Programs
1.) The program bigshow.m takes AR and MA
coefficients as input, and then plots a simulated time path, an impluse
response function, and the
spectral density. It calls the programs ss.m,
tf.m, impulse.m, dimpulse.m, shownew.m and
freq.m
2.) The program ex2.m solves the simple job
search model in question #6 in problem set 1. It calls the program valit.m.
(These programs were
written by Pierre Olivier-Weill, a Stanford graduate student at the
time, now an UCLA professor)
3.) The file epdata.m contains Mehra and Prescott's
(1985, JME) data. The program hanjagbnd.m
uses this
data to compute and
plot Hansen-Jagannathan bounds. These are used to answer question
5 in problem set 3.
Note, hanjanbnd.m calls
the program PTIME.M to do some data manipulations,
so you need to download this too.
4.) The following Dynare programs can be used for Problem
Set 3: CASSKOOP1.MOD, CASSKOOP2.MOD, CASSKOOP3.MOD
Papers
Methodological Issues
This paper explains why macroeconomists worry so much
about "microfoundations" (i.e., why it is so important to explain macroeconomic
aggregates
in terms of the underlying preferences and
technologies of individual agents).
Lucas (1976), "Econometric Policy Evaluation:
A Critique", Carnegie-Rochester Conference Series on Public
Policy
The next paper discusses the tension between positive
and normative approaches to macroeconomics. It points to a potential logical
inconsistency in the Lucas Critique.
It points out that the Lucas Critique may
be unimportant from a purely positive perspective in which government
policy is made endogenous.
Sargent (1984), "Autoregressions, Expectations, and Advice", American Economic Review
The next paper is Prescott's Nobel Lecture. It reviews
the dramatic changes that have taken place during the past few decades
in both the questions macroeconomists ask, and the way they
go about answering them.
Stokey's paper provides a relatively intuitive exposition
of continuous-time dynamic optimization. Hall gives an informal
overview of dynamic programming. The paper by Alvarex and
Stokey provides some existence and uniqueness results for
a class of unbounded return functions, of the kind often encountered
in economics.
Unemployment
Shimer and Werning use a McCall search model to study unemployment insurance policies when agents are risk averse. They show that when agents can borrow and lend at a constantMortensen (2011), "Markets With Search
Frictions and the DMP Model", American Economic Review
Shimer (2005), "The Cyclical
Behavior of Equilibrium Unemployment and Vacancies", American
Economic Review
Hornstein, Krusell & Violante (2005), "Unemployment and Vacancy Fluctuations
in the Mortensen-Pissarides Model", Richmond Fed Economic Review
Rogerson & Shimer (2010), "Search in Macroeconomic Models of the Labor
Market", forthcoming in Handbook of Macroeconomics
Moen extends the Mortensen-Pissarides model by introducing
competitive wage setting, and argues that the resulting equilibrium
is efficient.
Rogerson et al. provide a detailed
overview of search-theoretic models of the labor market, with an emphasis
on theory rather than empirical work. Ljungqvist & Sargent
review alternative approaches to understanding
unemployment, and question Prescott's recent contention that tax rates
explain differences between North American and European labor supply.
Moen (1997), "Competitive Search Equilibrium",
Journal of Political Economy
Rogerson, Shimer & Wright (2005), "Search-Theoretic Models of the Labor Market",
Journal of Economic Literature
Ljungqvist & Sargent (2005), "Jobs and Unemployment in Macroeconomic Theory:
A Turbulence Laboratory", mimeo
Ljungqvist & Sargent (2008), "Two Questions About European Unemployment",
Econometrica
Growth Theory
Lucas provides some perspective on the importance of understanding
business cycles. He summarizes a research program that he
initiated in 1987 which attempts to
calculate the welfare costs of business
cycles. His original estimate suggested that business cycles
have very small wefare effects - orders of magnitude smaller than
the welfare
effects of growth. The following article
argues that this original estimate is robust to a number of reasonable
modifications.
Lucas (2003), "Macroeconomic Priorities", American Economic Review
The first 2 papers ignited the endogenous growth revolution.
Lucas' model is based on human capital. The second
paper is a nice survey of endogenous growth
theory. Chapter 4 from Acemoglu's text highlights the distinction
between "proximate" and "fundamental"
determinants of growth. He discusses 4 different fundamental
sources of growth, and argues that "institutions" are the most important.
Lucas (1988), "The Mechanics of Economic Development",
Journal of Monetary Economics
Romer (1994), "The Origins
of Endogenous Growth", Journal of Economic Perspectives
Acemoglu (2009), "Fundamental
Determinants of Differences in Economic Performance", Chapter
4 from his text Introduction to
Mondern Growth
The next paper points out that if the Solow model is true (with identical technologies across countries) there should be HUGE incentives for capital to flow into poor countries
Lucas (1990), "Why Doesn't Capital Flow from Rich to Poor Countries?", American Economic Review
The next two papers argue that it is impossible to explain
the cross-sectional distribution of income levels unless you assume
that technology levels differ.
Parente and Prescott offer political economy-based
models to explain why technology does not diffuse across countries.
Prescott (1998), "Needed: A Theory of
Total Factor Productivity", International Economic Review
Parente & Prescott (1999), "Monopoly Rights: A Barrier to Riches",
American Economic Review
Asset Pricing
Lucas shows that with complete markets the intertemporal
marginal rate of subsitution in consumption can be used to price
assets. Constantinides & Duffie show
that incomplete markets with persistent idiosyncratic labor income
risk can explain the equity premium puzzle.
Lucas (1978), "Asset Prices in an Exchange
Economy", Econometrica
Constantinides & Duffie (1996), "Asset Pricing with Heterogeneous Consumers",
Journal of Political Economy
Macroeconomics of Pandemics
The standard model used to forecast the progression
of a pandemic is the SIR (Susceptible-Infected-Recovered) model, which
is a system of
3 nonlinear ODEs. The model requires knowledge
of several key parameters, e.g., infection and fatality rates. One
has every reason to
believe that these parameters are time-varying.
The first paper by Atkeson et. al. uses Bayesian econometric methods
to estimate these
parameters, using time-series data from both US states and
a cross-section of different countries. The second paper uses
these results to cast doubt on the effectiveness of government
imposed lockdowns. The final paper, by Barnett, Buchak, & Yannelis,
employs an alternative approach to uncertainty, based on the
work of Hansen & Sargent, to introduce ambiguity into a standard
SIR model,
and then uses this model to study how ambiguity influences
the trade-offs between economic activity and health risks.
Avery et. al. (2020), "An Economist's
Guide to Epidemiology Models of Infectious Disease", Journal
of Economic Perspectives
Atkeson, Kopecky & Zha (2020), "Estimating and Forecasting Disease
Scenarios for COVID-19 with an SIR Model", mimeo
Atkeson, Kopecky & Zha (2020), "Four Stylized Facts About COVID-19", mimeo
Barnett, Buchak, & Yannelis (2020), "Epidemic Responses Under Uncertainty",
mimeo
Lecture Slides
Lecture 1
Lecture 2
Lecture 3
Lecture 4
Lecture 5
Lecture 6
Lecture 7
Lecture 8
Lecture 9
Lecture 10
Lecture 11
Lecture 12
Lecture 13
Lecture 14
Lecture 15
Lecture 16
Lecture 17
Lecture 18
Lecture 19
Lecture 20
New Lecture 21
Lecture 21
Lecture 22