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Advanced Macroeconomic Theory II

Instructor:
Frederic Tournemaine, Ph.D., 
NipitWongpunya, Ph.D.
Tanapong Potipiti, Ph.D.
Course Description: Dynamic general equilibrium models; Macroeconomic implications of imperfections in good markets, labor markets, credit and financial markets; New Keynesian model for monetary and fiscal policy analysis; current issues in international macroeconomics; endogenous growth model.
Part I Growth
Instructor Frederic Tournemaine, Ph.D.
Required textbooks: "Growth Theory: Basic models with alternative applications" by Frederic Tournemaine, CUP, 2011
Tentative Outline :
Lecture 1 : Ramsey-Cass-Koopmans Model
1. Welfare Analysis

- Problem of the social planner
- Steady-state analysis
- Transitional dynamics
2. Equilibrium
- Rental market for capital
- Equilibrium with a financial market

Lecture 2 : The AK approach to endogenous growth theory

1. Endogenous growth in the “AK” model
- Model Equilibrium
2. Knowledge externalities and public policy: example in the Frankel-Romer model
- The Micro-economic structure of the Model
- Optimum
- Equilibrium
- Public policy to implement the optimum
3. Government expenditures and public policy: Example in the Barro model
- 1 The Micro-economic structure of the Model
- 2 Optimum
- 3 Equilibrium and example of public policy

Lecture 3 : The human capital approach to growth theory

1. A simple model with human capital
- Microeconomic structure of the model
- Optimum
- Discussion and extension
2. Application: Introducing endogenous population growth
- Microeconomic structure of the model
- A social planner problem

 Lecture 4 : The R&D-based Approach to Endogenous Growth 

1. Microeconomic structure of the model of expanding product variety of Romer (1990)
2. Optimum
3. Equilibrium
4. Innovations and example of public policy

Lecture notes :

Lecture 01
Lecture 02
Lecture 03
Lecture 04
Lecture 05

Part II Dynamic macroeconomics
Instructor Nipit Wongpunya, Ph.D.
The main textbooks

- Sargentand Ljungqvist (2000),Recursive Macroeconomic Theory,MIT Press.
- Sargent(1987), Dynamic Macroeconomic Theory, Harvard University Press.
- Stokey and Lucas (1989),Recursive Methods in Economic Dynamics, Harvard University Press.

The optional readings

- Adda and Cooper (2003), Dynamic Economics: Quantitative Methods and Applications, MIT Press.
- Gali (2008),Monetary Policy, Inflation, and the Business Cycle: An Introduction to the New Keynesian
Framework, Princeton University Press
- Chiang(2000),Elements of Dynamic Optimization, Waveland Press, Inc.
- Blanchard and Fischer (1989), Lectures on Macroeconomics, MIT Press.
- Dixit (2009), Optimization in Economic Theory. Second Edition, Oxford University Press.
- Obstfeld and Rogoff (1996), Foundations of International Macroeconomics, MIT Press.
- Hamilton (1994), Time Series Analysis, Princeton University Press.
- Cooley (1995), Frontiers of Business Cycle Research, Princeton University Press.
- Wickens (2008), Macroeconomic Theory: A dynamic General Equilibrium Approach, Princeton University Press.
- Walsh (2003), Monetary Theory and Policy. Second Edition, MIT Press.

Tentative Outline :
Lecture 1 : Linear Difference Systems (November 2) 

Lecture notes :

- Samuelson,P.A., “Interactions between the Multiplier Analysis and the Principle of Acceleration,” The Review of Economic Statistic, Vol.21, No.2.(May, 1929), pp. 75-78.
- Slutzky, E., “The Summation of Random Causes as the Source of Cyclical Processes,” Econometrica, Vol.5 (July 1937):105-146
- J. Tinbergen, “Econometric Business Cycle Research,” The Review of Economic Studies, Vol.7, No2. (Feb., 1940), pp. 73-90.
- Chow, G. Analysis and Control of Dynamic Economic Systems, Krieger, Malabar, 198
-- Chapter 1: “Problems of Dynamic, Stochastic Economies”
-- Chapter 2: “Analysis of Deterministic Linear Systems”
-- Chapter 3: “Analysis of Linear Stochastic Systems: Time Domain”
- Hamilton (1994), Time Series Analysis, Ch 2,3,4
Lecture 2 : Rational Expectation and Lucas Critique (November 9)

