| 1 |
Fluctuations facts
Covariance stationarity
Trends/cycles decompositions
Shocks and propagation mechanisms
Wold representation
ARMAs, VARs, SVARS
Impulse responses
Co-movements of GDP components
Correlations between real wages, interest rates, and output
The correlations of output and money
Cycles, slumps, and depressions
Nonlinearities
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Required readings
BF, chapter 1.
 Stock, J., and M. Watson. "Business Cycle Fluctuations in U.S. Macroeconomic Time Series." Chapter 1 in Handbook of Macroeconomics. Vol 1A. Edited by J. Taylor and M. Woodford. New York, NY: Elsevier, 1999. ISBN: 9780444501561.
Additional readings
A nice refresher on time series and VARs:
Cochrane, J. "Time Series for Macroeconomics and Finance." mimeo University of Chicago, 2005, pp. 1-65.
Blanchard, O., and D. Quah. "The Dynamic Effects of Aggregate Demand and Aggregate Supply Disturbances.'' American Economic Review 79, no. 4 (1989): 654-673.
Christiano, L., M. Eichenbaum, and C. Evans. "Monetary Policy Shocks: What have we Learned and to What End?" Handbook of Macroeconomics. Vol. 1A. Edited by J. Taylor and M. Woodford. New York, NY: Elsevier, 1999, pp. 65-148. ISBN: 9780444501561.
Aguiar, M., and G. Gopinath. "Emerging Market Business Cycles," and "The Cycle is the Trend." Journal of Political Economy 115, no. 1 (2007): 69-102.
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| 2 |
The basic model: The consumption/saving choice
Setting up the optimization problem
Intertemporal choice, shocks, uncertainty
The first order conditions
The Keynes-Ramsey condition
Solving the model numerically
Value functions
Log linearization
Special cases and other short cuts
Equivalence between centralized and decentralized economies
The consumption problem in the decentralized economy
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Required readings
BF, chapter 2 and section 6-2.
Additional readings
OR, chapters 1 and 2.
Campbell, J. "Inspecting the Mechanism: An Analytical Approach to the Stochastic Growth Model." Journal of Monetary Economics 33, no. 3 (June 1994): 463-506.
Uhlig, H. "A Toolkit for Analyzing Nonlinear Dynamic Stochastic Models Easily." mimeo University of Tilburg, 1997. (PDF)#
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| 3 |
Allowing for labor/leisure choice (the RBC model)
Movements in employment/unemployment
Interpreting the first order conditions
Solving the model numerically, and by log linearization
Special case: log and full depreciation
Evidence on labor supply elasticity
Evidence on high frequency technological shocks
Solow residuals and their interpretation
Alternative approaches
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Required readings
BF, chapter 7.
King, R., and S. Rebelo. "Resuscitating Real Business Cycles." Chapter 14 in Handbook of Macroeconomics. Vol. 1B. Edited by J. Taylor and M. Woodford. New York, NY: Elsevier, 1999, pp. 927-1007. ISBN: 9780444501578.
Additional readings
Prescott, E. C. "Theory Ahead of Business Cycle Measurement." Federal Reserve Bank of Minneapolis Quarterly Review 10, no. 4 (Fall 1986): 9-22.
Rebelo, S. "Real Business Cycle Models: Past, Present and Future." National Bureau of Economic Research Working Paper No. 11401, June 2005.
Gali, J., and P. Rabanal. "Technology Shocks and Aggregate Fluctuations: How Well does the RBC Model Fit Postwar U.S. Data?" In NBER Macroeconomics Annual 2004. Edited by M. Gertler and K. Rogoff. Cambridge, MA: MIT Press, pp. 225-318. ISBN: 9780262572293.
Basu, S., J. Fernald., and M. Kimball. "Are Technology Improvements Contractionary?" Federal Reserve Bank of Chicago, WP-2004-20.
Aghion, P., and P. Howitt. "Growth and Cycles." Chapter 8 in Endogenous Growth Theory. Cambridge, MA: MIT Press, 1998. ISBN: 9780262011662.
Shleifer, A. "Implementation Cycles." Journal of Political Economy 94, no. 6 (December 1986): 1163-1190.
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| 4 |
Allowing for non-trivial investment decisions
Costs of adjustment for investment
Investment, consumption, and interest rates in the decentralized economy
The role of the term structure of interest rates
The stock market and investment
The effects of shocks on output, investment, the stock market, and the term structure
The open economy version
Shocks, investment, saving, and movements in the current account
Asset price bubbles, investment, and fluctuations
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Required readings
BF, sections 2-4 and 6-3.
BF, sections 5-1 and 5-2.
Additional readings
OR, chapter 3.
Shiller, R. Irrational Exuberance. Princeton, NJ: Princeton University Press, 2000. ISBN: 9780691050621.
Blanchard, O., C. Rhee, and L. Summers. "The Stock Market, Profit, and Investment." Quarterly Journal of Economics 108, no. 1 (February 1993): 115-136.
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| 5 |
Allowing for two goods
Why introduce two goods?
The pitfalls of one-good models
Capital/consumption goods
Tradable/non tradable goods
Domestic/foreign goods
The consumer problem with two goods
Intratemporal and intertemporal first order conditions
Closing the model if tradables/non tradables
The Balassa-Samuelson effect
The transfer problem
Effects of technological shocks on relative prices, and on the current account
Global imbalances
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Required readings
Obstfeld, M., and K. Rogoff. "The Intertemporal Approach to the Current Account." Chapter 34 in Handbook of International Economics. Vol. 3. Edited by G. Grossman and K. Rogoff. New York, NY: Elsevier, 1997, pp. 1731-1799. ISBN: 9780444828644.
Additional readings
OR, chapter 4.
