Last year I created this site to communicate to students, as you can see by the number of post below it was an experiment that did not exactly take off -- I think mostly because I forgot the password and did not bother to figure out to sign in again, preferring the "canvass system" here at Brown.
Anyway, we are on again, and here is a preliminary syllabus. Perhaps I will keep this use this site more than last year.
_____________________
Spring
2014
Brown
University
Advanced
Macroeconomics for undergraduate students
Gauti
B. Eggertsson
SYLLABUS
Monetary and Fiscal Economics and Stabilization Policy
Readings
This
course is about macroeconomic policy with special focus on the recent economic
crisis. Questions will be addressed such as: How does monetary policy affect
the economy? What is the effect of government spending and tax cuts? What
should the government do in the event of a financial crisis?
The
main objective of the course is to introduce students to the type of models and
methods used in current research in macroeconomics both in the scholarly literature
but also in the practice of central banks and major policy institutions. The current financial crisis and the economic
recession of 2007-2009 will serve to illustrate the challenges confronted by
macroeconomic analysis. Empirical analyses will complement the understanding of
some important features of US macro and financial data.
Students are
assumed to have already completed intermediate-level courses in microeconomic
theory, macroeconomic theory, and econometrics, and to be familiar with the
fundamentals of multivariate calculus and linear algebra.
The main reference
for this class are lecture notes that will be posted prior or right after each
lecture.
A reference
textbook for the course is Jordi Gali, Monetary Policy, Inflation and the
Business Cycle, Princeton University Press, 2008 along with Michael
Woodford’s Interest and Prices,
Princeton University, 2003. These books will be supplemented with additional
readings, often providing applications of the theory. Many of the additional
readings are available online, and most of those that are not will be available
electronically on the course website.
The required work
for the course will consist of several problem sets (some analytical and some
applied), a midterm and a final.
Below
I have added several references and added stars to those reading that are essential.
Some of the material includes much more technical details than I expect the
students to master, the lecture notes and problems sets will give a better idea
of the appropriate level of detail students should be familiar with.
I. Monetary Policy and Economic Stabilization
Lecture
1 Introduction to the class
Lecture
2 Introduction to basic Time Series Methods
* Main reference: Class Notes.
James D. Hamilton, “Time Series
Analysis,” Princeton University Press. Chapter 1-3.
Lecture
3 Evidence on the Real Effects of Monetary Policy
*Christiano, Lawrence J., Martin
Eichenbaum, and Charles L. Evans, “Monetary Policy Shocks: What Have We Learned
and To What End?” in J.B. Taylor and M. Woodford, eds., Handbook of Macroeconomics, vol. 1A, Elsevier, 1999.
Christiano, Lawrence J., Martin Eichenbaum,
and Charles L. Evans, “Nominal Rigidities and the Dynamic Effects of a Shock to
Monetary Policy,” Journal of Political
Economy 113: 1-45 (2005).
Sims, Christopher A., “Macroeconomics
and Reality,” Econometrica, January 1980.
Milton Friedman and Anna Jacobson
Schwartz. 1963. “A Summing Up.” Chapter 13 of A Monetary History of the
United States, 1867-1960 (Princeton: Princeton University Press for NBER):
676-700.
Romer, C. and Romer, D. 1989, “Does
Monetary Policy Matter? A New Test in the Spirit of Friedman and Schwartz”,
NBER Macroeconomic Annual.
François R. Velde. 2009. “Chronicle of a Deflation Unforetold.” Journal
of Political Economy (August): 591-634.
Steinsson, J and Nakamura, “Five Facts about Prices,” Quarterly Journal
of Economics, 125(3), 961-1013, August 2010.
Lectures
4 & Lecture 5: Nominal Price Level Determination
*Gali, chap. 2.
Woodford, chap 2.
Lecture
6: Sticky Prices and the Real Effects of
Monetary Policy: The case of IS-LM
* Main reference here is lecture
notes and blackboard derivation
*Gali, chap. 3.
Woodford, chap 3.
Lecture
7: Sticky Prices and the Real Effect of Monetary Policy: The basic New
Keynesian model
*
Main reference here is lecture notes and blackboard derivation
* Gali, chap. 3.
*Gali, J. chap 4.
Woodford, chap 3.
