Download ECON 7020-001 Macroeconomic Theory I

Economics 7020
Macroeconomic Theory I
Fall 1991
JoAnne Feeney
Office Hours: T,R 3:00-4:30
Office: Econ 148
Course Information
Textbooks
Required:
.
Robert Barro, Macroeconomics, 3rd Edition, Wiley, 1990.
Readings from Barro will provide backround material for
the course .
Olivier Blanchard and Stanley Fischer, Lectures on
Macroeconomics, MIT Press, 1989.
Recommended:
Robert Barro, Modern Business Cycle Theory, Harvard
University Press, 1989. (MBCT)
Avinash Dixit, Optimization in Economic Theory, Oxford
University Press, 2nd Edition, 1990.
Robert Lucas, Studies in Business Cycle Theory, MIT, 1981
Mark Rush, Study Guide to Macroeconomics, 3rd Edition.
Nancy Stokey and Robert Lucas, Recursive Methods in
Economic Dynamics, Harvard Univer sity Press, 1989. (SL)
Course Requirements
Readings
Required readings are marked with an asterisk .
Homework
Problem sets will be assigned on occassion. I encourage you to work
together on these assignments, however, each person must submit his or her
own set of answers .
Exams
There will be a midterm exam and a final exam. Make-up exams will be
given only under extremely extenuating circumstances. Notification and
arrangements must be made before the exam.
The final exam is scheduled for Thursday, Dec. 19 at 7:30am-10:30am.
Abbreviations:
AER
American Economic Review
RES
CJE
Canadian Journal of Economics
EMA
Econometrica
JEP
Journal of Economic Perspectives
JET
Journal of LL~.w mi .::.. Th.-::.:;~-y
JME
Journal of Monetary Economics
JPE
Journal of Political Economy
QJE
Quarterly Journal of Economics
Review of Economic Studies
Course Outline and Reading List
I. Introduction
(Barro, Ch. 1)
*BF, Ch. 1
*Barro MBCT, Introduction
II. The Basic Market-Clearing Model
A. The Role of Individual Choice in Production and Consumption Patterns
(Barro, Ch. 2)
*Notes
Dixit, Chs. ~.2,4
B. Introduction to Dynamic Macro
(Barro, Ch. 3)
*Notes
*Denslow and Rush, "Supply Shocks and the Interest Rate," Economic
Inquiry, 1989, pp. 501-510.
C. Money and Inflation
(Barro, Chs. 4,5,7,8)
*Barro and Fischer, "Recent Developments in Monetary Theory," JME, April
1976. Sections 3,4
*Friedman, "The Optimum Quantity of Money," in The Optimum Quantity of
Money and Other Essays.
*Cagan, "The Monetary Dynamics of a Hyperinflation," in M. Friedman,
Studies in the Quantity Theory of Money.
Sargent, "The Ends of Four Big Inflations," in R. Hall, Inflation: Causes
and Effects.
Bailey, "The Welfare Cost of Inflationary Finance," JPE, April 1956.
Barro, "Inflationary Finance under Discretion and Rules," CJE, January
1983.
Kydland and Prescott, "Rules Rather than Discretion: The Inconsistency of
Optimal Plans," JPE 85, 1977 .
III. Consumption/Savings Decisions under Uncertainty
*BF, Ch. 6.1-6.2 (p. 275-291)
*Sandmo, "The Effect of Uncertainty on Saving Decisions," RES, July 1970.
*Levhari and Srinivasan, "Optimal Savings under Unce rt.a inty," RES, 1969.
Dixit , Ch. 9.
IV. Investment and Growth
(Barro, Chs. 9,10)
*No tes
*BF, Ch. 2. 1-2. 2 (p.37-52) (Certainty)
BF, Ch. 6.3
(Uncer tainty)
SL, Ch. 1
Arrow and Kurz, Ch. 2, "Methods of Optimization over Time "
Dixit, Chs. 10, 11
*Solow, "A Contribution to the Theory of Economic Growth," QJE , Feb. 1956
Romer, "Capital Accumulation and the Theory of Long-Run Growth," Ch. 2 in
Barro MBCT.
Johnson, "Money in a Neo-Cl assical, One-Sector Growth Model," in Essays
in Mone tary Economics, Ch. 4.
S idrauski, "Rational Choice and Patterns of Growth in a Monetary
Economy," AER, May 1967.
V. Public Policy
A. Government Expenditures, Taxes, and Debt
(Barro, Chs. 12-1 4)
*Barro , "Public Debt a nd Taxes," Ch. 10 in Barro, Money, Expe ctations , and
Business Cycles, Academi c Press , 1981.
*Barro , "Output Effects of Government Purchases," JPE , December 1981.
*Barro, "The Neoclassical Approach to Fisca l Policy," Ch. 5 in Barro MBCT.
Benjamin and Kochin , "War , Prices, and Interest Rates : A Martial Solution
to Gibson's Paradox, " in Bordo and Schwartz, A Retrospective on the
C~a~~i~~:
~oiJ S tandard , University of Chicago Press , 1984.
Barro, "Are Government Bonds Net Wealth?" JPE, November 1974.
Barro, "On the Determination of the Public Debt," JPE, October 1979.
Plosser, "Government Financing Decisions and Asset Returns," JME May 1982
B. Rational Expectations and Policy Evaluation
*Lucas, "Econometric Policy Evaluation: A Critique," in The Phillips
Curve and Labor Markets, eds. K. Brunner and A. Meltzer,
Carnegie-Rochester Conference Series on Public Policy, vol. 1,
1
North-Holland, 1976, pg. 19-46. Reprinted in Robert Lucas, Studies in
Business Cycle Theory, MIT Press, 1981.
*Lucas, "Rules, Discretion, and the Role of the Economic Advisor," in
Rational Expectations and Economic Policy, ed. Stanley Fischer,
University of Chicago Press, 1980. Reprinted in Lucas (1981).
Chari, Kehoe, and Prescott, "Time Consistency and Policy," Ch. 7 in MBCT.
VI. Equilibrium Models of Business Cycles - An Introduction
*Lucas, "Understanding Business Cycles," Carnegie-Rochester Series on
Public Policy, 1977.
*Nelson and Plosser, "Trends and Random Walks in Macroeconomic Time
Series," JME 10, 1982.
*McCallum, "Real Business Cycle Models," Ch. 2 in Barro MBCT.
*Plosser, "Understanding Real Business Cycles," JEP, Summer 1989.
Long and Plosser, "Real Business Cycles," JPE 91, 1983.
Kydland and Prescott, "Time to Build and Aggregate Fluctuations," EMA 50,
1982.
Solow, "Technical Change and the Aggregate Production Function," RES 39,
1957.