Download Macroeconomics Course at South Asian University, Monsoon 2018 and more Study Guides, Projects, Research Macroeconomics in PDF only on Docsity!
Faculty of Economics South Asian University
M.A. Economics Monsoon Semester 2018
Topics in Macroeconomics
(Optional Course)
Soumya Datta
Lectures: Thu & Fri 11am -1pm (ECO-02 / Computer Lab)
Office: Room No. 328
Office Hours: Mon & Tue 11am - 1pm or by appointment
Email: soumya@econ.sau.ac.in
Email Group: tmac2018@econ.sau.ac.in
Email Group Website: https://is.gd/e6Js5t
Course Description
This course consists of a selection of topics which have received significant attention by macroe- conomists and policymakers in recent times. The emphasis shall be on formal models, especially some of the workhorse models in contemporary macroeconomics. After completing this course, the students will gain an understanding of not only theoretical but also empirical as well as policy discourse in this area, and will also be in a position to explore further in an area of their choice.
Computational methods have become an indispensable part of contemporary macroeconomics, and hence, will form an integral part of this course. Hands-on training will be provided on MATLAB, a popular computer algebra system with macroeconomists. In addition, the students will also be introduced to Dynare, a MATLAB based sofware platform for handling DSGE and OLG models. We will make use of the new state-of-the-art systems in the Computer Lab (Room no. 219) with MATLAB 2018a installed for this purpose. Students are encouraged to extensively use these systems beyond teaching / lab hours in order to maximize gains from this part of the course.
An email group, consisting of institutional email IDs (i.e. in sau.ac.in domain) of students registered for this course is being set up. Important communication regarding lectures, course contents, readings etc. will be circulated through this group. To join this group, either visit the course email group website (mentioned above) or send a join request to tmac2018@econ.sau.ac.in or me. It is your responsibility to remain updated by checking your institutional email regularly.
A brief outline of the course and reading list is provided below. Note that starred readings are optional.
Course Outline
1 Introduction
A brief review of a few important developments in contemporary macroeconomics. Some stylized facts, Great Moderation, Global Financial Crisis, a few contemporary macroeconomic issues. Readings: Uribe & Schmitt-Groh´e (2017) Chapt. 1, Cooley (1995) Chapt. 1, Lucas (1976), *Kydland & Prescott (1977), *Sims (1980).
2 Essential Tools
2.1 Dynamic Programming
Dynamic programming, Bellman equation and policy functions, introduction to stochastic processes and Markov chains, optimal stopping problems, stochastic dynamic programming. Readings: Adda & Cooper (2003) chapt. 2, *Ljungqvist & Sargent (2012) chapt. 2 & 3.
2.2 Coding and Softwares
Introduction to coding and programming languages, simple numerical exercises using spreadsheets, in- troduction to MATLAB / GNU Octave, writing simple codes in MATLAB, using MATLAB symbolic toolbox for solving simple problems, numerical solutions to differential equations using Runge-Kutta method (ode45 package), numerical simulation of deterministic and stochastic growth models (using MATLAB), dynamic programming in MATLAB, introduction to Dynare. Readings: MATLAB & Dynare User guides, Afonso & Vasconcelos (2016), Novales, Fern´andez & Ruiz (2014).
3 DSGE Models
3.1 Basic DSGE Model
Recursive methods (in deterministic & stochastic models), stochastic growth model with labor-leisure choice: Arrow-Debreu equilibrium vs. recursive competitive equilibrium, log-linearization techniques, linear quadratic dynamic programming and the method of Kydland & Prescott (time permitting), sta- tionary and non-stationary equilibrium dynamnics, inducing stationarity, moving from theory to data, calibration (brief discussion only), Hodrick-Prescott filter, limitations and critiques of equilibrium theo- ries. Readings: Adda & Cooper (2003) chapt. 5, Cooley (1995) chapt. 1, Uribe & Schmitt-Groh´e (2017) chapt. 4, *McCandless (2008) chapt. 4 to 7, Summers (1990), *Kydland & Prescott (1982), *Kydland & Prescott (1990), *King & Rebelo (1999).
3.2 Incomplete Markets
Incomplete markets, uninsured idiosyncratic risks, heterogeneous agents. Readings: Aiyagiri (1994), *Benhabib, Bisin & Zhu (2015).
3.3 Imperfect Competition, Imperfect Information and Nominal Rigidities
Imperfect competition (Dixit-Stiglitz framework); imperfect information: signal extraction and nominal sluggishness; nominal rigidities: introduction of non-Walrasian features, Gray contract, Fischer contract, Taylor model, Rotemberg model, Calvo model, New Keynesian Phillips curve, New Keynesian Model. Readings: B´enassy (2011) chapt. 12 & 13, *Novales et al. (2014) chapt. 8.
3.4 Applications
Application to Euro Area, business cycles in emerging markets. Readings: *Smets & Wouters (2003), *Smets & Wouters (2007), *Ghate, Pandey & Patnaik (2013), *Aguiar & Gopinath (2007), *Neumeyer & Perri (2005).
Reference and Further Readings
Adda, J. & Cooper, R. (2003), Dynamic Economics, MIT Press, Cambridge, Massachusetts.
Afonso, O. & Vasconcelos, P. B. (2016), Computational Economics, Routledge.
