent ch 10)
b. Perfect Information (Romer ch 6)
b. Imperfect Information (Romer ch 6, Sargent ch 16)
c. Empirical evidence and the Lucas critique once again (Romer ch 6)
5. Linear Stochastic Difference Equations (Sargent ch 9, 11, 16, Sargent and Ljungqvist ch 2, pg 40-74)
a. Difference equations and lag operators
b. Adding stochastic shocks
c. Investment under uncertainty and other examples
d. Systems of equations and state space systems
e. Impulse response functions
6. Dynamic Stochastic General Equilibrium Models of Fluctuations (Romer ch. 7)
a. Building Blocks
b. Predetermined Prices
c. Fixed Prices
d. The Caplin-Spulber Model
e. Empirical Applications
Papers: [More to be added later]
Dornbusch, Rudiger, Expectations and Exchange Rate Dynamics, Journal of Political Economy, Vol. 84, No. 6 (Dec., 1976), pp. 1161-1176.
Poole, W., "Optimal Choice of Monetary Policy Instruments in a Simple Stochastic Macro Model," Quarterly Journal of Economics, 1970, 197-216.
Sargent, T. and Wallace, N., "Rational Expectations and the Theory of Economic Policy," Journal of Monetary Economics, Vol. 2, 1976.
McCallum, B.T., "Rational Expectations and Macroeconomic Stabilization Policy: An Overview," Journal of Money, Credit, and Banking, Nov., 1980, 716-745.
Christina D. Romer and David H. Romer., 1989. "Does Monetary Policy Matter? A New Test in the Spirit of Friedman and Schwartz," NBER Macroeconomics Annual 4: 121-170.
Friedman, Milton, and Schwartz, Anna J. 1963. A Monetary History of the United States, 1867-1960. Princeton, NJ: Princeton University Press.
Lucas, R., "Some International Evidence on Output-Inflation Tradeoffs," American Economic Review 63 (June) 1973.
Lucas, R., "Econometric Policy Evaluation: A Critique," Journal of Monetary Economics, (supplement), 1976.
Lucas, Robert E., Jr. "Expectations and the Neutrality of Money." Journal of Economic Theory, 1972, 4 (2), pp. 103-24.
- Fischer, Stanley, " Long-Term Contracts, Rational Expectations, and the Optimal Money Supply Rule," Journal of Political Economy, Vol. 85, No. 1 (Feb., 1977), pp. 191-205.
Taylor, J. 1979. "Staggered Wage Setting in a Macro Model.'' American Economic Review 69:108-113.
Taylor, John, "Aggregate Dynamics and Staggered Contracts," Journal of Political Economy 88, 1-24 (1980).
Andrew Caplin and Daniel Spulber, "Menu Costs and the Neutrality of Money," Quarterly Journal of Economics, November 1987, pp. 703-725.
Caplin, Andrew & Leahy, John, 1991. "State-Dependent Pricing and the Dynamics of Money and Output," Quarterly Journal of Economics, 106 (3), 683-708.
N. Gregory Mankiw & Ricardo Reis, 2002. "Sticky Information Versus Sticky Prices: A Proposal To Replace The New Keynesian Phillips Curve," Quarterly Journal of Economics, vol. 117(4), pages 1295-1328.
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