Syllabus - Roberto Pancrazi

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Economics 210









ROBERTO PANCRAZI

Spring Semester 2009









Duke University



MACROECONOMIC THEORY


Modern macroeconomics studies the dynamic interactions among macroeconomic variables such as

output, consumption, investment and employme
nt and asks questions about the effects and desirability of

various government policies.




Administrative Information


Contact Info:
Tel: 660
-
6898
, Office:
Social Science 325L
, E
-
mail:
roberto.pancrazi@duke.edu

Lectures:
MW 4:25
-
5:40 SocSci 119

Office ho
urs:
M 3.00
-
4.20

Teaching Assistants
:
Nurgul B. Ukueva

(

nurgul.ukueva@duke.edu

,
SocSci

308E
)

Office hours:
TBA

Course website:
Blackboa
rd page

Grading
. The grade will be

based on a final exam (Thu
,
Apr. 30, 9am
-
Noon
, 60%), a midterm exam

(
Feb. 18 class time
, 30%) and assignments (10%).

Assignment Policy
. Up to 3

students may work together as a group on any particular assignment. If

you wo
rk as a group you should hand in a single assignment with the names of all contributors listed.

Members of one group should not discuss the assignment with members of another group until it has been

handed in for grading. Groups do not need to maintain the

same membership through the entire term.



Reference Books:

-

Romer, David.
Advanced Macroeconomics
, 3rd ed. New York: McGraw
-
Hill, 2006.

-

Cochrane, John,
Asset Pricing Revised edition
, Princeton University Press, 2005. Ch.1, 2, 21.1
R

-

Gali, Jordi.
Mon
etary Policy, Inflation, and the Business Cycle
-
An introduction to the New
-
Keynesian Framework,

`




Princeton University Press, 2008
.


Useful Books:

-

Barro, Robert J. and Xavier Sala
-
i
-
Martin,
Economic Growth
.
2nd edition, MIT press 2003

-

Barr
o, Robert J.
Macroeconomics
, 5th ed. Cambridge, Mass.: MIT Press, 1997.


Required readings are followed by a bold
R
.

Advanced readings are followed by a bold
A
.

All lecture notes are
required reading. The other readings

indicated in the syllabus are useful

background reading, or are primary
sources for the lecture notes.




Abbreviations Used in the Reading List:



AER
: American Economic Review


CE
: Computational Economics


CRCSPP
: Carnegie
-
Rochester Conference Series on

Public Policy


FRBMQR
: Federal Reser
ve Bank of Minneapolis

Quarterly Review
.

JEDC
: Journal of Economic Dynamics and Control

JEP
: Journal of Economic Perspectives


JET
: Journal of Economic Theory

JME
: Journal of Monetary Economics


JMCB
: Journal of Money, Credit and Banking

JPE
: Journal of P
olitical Economy


QJE
: Quarterly Journal of Economics










1. ECONOMIC GROWTH



1a. The Solow Model

-

Romer, §1

R

-

Barro, Sala
-
i
-
Martin,

§1
.1 1.2

A

-

Barro, §11



1b. The Neoclassical Model

-

Romer, §2.1



2.5
R

-

Barro, Sala
-
i
-
Martin, § 2.1
-
2
.6

A

-

King, Robert G. and Sergio Rebelo (1993) Transitional dynamics and economic growth in the

neoclassical model,
AER
, 83, 908.31.

-

Klenow, Peter J. and Andrés Rodríguez
-
Clare (1998) The neoclassical revival in growth economics:

Has it gone too far? i
n: B. Bernanke and J. Rotemberg eds.,
NBER Macroeconomics Annual

1997
. Cambridge, Mass.: MIT Press, pp 73.102.

-

Mankiw, N. Gregory, David Romer and David N. Weil (1992) A contribution to the empirics of

economic growth,
QJE
, 107, 407.37.


