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Syllabus for Core Macro I
Economics 607
Course Title: Seminar in Advanced Macroeconomic Theory
Instructor: Mark Thoma
Office: 471 PLC
Phone: 346-4673
Email: mthoma@uoregon.edu
Office Hours: T/Th 10:45-11:45 and by appointment
Web Page:
http://economistsview.typepad.com/economics607coremacro/
Tests: There are two midterm exams and a
comprehensive final. The midterms will be given Tuesday, October 17th
and Thursday, November 9th. The final exam is scheduled
for Tuesday, December 5th at 1:00 p.m., but it is usually adjusted, if possible,
to spread the three final exams more uniformly over final’s 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 two midterms are worth 50%, and the final is
worth 35%. Contingent upon certain minimum standards of performance, grades are
based upon your relative standing in the course.
Texts: Romer, David, Advanced Macroeconomics,
3nd edition (2001). There are a wide variety of intermediate level undergraduate
texts that can be used as review and reference texts.
Brief Outline:
I. Traditional Keynesian Theories of Fluctuations
Romer Ch. 5
1. The Traditional Keynesian Model
a. Aggregate Demand
b. Alternative Assumptions about Wage and Price Rigidity
c. Output-Inflation Tradeoffs
d. Empirical Applications
II. Microeconomic Foundations of Incomplete Adjustment
Romer Ch. 6
1. The Lucas Incomplete Information Model
a. Perfect Information
b. Imperfect Information
c. Implications and Limitations
2. New Keynesian Economics
a. A Model of Imperfect Price
Competition and Price Setting
b. Are Small Frictions Enough?
c. Real Rigidity
d. Coordination-Failure Models and
Real Non-Walrasian Theories
3. Dynamic New Keynesian Models and Staggered Price
Adjustment
a. Building Blocks
b. Predetermined Prices
c. Fixed Prices
d. The Caplin-Spulber Model
e. Empirical Applications
f. The Mankiw-Reis Model
III. Inflation and Monetary Policy
We will cover this chapter as time permits (and it probably
won’t). The sections we will cover will be announced later in the course.
Romer Ch. 10, sections TBA
Additional Reading:
Traditional Keynesian Theories of Fluctuations
Keynes, John Maynard. 1936. The General Theory of Employment, Interest,
and Money. London: Macmillan
Muth, "Rational Expectations and the Theory of Price Movements,"
Econometrica, vol. 29, No. 6, 1961
Friedman, Milton, and Schwartz, Anna J. 1963. A Monetary History of the
United States, 1867-1960. Princeton, NJ: Princeton University Press
Phelps, "Phillips Curves, Expectations of Inflation, and Optimal Employment
Over Time," Economica, Aug., 1967.
Friedman, M., "The Role of Monetary Policy," American Economic Review,
March, 1968.
Phelps, Edmund S. 1968. “Money-Wage Dynamics and Labor Market Equilibrium.”
Journal of Political Economy 76 (July/August, Part 2): 678-711.
Anderson, Leonall C., and Jordan, Jerry L., 1968. “Monetary and Fiscal
Actions: A test of Their relative Importance in Economic Stabilization.” Federal
Reserve Bank of St. Louis Review 50 (November): 11-24.
Hall, R.E., "Why is the Unemployment Rate So High at Full Employment?,"
Brookings Papers on Economic Activity, 1970, No. 3.
Poole, W., "Optimal Choice of Monetary Policy Instruments in a Simple
Stochastic Macro Model," Quarterly Journal of Economics, 1970, 197-216.
Barro, R.J. and Grossman, H.I., "A General Disequilibrium Model of Income and
Employment," American Economic Review, Mar.,1971.
Sargent, T. and Wallace, N., "Rational Expectations and the Theory of
Economic Policy," Journal of Monetary Economics, Vol. 2, 1976.
Gordon, R.J., "Recent Developments in the Theory of Inflation and
Unemployment," Journal of Monetary Economics, April, 1976.
Malinvaud, Edmund. 1977. The Theory of Unemployment Reconsidered.
Oxford: Basil Blackwell.
Santomero and Seator, "The Inflation-Unemployment Tradeoff: A Critique of the
Literature," Journal of Economic Literature, June, 1978.
Shiller, "Rational Expectations and the Dynamic Structure of Macroeconomic
Models," Journal of Monetary Economics, Jan., 1978.
Kantor, B., "Rational Expectations and Economic Thought," Journal of
Economic Literature, Dec., 1979.
Fischer, S., Rational Expectations and Economic Policy, University
of Chicago Press, 1980.
McCallum, B.T., "Rational Expectations and Macroeconomic Stabilization
Policy: An Overview," Journal of Money, Credit, and Banking, Nov.,
1980, 716-745.
King, Robert G. and Plosser, Charles I. 1984. “Money, Credit and Prices in a
Real Business Cycle.” American Economic Review 64 (June) : 363-380.
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.
Staiger, Douglas, Stock, James H., and Watson, Mark W. 1997. “How Precise are
Estimates of the Natural Rate of Unemployment?” In Christina D. Romer and David
H. Romer , eds., Reducing Inflation: Motivation and Strategy, 195-242.
Chicago: University of Chicago Press.
Katz, Lawrence F., Krueger, Alan B. 1999. “The High-Pressure U.S. labor
Market of the 1990s.” Brookings Papers on Economic Activity, no. 1,
1-87.
