ECON7020: MACROECONOMIC THEORY I - University of … … · · 2016-05-04ECON7020: MACROECONOMIC THEORY I Instructor: Office: Martin Boileau ... The second is the application of

r UNIVERSITY OF COLORADO

Department of Economics

ECON7020: MACROECONOMIC THEORY I

Instructor:

Office:

Martin Boileau

Economics 14A

Office Hours: Monday and Friday 10:00 to 12:00

Phone: (303) 492-2108

E-mail: Martin.Boileau©Colorado.EDU

COURSE DESCRIPTION

This course is an introduction to modern macroeconomic theory. We will focus our atten

tion on dynamic optimization and general equilibrium models. Most of the typical topics

in macroeconomics are covered. These topics includes growth, consumption, production,

investment, fiscal policy, and monetary policy.

The course has two objectives. The first is the presentation of the tools required to study

dynamic, stochastic, general equilibrium models. The second is the application of these

tools to topics in macroeconomics.

EVALUATION

The assessment for this class consists of a two (2) term test and a final exam. Tests

and final exam are closed notes and closed books. No make-up tests will be given. The

tentative schedule and the grade distribution are displayed in the table below.

Evaluation Term Test 1:

Term Test 2:

Final Exam:

Date % 7 October in class 25

11 November in class 25

14 December 11:30 to 14:30 50

1

REQUIRED TEXT

Romer, David, 1996, Advanced Macroeconomics, New York: McGraw-Hill.

BACKGROUND TEXTS

Barro , Robert J. and Xavier Sala-i-Martin, 1995, Economic Growth, New York: McGraw

Hill.

Blanchard, Olivier J. and Stanley Fischer, 1989, Lectures on Macroeconomics, Cambridge:

MIT Press.

Dixit, Avinash K., 1990, Optimization in Economic Theory, Second Edition, Oxford: Ox

ford University Press.

Farmer, Roger E., 1993, The Macroeconomics of Self-Fulfi.lling Prophecies, Cambridge:

MIT Press.

Feeney, JoAnne, 1999, Supplemental Notes.

Frankel, Jacob A. and Assaf Razin, with Chi-Wa Yuen, 1996, Fiscal Policies and Growth

in the World Economy, Third Edition, Cambridge: MIT Press.

Mas-Colell, Andreu, Michael D.· Whinston, and Jerry G. Green, 1995, Microeconomic

Theory, Oxford: Oxford University Press.

Sargent, Thomas J. , 1987b, Dynamic Macroeconomic Theory, Cambridge: Harvard Uni

versity Press.

2

COURSE OUTLINE

I. INTRODUCTION

1. Background Issues

• Blanchard and Fischer: Chapter 1

• Romer: Introduction

2. Tools and Models

Dixit: Chapters 1 through 8

II. REVIEW: TWO-PERIOD ECONOMIES

1. Consumption

• Feeney: Chapter 1

Mas-Colell, Whinston, and Green: Chapters 1 through 4

2. A Pure Exchange Economy

Farmer: Chapter 4


Mas-Colell, Whinston, and Green: Chapter 15.B

3. A Production Economy


• Frankel and Razin: Chapter 5.1 to 5.5

Mas-Colell, Whinston, and Green: Chapters 15 and 16

3

III. INFINITE HORIZON ECONOMIES

1. Overlapping Generations Models


Farmer: Chapter 6

Mas-Colell, Whinston, and Green: Chapter 20.H

• Romer: Chapter 2, part B

Diamond, Peter A., 1965, National Debt in a Neoclassical Growth Model, Amer

ican Economic Review 55, 1126- 1150.

2. The Solow Growth Model

Barro and Sala-i-Martin: Chapter 1

• Romer: Chapter 1

Solow, Robert M., 1956, A Contribution to the Theory of Economic Growth,

Quarterly Journal of Economics 70, 65- 94.

3. Dynamic Programming and Optimal Control

Dixit: Chapters 10 and 11

• Sargent: Chapter 1

4. The Neoclassical Growth Model

Barro and Sala-i-Martin: Chapter 2


• Feeney: Chapters 3 and 4

Mas-Colell, Whinston, and Green: Chapter 20

• Romer: Chapter 2 part A

4

(

IV. STOCHASTIC ECONOMIES

1. Expected Utility Theory

Dixit: Chapter 9

Farmer: Chapter 8

Mas-Colell, Whinston, and Green: Chapter 6

2. Consumption

Blanchard and Fischer: Chapter 6 part 2


• Sargent: Chapter 3

Hall, Robert E., 1978, Stochastic Implications of the Life Cycle-Permanent In

come Hypothesis: Theory and Evidence, Journal of Political Economy 86, 971-

987.

3. Investment

Blanchard and Fischer: Chapter 6 part 2


Sargent: Chapter 3

Hayashi , Fumio, 1981, Tobin's Marginal q and Average q: A Neoclassical Inter

pretation, Econometrica 50, 213-224.

4. Linear Rational Expectations Solutions

• Romer: Chapter 6 part B

Farmer: Chapters 2 and 3

5. Real Business Cycle Theory



• King, Robert G., Charles I. Plosser, and Sergio T. Rebelo, 1988, Production,

Growth, and Business Cycles: I. The Basic Neoclassical Model, Journal of Mon

etary Economics 7, 67- 82.

5

V. MONETARY ECONOMIES

1. Models of Money


2. Traditional Models of Money


• Romer: Chapters 5 and 6

3. Currency in the Utility and Cash-in-Advance Models

• Sargent: Chapters 4


Svensson, Lars E.O. , 1985, Money and Asset Prices in a Cash-in-Advance Econ

omy, Journal of Po.litical Economy 95 , 919-944.

VI. UNEMPLOYMENT

1. Contracts and Efficiency Wages Models

Blanchard and Fischer: Chapter 9


Yellen, Janet L. , 1984, Efficiency Wages Model of Unemployment, American Eco

nomic Review 7 4, 200- 205.

2. Search and Matching Models

Sargent: Chapters 2


Pissarides, Christopher A. , 1985, Short-Run Dynamics of Unemployment, Vacan

cies, and Real Wages, American Economic Review 75, 676- 690.

6

VII. ECONOMIC POLICY

1. The Lucas Critique


• Lucas, Robert E., 1976, Econometric Policy Evaluation: A Critique, Carnegie

Rochester Series on Public Policy 1, 19- 46.

2. Ricardian Equivalence


• Barro, Robert J ., 1990, The Ricardian Approach to Budget D.eficits, JournaJ. of

Economic Perspectives 3, 32- 54.

3. Optimal Taxation

• Aiyagari, S. Rao, 1989, How Should Taxes Be Set? Federal Reserve Bank of

Minneapolis Quarterly Review 13, Winter.

• Chari, V.V., 1988, Time Consistency and Optimal Policy Design, Federal Reserve

Bank of Minneapolis Quarterly Review 12, Fall.

4. Optimal Monetary Policy



Kydland, Finn and Edward Precott, 1977, Rules Rather Than Discretion: The

Inconsistency of the Optimal Plans, Journal of Political Economy 87, 473- 492.

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ECON7020: MACROECONOMIC THEORY I - University of … … · · 2016-05-04ECON7020: MACROECONOMIC THEORY I Instructor: Office: Martin Boileau ... The second is the application of

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