macro3_2011

Advanced Macroeconomics III

Fall 2011

Meeting Time: Tuesday 6:00pm - 8:35am

Meeting Place: 4203

Course webpage: https://www.wendangku.net/doc/b63561750.html,/bbcswebdav/users/2009000108/teach.htm

& http://individual.utoronto.ca/zheli/teach.html

Instructor: Zhe Li

Email: lizhezhe@https://www.wendangku.net/doc/b63561750.html,

Office Phone: 65904363

Office Location: Room 407, School of Economics building

Office Hours: by appointment

TA: Jie Chen

TA’s Email: chenjie50691293@https://www.wendangku.net/doc/b63561750.html,

Description of the Course:

This is an advanced Ph.D (Master-PhD stream) course on Macroeconomics, aimed at second year Ph.D (Master-PhD stream) students. This course will be based on a collection of papers that cover endogenous growth, business cycle theory, asset pricing, banking, and labor market theory. The course is intended to achieve two objectives. One is to introduce students to a selected set of Macroeconomic issues, and the other is to demonstrate how to use analytical models and techniques to examine the issues. Both the issues and the models should be treated as important components of the course. While the issues provide the motivations for the analysis, the models provide the necessary abstraction to make the analysis tractable and consistent.

Textbook (Supplementary)

https://www.wendangku.net/doc/b63561750.html,rs Ljungvist and Thomas J. Sargent, 2004. Recursive Macroeconomic Theory, MIT

Press

2.Thomas F. Cooley (ed.), 1997. Frontiers of Business Cycle Research, Princeton

University Press

3.Acemoglu, Daron, 2010. Introduction to Modern Economic Growth, MIT press

4.Stockey, Nancy und Lucas, Robert E., with E. Prescott, 1989. Recursive Methods in

Economic Dynamics, Harvard University Press, Cambridge MA, London

Evaluation and Assessment:

Students are expected to actively participate in the course, work out the models presented in the class and modified models given in the assignments, read other listed papers and give a presentation.

Assignments: 20%;

Assignments handed in after the due date will not be accepted. If acceptable reasons prevent a student from handing in an assignment on time, the weight for that assignment will be re-assigned to the final exam.

Presentation: 15%

The topic of the presentation can be selected from the list of the references provided below. Since the time is limited, 4 students are expected to work together to give a one-hour presentation. Students are expected to form a group and select a topic before the third lecture.

Midterm: 30%

Final exam: 35%

Academic Dishonesty

Academic dishonesty by the student code of conduct includes cheating on the assignments or exams; plagiarizing; altering; forging, or misusing a University academic record; taking, acquiring, or using test materials without faculty permission; and acting alone or in cooperation with another to enhance a grade, etc. A minimum penalty for academic dishonesty is a grade of zero. Other penalties may include a “Fail” in course and a complaint to university authorities so that they act consequently with the corresponding university policy.

Reading List:

** marked as papers that will be covered in the lectures.

A.Endogenous Growth Theory (3 weeks)

Book chapters: Acemoglu chapter 1, 12, 13

1.**Lucas, R., 1988. “On the Mechanics of Economic Development.” Journal of

Monetary Economics 22, p. 2-42. Slides

2.Romer, P. M. 1990. “Endogenous Technological Change.” Journal of Political

Economy 98, p. 71-102.

3.**Aghion, P. and P. Howitt. 1992. “A Model of Growth through Creative

Destruction.” Econometrica 60, p. 323-351. Slides.

4.Song, Z, K. Storesletten and F. Zilibotti, 2011. “Growing Like China.” American

Economic Review 101(1): 196–233.

B.Real Business Cycles

Book chapters: Cooley, Chapters 1, 2

5.Kydland, F. E. and E. C. Prescott, 1982. “Time to Build and Aggregate Fluctuations.”

Econometrica 50, p. 1345-1370.

6.Long, J. B. and C. I. Plosser, 1983. “Real Business Cycles.” Journal of Political

Economy 91, p. 39-69.

7.Hansen, G. D., 1985. “Indivisible Labor and the Business Cycle.” Journal of

Monetary Economics 16, p. 309-327. Slides

8.Greenwood, J., Hercowitz, Z. and G. W. Huffman, 1988. “Investment, Capacity

Utilization, and the Real Business Cycle.” American Economic Review 78: 402-417. 9.Burnside, C., Eichenbaum, M., and S. Rebelo, 1993. “Labor Hoarding and the

Business Cycle.” Journal of Political Economy 101, p. 245-273.

C.Asset Pricing (2 weeks)

Book chapters: Ljungqvist and Sargent, Chapter 10

10.** Lucas, R.E., 1978. “Asset prices in an exchange economy.” Econometrica 46, p.

1429-1445. Slides

11.** Mehra, R. and E.C. Prescott, 1985. “The equity premium: a puzzle,” Journal of

Monetary Economics 15, p. 145-161. Slides

D.Monetary Theory and Monetary Cycles

Book chapters: Ljungqvist and Sargent, Chapter 24, 25, 26

12.Lucas, R. E. Jr., 1972. “Expectations and the Neutrality of Money.” Journal of

Economic Theory 4, p. 103-124. Slides

13.Lucas, R. E. Jr., 1973. “Some International Evidence on Output-Inflation Tradeoffs."

American Economic Review 63, p. 326-334.

https://www.wendangku.net/doc/b63561750.html,gos Ricardo, and Randall Wright, 2005. "A Unified Framework for Monetary

Theory and Policy Analysis," Journal of Political Economy 113(3): 463-484.

15.Faig, M., and Z. Li, 2009. “The Welfare Costs of Expected and Unexpected

Inflation.” Journal of Monetary Economics 56(7), p. 1004-1013. Slides

E.Banking and labor market (6 weeks)

16.** Diamond, D. and P. Dybvig, 1983. “Bank runs, deposit insurance and Liquidity.”

Journal of Political Economy 91, p.410-419. Slides

17.Williamson, S., 1987. “Costly monitoring, financial intermediation, and equilibrium

credit rationing.” Quarterly Journal of Economics 102, p. 135-146.

18.** Li, Z. and J. Sun, 2011. “Bank competition, securitization and risky investment.”

Manuscript.

19.** Peters, Michael, 1984. "Bertrand equilibrium with capacity constraints and

restricted mobility." Econometrica 52 (5): 1117-1127.

20.Burdett, Kenneth, Shouyong Shi, and Randall Wright, 2001. "Pricing and Matching

with Frictions." Journal of Political Economy 109 (5): 1060-1085.

21.**Hellman, T., K. Murdock and J. Stigliz, 2000. “Liberalization, Moral Hazard in

Banking, and Prudential Regulation: Are Capital Requirements Enough?” American Economic Review 90(1).

F.Credit Cycles (3 weeks)

22.Greenwald, B. and J. Stiglitz, 1993. “Financial market imperfections and business

cycles.” Quarterly Journal of Economics 108, p. 77-114.

23.**Bernanke, B., and M. Gertler, 1989, “Agency costs, net worth, and business

fluctuations.” American Economic Review 79, p. 14-31. Slides

24.** Kiyotaki, Nobuhiro. and John H. Moore, 1997. “Credit cycles.” Journal of

Political Economy 105, p. 211-248. Slides

25.Kiyotaki, Nobuhiro, and John Moore, 2008. “Liquidity, Business Cycles, and

Monetary Policy.” Manuscript.

26.Gertler, Mark, and Nobuhire Kiyotaki, 2009. “Financial Intermediation and Credit

Policy in Business Cycle Analysis.” Manuscript.