Syllabus
Part I 1. Introduction (~3 lectures).
· What is macroeconomics? What is a macroeconomic model? HP filtering. A general infinite horizon economy with consumers and firms. Competitive equilibrium. What does the model omit? Slides. Readings: Jones, part 1.
· Competitive equilibrium continued. (skip as already covered: Firms' problem as a sequence of static problems. CRS and the zero profit result. Feasibility. Pareto efficiency.) First Welfare Theorem (with proof) and Second Welfare Theorem (without proof). Readings: Jones, part 1, SLP, MasCollel, Whinston and Green (1995).
· Simplifying the model: Aggregation. CRS and simplifying the firms' side. Simplifying the consumers' side: (i) identical consumers, (ii) homothetic utility. The social planner's problem. The (stationary deterministic) one sector growth model. Readings: Jones, part 1, SLP, MasCollel, Whinston and Green (1995). 2. Extending the stationary, deterministic one sector growth model (~2 lectures).
· (Briefly) dynamics in the deterministic one sector growth model (SLP, chapter 6). Identifying two problems with the stationary one sector growth model: no growth and no fluctuations.
Skip (covered by Veronika and Marek), but feel free to go over in the notes: Adding growth to the one sector growth model. Exogenous growth. One sector growth model with exogenous growth and dynamic programming (rewriting the problem into one with no growth, included in Jones, part 1.). Endogenous growth - the Ak model, the A(k; h) model. Readings: Jones, part 3.
· Adding fluctuations to the one sector growth model, i.e. the stochastic one sector growth model. An example stochastic growth model with a closed form solution, i.e. the stochastic Ak model. The role of uncertainty in growth. Relationship of this model to portfolio problems: homothetic utility and linear budget constraint and the Merton-Samuelson Theorem. Readings: Jones, part 4. 3. Fiscal policies in the growth model. (~4-6 lectures). Readings: Jones, part 2.
· Adding government. Tax distortive competitive equilibrium. Ricardian equivalence. Welfare theorems revisited. Pareto optimality of lump sum taxes. Tax structures equivalent to lump sum taxes. Readings: LS, chapter 10, LS, chapter 11.
· Solving for the TDCE. The non-arbitrage condition revisited. The transversality condition.
· Steady state. Comparative statics of k and c wrt taxes in steady state. Equivalence between various tax structures. Redundancy of consumption and investment taxes.
· The Ramsey problem. Setting up the Ramsey problem. The primal vs. the duial approach.
The implementability condition. Rewriting the Ramsey problem as a one sector growth model. Steady state. The Chamley-Judd result: 0. Readings: LS, chapter 15.
· Long run behavior of the optimal tax on labor. Robustness of the Chamley-Judd result - government BC clearing period by period. When does the Chamley-Judd result break down?
Readings: Chari-Kehoe Handbook Chapter, Jones, Manuelli, Rossi (JET, 1997), Lansing
(1999), Straub and Werning (AER), Chari, Nicolini and Teles (JME), Benhabib, Szoke (AEJ:
Macro).
Part II
I. Introduction
· Dynamic Optimization in Continuous Time ([BS] Appendix A.3)
· Stylized Facts on Economic Growth ([BS] Ch. 0 and [AH] Ch. 1)
II. Neoclassical Growth Models
· Basic Solow-Swan Model ([BS] Ch. 1)
· Ramsey Model ([BS] Ch. 2)
· Overlapping Generations Model ([BS] Ch. 3)
· Finite-Life Model ([BS] Ch. 3)
· The Open-Economy Ramsey Model ([BS] Ch. 3)
III. Endogenous Growth Models
· AK Growth Models (One-Sector Models of Endogenous Growth) ([BS] Ch. 4) o One-Sector Model With Physical and Human Capital o Model With Learning-By-Doing and Knowledge Spillovers o Public Services and Endogenous Growth
· Two-Sector Models of Endogenous Growth ([BS] Ch. 5) o Extended One-Sector Model With Physical and Human Capital o Lucas Growth Model
· Endogenous Technological Change o Model With Expanding Variety of Products ([BS] Ch. 6) o Schumpeterian Model of Quality Ladders ([BS] Ch. 7) o Diffusion of Technology ([BS] Ch. 8)
IV. Fiscal and Monetary Policy in Growth Model
· Fiscal Policy in Neoclassical Growth Model ([LS] Ch. 11)
· Fiscal-Monetary Theories of Inflation ([LS] Ch. 24)
V. Empirical Evidence on the Neoclassical Growth Model
· Growth Accounting ([BS] Ch. 10)
· Convergence and Growth Regressions ([BS] Ch. 11 and Ch. 12)