Rotenberg, Julio J. and Woodford, Michael. 1999. “The Cyclical Behavior of
Prices and Costs.” In John B. Taylor and Michael Woodford, eds., Handbook of
Macroeconomics, 1052-1135. Amsterdam: Elsevier
Empirical Evidence:
Phillips, A.W., "The Relationship Between Unemployment and the Rate of Change
of Money Wage Rates in the United Kingdom, 1861-1957," Economica, Nov.,
1958
Lipsey, "The Relation Between Unemployment and the Rate of Change of Money
Wage Rates in the United Kingdom, 1862-1957: A Further Analysis," Economica,
Feb., 1960.
Sims, C.A. 1972. "Money, Income, and Causality," American Economic Review,
62 (4),540-552.
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.
Sims, C.A. 1980. "Comparison of Interwar and Postwar Business Cycles:
Monetarism Reconsidered" American Economic Review, vol. 70, No. 2
250-257.
Bernanke, Ben S. and Blinder, Alan S., "The Federal Funds Rate and the
Channels of Monetary Transmission," American Economic Review (volume
82, no. 4), September 1992, 901-921.
Solon, Gary & Barsky, Robert & Parker, Jonathan A, 1994. "Measuring the
Cyclicality of Real Wages: How Important Is Composition Bias?," The
Quarterly Journal of Economics, vol. 109(1), pages 1-25.
Kuttner, Kenneth D. “Monetary Policy Surprises and Interest Rates: Evidence
from the Fed Funds Futures Market,” Journal of Monetary Economics,
Volume 47 No. 3, June 2001, pp. 523-644.
Microeconomic Foundations of Incomplete Nominal Adjustment
Phelps, E.S., ed., Microeconomic Foundations of Employment and Inflation
Theory, Norton Press, 1970.
Lucas, Robert E., Jr. "Expectations and the Neutrality of Money." Journal
of Economic Theory, 1972, 4 (2), pp. 103-24.
Barro, Robert J., 1972. "A Theory of Monopolistic Price Adjustment,"
Review of Economic Studies, Blackwell Publishing, vol. 39(1), pages 17-26.
Barro, Robert J., "Rational Expectations and the Role of Monetary Policy,"
Journal of MonetaryEconomics, 2 January 1976 (reprinted in R. Lucas and
T. Sargent, Rational Expectations and Econometric Practice).
Sheshinski Eytan, Weiss Yoram. 1977. Inflation and Costs of Price Adjustment.
Review of Economic Studies. 44:287-303.
Fischer, S. 1977. Long term contracts, rational expectations and the optimal
money supply rule. Journal of Political Economy, 85 (February):
191-205.
Phelps, Edmund S., and John B. Taylor, 1977, Stabilizing powers of monetary
policy under. rational expectations, Journal of Political Economy 85
(February): 163-190.
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).
Rotemberg, Julio, "Sticky Prices in the United States", Journal of
Political Economy 90, 1187-1211, (1982).
Diamond, Peter, "Aggregate Demand Management in Search Equilibrium,"
Journal of Political Economy, 90, 881-894, (1982).
Mankiw, Gregory, "Small Menu Costs and Large Business Cycles: A Macroeconomic
Model of Monopoly," Quarterly Journal of Economics 100, 529-539,
(1985).
Blanchard, O. J., and N. Kiyotaki, 1987, Monopolistic Competition and the
Effects of Aggregate Demand, American Economic Review 77, 647–666.
Rotemberg, Julio, "The New Keynesian Microfoundations," NBER Macroeconomics
Annual, 1987. [See also comments by Mankiw and Prescott]
Andrew Caplin and Daniel Spulber, "Menu Costs and the Neutrality of Money,"
Quarterly Journal of Economics, November 1987, pp. 703-725.
Cooper, Russell & John, Andrew, 1988. "Coordinating Coordination Failures in
Keynesian Models," The Quarterly Journal of Economics 103 (August) :
441-463.
Laurence Ball, N. Gregory Mankiw, and David Romer (1988), "The New Keynesian
Economics and the Output-Inflation Tradeoff," Brookings Papers on Economic
Activity, no. 1, 1-65.
Bernanke, Ben and Mark Gertler, "Agency Cost, Net Worth, and Business
Fluctuations", American Economic Review, 79, 14-31 (1989).
Ball, Lawrence and David Romer, 1990. "Real Rigidities and the Non-Neutrality
of Money," Review of Economic Studies 57, 183-203.
Caplin, Andrew & Leahy, John, 1991. "State-Dependent Pricing and the Dynamics
of Money and Output," The Quarterly Journal of Economics, 106 (3),
683-708.
Caballero, Ricardo J & Engel, Eduardo MRA, 1993. "Heterogeneity and Output
Fluctuations in a Dynamic Menu-Cost Economy," Review of Economic Studies,60(1),
January 1993, 95-120.
Kiyotaki, Nobuhiro and John Moore, "Credit Cycles", Journal of Political
Economy, 105, 211-48 (1997).
Rotemberg, Julio J. and Woodford, Michael D., "The Cyclical Behavior of
Prices and Costs" (January 1999) in Handbook of Macroeconomics,
1052-1135. Amsterdam: Elsevier.
Benhabib, Jess, and Roger E.A. Farmer. (1999). “Indeterminacy and Sunspots in
Macroeconomics,” in J. Taylor and M. Woodford, eds., Handbook of
Macroeconomics, 387-448. Amsterdam: North Holland.
N. Gregory Mankiw & Ricardo Reis, 2002. "Sticky Information Versus Sticky
Prices: A Proposal To Replace The New Keynesian Phillips Curve," The
Quarterly Journal of Economics, vol. 117(4), pages 1295-1328.
Woodford, Michael. 2003. Interest and Prices: Foundations of a Theory of
Monetary Policy. Princeton: Princeton University Press.