1d. The Stoch
astic Neoclassical Growth Model





2. CONSUMPTION


-

Romer, §7
R

-

Hall, Robert E. (1978) Stochastic implications of the life cycle
-
permanent income hypothesis: Theory

and evidence,
JPE
, 86, 971.87.

e


3. REAL BUSINESS CYCLE MODELS


3a. What are We Tryin
g to Explain?

-

King, Robert G. and Sergio T. Rebelo (1999) Resuscitating real business cycles, in:
Handbook
, Vol.

1B, 927.1007. Secs 1.2.
R

-

Stock, James H. and Mark W. Watson (1999) Business cycle fluctuations in U.S. macroeconomic time

series, in
Hand
book
, Vol. 1A, 3.64
.
R

-

Hodrick, Robert J. and Edward C. Prescott (1997) Postwar U.S. business cycles: An empirical

investigation,
JMCB
, 29, 1.16.


-

King, Robert G. and Sergio T. Rebelo (1993) Low frequency filtering and real business cycles,
JEDC
,

17, 2
07.31.


-

Canova, Fabio (1998) Detrending and business cycle facts,
JME
, 41, 475.512.


-

Burnside, Craig (1998) Detrending and business cycle facts: A comment,
JME
, 41, 513.32.



3b. The Basics of an RBC Model

-

King and Rebelo (1999) Sec 3.
R

-

Barro, §2
, 3, 5, 6, 9



-

Kydland, Finn E. and Edward C. Prescott (1982) Time to build and aggregate fluctuations,

Econometrica
, 50, 1345.70.

-

Lucas, Robert E. Jr.
(1977) Understanding business cycles,
CRCSPP
, 5, 7.29.

-

Lucas, Robert E. Jr. (1980) Methods and pr
oblems in business cycle theory,
JMCB
, 12, 696.715.



3c. Putting Theory into Practice

-

King and Rebelo (1999) Secs 4.1.4.4 and 5.
R

-

Burnside, Craig (1999) Real business cycle models: Linear approximation and GMM estimation, World

Bank, mimeo.



3.d:
.
Early Critiques and Defenses of the RBC Model
(READING)

-

King and Rebelo (1999) Sec 4.5, 6.1.







4
. ASSET PRICING


-

Cochrane, John,
Asset Pricing Revised edition
, Princeton University Press, 2005. Ch.1, 2, 21.1
R

-

Kocherlakota, Narayana (1996), The

Equity Premium: It’s Still a Puzzle, Journal of Economic Literature,



Vol. XXXIV, March, pp.42
-
71




5
.

IMPERFECT COMPETITION,
NOMINAL RIGIDITIES

AND
MONETARY POLICY


-

Gali,
§1
-
5

R


5
a. Re
view of Traditional Keynesian Models

-
Romer, §5

R


5
b. The Em
pirical Facts of Interest

-

Stock and Watson (1999), full citation above in Sec 3a.
R

-

Christiano, Lawrence J., Martin Eichenbaum and Charles Evans (2001) Nominal rigidities and the

dynamic effects of a shock to monetary policy, Northwestern University,
mimeo. Secs. 1.2.

-

Christiano, Lawrence J., Martin Eichenbaum and Charles Evans (1999) Monetary policy shocks: What

have we learned and to what end? in: Handbook, Vol. 1A, 65.148. Working paper version is

downloadable.




5
c. Models: Imperfect Information


-

Romer, §6.1.6.3
R

-

Rotemberg, Julio J. and Michael Woodford (1995) Dynamic general equilibrium models with

imperfectly competitive product markets, in: Thomas F. Cooley, ed.,
Frontiers of Business

Cycle Research
. Princeton: Princeton University Pres
s, 243.93. Working paper version is

downloadable.

-

Rotemberg, Julio J. and Michael Woodford (1999) The cyclical behavior of prices and costs, in:

Handbook
, Vol. 1B, 1051.135. Working paper version is downloadable.
Re