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E417Syllabus 19

This course covers advanced macroeconomic models including consumption and asset pricing, investment, fiscal and monetary policies, business cycles, and unemployment. Models with both standard competitive equilibrium and those with financial and labor market frictions will be examined. Required readings include papers and textbook chapters on topics such as the equity premium puzzle, fiscal policy, overlapping generations models, credit and business cycles, and sticky prices. Students are expected to read papers marked with an asterisk in the course outline.

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270 views2 pages

E417Syllabus 19

This course covers advanced macroeconomic models including consumption and asset pricing, investment, fiscal and monetary policies, business cycles, and unemployment. Models with both standard competitive equilibrium and those with financial and labor market frictions will be examined. Required readings include papers and textbook chapters on topics such as the equity premium puzzle, fiscal policy, overlapping generations models, credit and business cycles, and sticky prices. Students are expected to read papers marked with an asterisk in the course outline.

Uploaded by

kashmira
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We take content rights seriously. If you suspect this is your content, claim it here.
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Advanced Macroeconomics

EC417, Michaelmas Term 2019

Instructor: Nobuhiro Kiyotaki, O¢ ce hour Mon 4:30-5:30pm, 32L1.10


Teaching Fellow: Xitong Hui, 32L 1.25

In this course, we will use dynamic general equilibrium models to address


substantive questions in macroeconomics. We study consumption, asset pric-
ing, investment, business cycles, unemployment, …scal and monetary policies.
We …rst examine these in standard competitive equilibrium models without
…ctions, and then by considering …nancial frictions, labor market frictions
and nominal price stickiness. The recommended (not required) textbook is
Lars Ljungqvist and Thomas Sargent. Recursive Macroeconomic Theory, 3rd
edition, MIT Press (2012) (2nd edition is …ne). Papers are available at LSE
library EJournals and/or the author’s personal website.

Course outline: Students are expected to read the articles with (*) in
the list.

0. Brief Overview of System of National Accounts

1. Consumption and Asset Pricing Models

Milton Friedman. A Theory of Consumption Function. Chapters 2 and


3. (1957) Princeton University Press.
(*) Rajnish Mehra and Edward Prescott. "The Equity Premium: A
Puzzle." Journal of Monetary Economics (1985): 145-162.
Ljungqvist-Sargent. Chapters 13 and 14.

2. Investment

Stephen Bond and Jason Cummins. "The Stock Market and Investment
in the New Economy: Some Tangible Facts and Intangible Fictions." Brook-
ings Papers on Economic Activity (2000:1):61-124.
(*) Dan Cao, Guido Lorenzoni and Karl Walentin. "Financial Frictions,
Investment and Tobin’s q." Journal of Monetary Economics (2019) 103C:
105-122.

3. Fiscal Policies in a Growth Model

1
(*) Ljungqvist-Sargent. Chapter 11.
4. Overlapping Generations Model
(*) Ljungqvist-Sargent. Chapters 9 and 10.
(*) Karl Shell. "Notes on the Economics of In…nity." Journal of Political
Economy 1971: 1002-11.
5. Business Cycles and Credit
(*) Edward Prescott. "Theory Ahead of Business Cycle Measurement."
Federal Reserve Bank of Minneapolis Quarterly Review (Fall 1986).
Ljungqvist-Sargent. Chapter 12.
Takashi Kamihigashi. "Real business cycles and sunspot ‡uctuations are
observationally equivalent." Journal of Monetary Economics (1996):105-117.
(*) Nobuhiro Kiyotaki. "Credit and Business Cycles." Japanese Eco-
nomic Review (1998): 18-35.
Nobuhiro Kiyotaki and John Moore. "Liquidity, Business Cycles and
Monetary Policy." Journal of Political Economy, forthcoming.
Mark Gertler and Simon Gilchrist. "What Happened: Financial Factors
in the Great Recession." Journal of Economic Perspectives (Summer 2018).
6. Unemployment
Ljungqvist-Sargent. Chapter 28.
(*) Dale Mortensen and Christopher Pissarides. "Job Creation and Job
Destruction in the Theory of Unemployment." Review of Economic Studies
(1994): 397-415.
Robert Shimer. "The Cyclical Behavior of Equilibrium Unemployment
and Vacancies." American Economic Review (2005): 25-49.
7. Sticky Prices and Monetary Policy
Jordi Gali. "The Basic New Keynesian Model. " Chapter 3 in Monetary
Policy, In‡ation, and the Business Cycle (2008) Princeton University Press.
Julio Rotemberg. "Sticky Prices in the United States." Journal of Polit-
ical Economy, (1982): 1187-1211.
Eric Leeper, Christopher Sims and Tao Zha. "What Does Monetary
Policy Do?" Brookings Papers on Economic Activity (2:1996): 1-63.
Emi Nakamura and Jon Steinsson. "Identi…cation in Macroeconomics."
Journal of Economic Perspectives (Summer 2018).

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