Aguiar, M. & Gopinath, G. (2007), âEmerging market business cycles: The cycle is the trendâ, Journal of Political Economy 115 , 69â102.
Aiyagiri, S. R. (1994), âUninsured insurance risk and aggregate savingâ, The Quarterly Journal of Eco- nomics 109 (3), 659â684.
Arthur, W. B. (2014), Complexity economics: A new framework for economic thought, in W. B. Arthur, ed., âComplexity Economicsâ, Oxford University Press.
B´enassy, J.-P. (2011), Macroeconomic Theory, Oxford University Press, New York.
Benhabib, J., Bisin, A. & Zhu, S. (2015), âThe wealth distribution in Bewley economies with capital income riskâ, Journal of Economic Theory 159 , 489â515.
Blecker, R. (2002), Distribution, demand and growth in neo-kaleckian macro-models, in âThe Economics of Demand-Led Growthâ, Edward Elgar Publishing, chapter 8, pp. 129â152.
Chiarella, C., He, X.-Z. & Zheng, M. (2013), âHeterogeneous expectations and exchange rate dynamicsâ, The European Journal of Finance 19 (5), 392â419.
Colander, D., Holt, R. & Rosser, B. (2004), âThe changing face of mainstream economicsâ, Review of Political Economy 16 (4), 485â499.
Cooley, T. F., ed. (1995), Frontiers of Business Cycles Research, Princeton University Press.
de Grauwe, P. (2012), Lectures on Behavioral Macroeconomics, Princeton University Press.
de Grauwe, P. (2016), Economics of Monetary Union, Oxford University Press.
Fama, E. F. (1970), âEfficient capital markets: A review of theory and empirical workâ, The Journal of Finance 25 (2), 383â417.
Ghate, C., Pandey, R. & Patnaik, I. (2013), âHas India emerged? business cycle stylized facts from a transitioning economyâ, Structural Change and Economic Dynamics 24 , 157â172.
King, R. G. & Rebelo, S. T. (1999), Resusciating real business cycles, in J. Taylor & M. Woodford, eds, âHandbook of Macroeconomicsâ, Vol. 1, Elsevier Science B.V.
Kocherlakota, N. (2008), âInjecting rational bubblesâ, Journal of Economic Theory 142 , 218â232.
Kurz, H. D. & Salvadori, N. (2011), The post-keynesian theories of growth and distribution: a survey, in Handbook of Alternative Theories of Economic Growth (Setterfield 2011).
Kydland, F. E. & Prescott, E. C. (1977), âRules rather than discretion: The inconsistency of optimal plansâ, Journal of Political Economy 87 , 473â492.
Kydland, F. E. & Prescott, E. C. (1982), âTime to build and aggregate fluctuationsâ, Econometrica 50 (6), 1345â1370.
Kydland, F. E. & Prescott, E. C. (1990), âBusiness cycles: Real facts and monetary mythsâ, Federal Reserve Bank of Minneapolis Quarterly Review.
Lavoie, M. (2014), Post-Keynesian Economics: New Foundations, Edward Elgar Publishing Ltd.
Ljungqvist, L. & Sargent, T. J. (2012), Recursive Macroeconomic Theory, third edn, MIT Press, Cam- bridge, Massachusetts.
Lucas, R. E. (1976), âEconometric policy evaluation: A critiqueâ, Carnegie-Rochester Conference Series on Public Policy 1 (0), 19 â 46.
McCandless, G. (2008), The ABCs of RBCs: An introduction to dynamic macroeconomic models, Har- vard University Press, Cambridge, Massachusetts.
Neumeyer, P. A. & Perri, F. (2005), âBusiness cycles in emerging economies: the role of interest ratesâ, Journal of Monetary Economics 52 (2), 345â380.
Novales, A., Fern´andez, E. & Ruiz, J. (2014), Computational Economics, Routledge.
Pissarides, C. A. (2000), Equilibrium Unemployment Theory, 2nd edn, MIT Press, MA.
Setterfield, M. (2011), Handbook of Alternative Theories of Economic Growth, Edward Elgar Publishing Ltd.
Shleifer, A. & Vishny, R. W. (1997), âThe limits of arbitrageâ, The Journal of Finance 52 (1), 35â55.
Sims, C. A. (1980), âMacroeconomics and realityâ, Econometrica 48 (1), 1â48.
Skott, P. (2011), Growth, instability and cycles: Harrodian and kaleckian models of accumulation and income distribution, in Handbook of Alternative Theories of Economic Growth (Setterfield 2011).
Smets, F. & Wouters, R. (2003), âAn estimated dynamic stochastic general equilibrium model of the euro areaâ, Journal of the European Economic Association 1 (5), 1123â1175.
Smets, F. & Wouters, R. (2007), âShocks and frictions in us business cycles: A Bayesian DSGE approachâ, American Economic Review 97 (3), 586â606.
Summers, L. H. (1990), âSome skeptical observations on real business cycle theoryâ, Federal Reserve Bank of Minneapolis Quarterly Review.
Tirole, J. (1985), âAsset bubbles and overlapping generationsâ, Econometrica 53 (6), 1499â1528.
Uribe, M. & Schmitt-Groh´e, S. (2017), Open Economy Macroeconomics, Princeton University Press.