Blanchard, O. "Current Account Deficits in Rich Countries." mimeo MIT Department of Economics Working Paper No. 07-06, February 2007.
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| 6 |
Introducing money
Decentralized exchange and the use of money
Cash-in-advance models
Money in the utility function
The effects of money growth on capital accumulation
Dynamics of hyperinflation
The Cagan model
The budget deficit and money growth
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Required readings
BF, sections 4.3-4.7 and 10.2.
Additional readings
MW, chapter 2-1, and "Price Level Determination under Interest Rate Rules."
Dornbusch, R., F. Sturzenegger, H. Wolf, S. Fischer, and R. Barro. "Extreme Inflation: Dynamics and Stabilization." Brookings Papers on Economic Activity 1990, no. 2 (1990): 1-84.
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| 7 |
Introducing price setting
Decentralized exchange, money, and price setters
A yeoman farmer model of price setting under monopolistic competition
The role of price above marginal cost, markups
Predetermined prices
The effects of money on output and welfare
Role of wage versus price setting
The behavior of real wages
Revisiting the effects of technological and other shocks
Indexation
Macroimplications of the choice of numeraire
The monetary policy problem
Time consistency
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Required readings
Blanchard, O. "Why Does Money Affect Output? A Survey." In Handbook of Monetary Economics. Vol 2. Edited by B. Friedman and F. Hahn. New York, NY: Elsevier, 1990, pp. 779-835. ISBN: 9780444880260.
BF, sections 8-1 and 11-4.
MW, chapter 3-1, and "Optimizing Models with Nominal Rigidities. A Basic Sticky-Price Model."
Additional readings
Dhyne, E., L. Álvarez, H. Le Bihan, G. Veronese, D. Dias, J. Hoffmann, N. Jonker, P. Lünnemann, F. Rumler, and J. Vilmunen. "Price Changes in the Euro area and the United States: Some Facts from Individual Consumer Price Data." The Journal of Economic Perspectives 20, no. 2 (2006): 171-192.
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| 8 |
The "new Keynesian" model
Staggering of price decisions
Fischer-Taylor-Calvo models
Coordination problems
The "modern Phillips curve"
Inflation inertia?
The "modern IS-LM model," and the "modern AS-AD model"
A second look at productivity booms
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Required readings
BF, chapters 8-2 and 8-3.
Additional readings
MW, chapter 3-2, "Optimizing Models with Nominal Rigidities," and "Inflation Dynamics with Staggered Price Setting."
King, R. "The New IS-LM model: Language, Logic, and Limits." Federal Reserve Bank of Richmond Economic Quarterly 86, no. 3 (Summer 2000): 45-103. (PDF)#
Blanchard, O., and J. Gali. "Real Wage Rigidities and the New Keynesian Model." mimeo MIT, February 2006.
Beaudry, P., and F. Portier. "Stock Prices, News, and Economic Fluctuations." mimeo University of British Columbia, March 2004. (PDF)#
Lorenzoni, G. "A Theory of Demand Shocks." mimeo MIT, November 2006.
Smets, F., and R. Wouters. "Comparing Shocks and Frictions in US and Euro Area Business Cycles: A Bayesian DSGE Approach." Center for Economic Policy Research Discussion Paper No. 4750 (November 2004): 1-26.
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| 9 |
Monetary policy
Time consistency
Inflation targeting
Interest rate rules
The liquidity trap
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Required readings
Clarida, R., J. Gali, and M. Gertler. "The Science of Monetary Policy: A New Keynesian Perspective." Journal of Economic Literature 37 (December 1999): 1661-1707.
Additional readings
MW, chapters 4-1 and 4-2, and "A Neo-Wicksellian Framework for the Analysis of Monetary Policy."
Gali, J. "New Perspectives on Monetary Policy, Inflation, and the Business Cycle." National Bureau of Economic Research Working Paper No. 8767, February 2002: 1-52.
King, M. "What has Inflation Targeting Achieved?" In The Inflation-Targeting Debate. Edited by B. Bernanke and M. Woodford. Chicago, IL: University of Chicago Press, 2005. ISBN: 9780226044712.
Bernanke, B., V. Reinhart, and B. Sack. "Monetary Policy Alternatives at the Zero Bound. An empirical assessment." Finance and Economics Discussion Series 2004-48. Washington, DC: Divisions of Research and Statistics and Monetary Affairs, Federal Reserve Board, 2004. (PDF)#
Svensson, L. "Escaping from a Liquidity Trap and Deflation: The Foolproof Way and Others." National Bureau of Economic Research Working Paper No. 10195 (December 2003): 1-24.
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| 10 |
Fiscal policy
Effects of spending and taxes in models with flexible or sticky prices
Empirical evidence
Perverse effects of fiscal expansions
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Required readings
Galí, J., J. López-Salido, and J. Vallés. "Understanding the Effects of Government Spending on Consumption." Journal of the European Economic Association 5, no. 1 (March 2007): 227-270.
Additional readings
Chari, V. V., and P. Kehoe. "Optimal Fiscal and Monetary Policy." Federal Reserve Bank of Minneapolis Staff Report 251 (July 1998).
Baxter, M., and R. King. "Fiscal Policy in General Equilibrium." American Economic Review 83, no. 3 (June 1993): 315-334.
Blanchard, O., and R. Perotti. "An Empirical Characterization of the Dynamic Effects of Government Spending and Taxes on Output." Quarterly Journal of Economics 117, no. 4 (2002): 1329-1368.
Giavazzi, F., and M. Pagano. "Non-Keynesian Effects of Fiscal Policy Changes: International Evidence and the Swedish Experience." National Bureau of Economic Research Working Paper No. 5332 (October 1996): 1-50.
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