Lecture notes
Muth, J.F., “Rational Expectations and the Theory of Price Movements,” Econometrica, Vol.29, no.3 (July 1961), pages 313-335.
Lucas, R.E.,Jr., “Econometric Policy Evaluation:A Critique,” in The Phillips Curve and Labor Markets,‘The Phillips Curve and the Labour Market’ Carnegie-Rochester Series in Public Policy, Vol 1, North Holland, 1976.Repreinted in R. Lucas, Studies in Business CycleThoery, MIT Press, 1981, pp. 104-130.
Wickens, Macroeconomic Theory: A dynamic General Equilibrium Approach, Ch 15
Sargentand Ljungqvist, Recursive Macroeconomic Theory, Ch 1

Lecture 3 : Solving Linear Rational Expectation Models (Novermber 16)

Lecture notes and Handouts distributed in class(or e-mail)
Blanchard, O.J., and C. Kahn, “ The Solution of Linear Difference Models Under Rational Expectations,” Econometrica, 45, July 1980, 1305-1311.
King, R.G. and M.W. Watson, “The Solution of Singular Linear Difference Models Under Rational Expectations”, International Economic Review, 1998.
King, R.G. and M.W. Watson, “System Reduction and Solution Algorithms for Singular Linear
Difference Systems Under Rational Expectations”, 1997.
Anderson, G.S, “Solving Linear Rational Expectations Models: A Horse Race”, Finance and Economics Discussion Series, Federal Reserve Board, 2006-26
Klein, P. “ Using the generalized schur form to solve a multivariate linear rational expectations model”,Journal of Economic Dynamics and Control, 1999.
Sims,C.A. “ Solving linear rational expectations models”, Seminar paper, Yale University, 1996.
Uhlig,H. “A toolkit for analyzing nonlinear dynamic stochastic models easily”, Working paper, University of Tilburg, 1999
Anderson, G. and G. Moore. “A linear algebraic procedure for solving linear perfect foresight models”,Economics Letters, (3), 1985.
Buiter,W.H. “Predetermined and Non Predetermined Variables in Rational Expectation Models” NBER Technical paper No.21,1982
Wickens, Macroeconomic Theory: A dynamic General Equilibrium Approach, Ch 15

Lecture 4 : Dynamic Optimization(November23)

Lecture notes Handouts distributed in class(or e-mail)
Chiang, Elements of Dynamic Optimization, Ch1,2 and 3
Wickens, Macroeconomic Theory: A dynamic General Equilibrium Approach, Ch 15
Parker, A.J, “Euler Equation” NBERworking paper, December 2007
Dixit (2009), Optimization in Economic Theory, Ch 2
Adda and Cooper, Dynamic Economics: Quantitative Methods and Applications, Ch 3,9

Lecture 5 and 6 : Dynamic Programming (November 30 and December 7)

Lecture notes : Handouts distributed in class(or e-mail)

- Sargentand Ljungqvist, Recursive Macroeconomic Theory, Ch2,3 and 4
Sargent, Dynamic Macroeconomic Theory, Chapter 1
Stokey and Lucas, Recursive Methods in Economic Dynamics, Ch 4,5,6,8,9 and 10
Bellman, R. (1957), “Dynamic Programming,” Princeton University Press.
Bellman, R., and S.E.Dreyfus (1962), “Applied Dynamic Programming,” Princeton University Press.
Wickens, Macroeconomic Theory: A dynamic General Equilibrium Approach, Ch15
Dixit, Optimization in Economic Theory, Chapter 10, 11
Adda and Cooper, Dynamic Economics: Quantitative Methods and Applications, Ch 2,3
- Chiang, Elements of Dynamic Optimization, Ch7,8

Lecture notes :

Lecture 01
Lecture 02
Lecture 03
Lecture 04
Lecture 05 and 06
Lecture 07
Lecture Notes
Part III Numerical methods
Instructor Tanapong Potipiti, Ph.D.
Required textbooks Applied Computational Economics and Finance by Mario J. Miranda and Paul L. Fackler
Tentative Outline

Lecture 1 : Basic Programing
Lecture 2 : Root Finding and Monte Carlo Simulation
Lecture 3 : Solving Finite Horizon Models
Lecture 4 : Log linearization
Lecture 5 : Numerical Dynamic Programing

Last modified onSaturday, 27 September 2014 08:37
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