Taylor, John B., “A Historical Analysis
of Monetary Policy Rules,” in J.B. Taylor, ed., Monetary Policy Rules, Chicago: Univ. of Chicago Press, 1999.
Clarida, Richard, Jordi Gali, and Mark
Gertler, “Monetary Policy Rules and Macroeconomic Stability: Evidence and Some
Theory,” Quarterly Journal of Economics 115: 147-180 (2000).
Orphanides, Athanasios, “Monetary Policy Rules, Macroeconomic Stability
and Inflation: A View from the Trenches,” Journal of Money, Credit and
Banking 36: 151-175 (2004).
Lecture
8: Nominal Frictions and Optimal Monetary Policy under Commitment and Discretion
*Main reference here is lecture notes and
blackboard derivation
*Clarida, Richard, Jordi Gali, and Mark Gertler, “The
Science of Monetary Policy: A New Keynesian Perspective,” Journal of Economic Literature 37: 1661-1707 (1999).
Kydland, Finn E., and Edward C. Prescott, “Rules Rather than
Discretion: The Inconsistency of Optimal Plans,” Journal of Political Economy 85: 473-491 (1977).
Gali, chap. 5.
Walsh, chap. 8, and sec. 11.3.
Woodford, I&P, chap. 7, secs. 1, 2, and 5.
Lecture 9: Medium scale estimated
macroeconomic models
* Sbordone, A. Tambalotti, A, Rao, K, and K. Walsh, (2010)
“Policy Analysis using DSGE Models: An Introduction.” FRBNY Economic Policy
Review.
Smets, Frank, and Rafael Wouters. 2007. "Shocks and
Frictions in US Business Cycles: A Bayesian DSGE Approach." American
Economic Review, 97(3): 586–606.
Christiano, Lawrence J., Martin Eichenbaum, and Charles L.
Evans, “Nominal Rigidities and the Dynamic Effects of a Shock to Monetary
Policy,” Journal of Political Economy 113:
1-45 (2005).
II. Stabilization Policy During Financial Crises
Lecture
11. The Liquidity Trap, Japan and the
Great Depression
*Eggertsson, Gauti B., and Michael
Woodford, “The Zero Bound on Interest Rates and Optimal Monetary Policy,”
Brookings Papers on Economic Activity 2003-1: 139-235. [Also available at http://www.columbia.edu/~mw2230/BPEA.pdf]
*Eggertsson,
Gauti B., “Great Expectations and the End of the Depression,” American Economic Review 98: 1476-1516
(2008).
Krugman, Paul R., “It’s Baaack: Japan’s
Slump and the Return of the Liquidity Trap,” Brookings Papers on Economic Activity 1998-2: 137-206. [Also
available at
Ben S. Bernanke and Vincent R. Reinhart,
“Conducting Monetary Policy at Very Low Short-Term Interest Rates,” American Economic Review [Papers and
Proceedings] 94(2): 85-90 (2004).
Lecture 12. Non-standard Monetary Policy in a “Liquidity
Trap”: Is “Quantitative Easing” or Credit Easing Effective?
Curdia, Vasco,
and Michael Woodford, “The Central-Bank Balance Sheet as an Instrument of
Monetary Policy,” Journal of Monetary
Economics, forthcoming. [Available online at http://www.columbia.edu/~mw2230/CR2010.pdf]
Keister,
Todd, and James McAndrews, “Why Are Banks Holding So Many Excess Reserves?”
Federal Reserve Bank of New York Staff Report no. 380, July 2009.
Del
Negro, M, Eggertsson, G, Ferrero, A and N. Kiyotaki, “The Great Escape? A
Quantitative Evaluation of the Fed’s Liquidity Facilities”, mimeo [Available on
my homepage]
Lectures
13 Is Fiscal Stimulus Effective?
* Eggertsson, Gauti B., “What Fiscal Policy is Effective at Zero
Interest Rates?” NBER Macroeconomics
Annual 2010, forthcoming. [Available on my webpage]
* Denes, Matthew, Gilbukh, Sonia and Eggertsson,
Gauti, “Deficits, Public Debt Dynamics and Tax and Spending Multipliers,” Economic
Journal, 123 (566), 133-163, 2013 [Available on my webpage]
Woodford, Michael, “Simple Analytics
of the Government Expenditure Multiplier,” American
Economic Journal: Macroeconomics 3: 1-35 (2011)
Christiano, Lawrence, M. Eichenbaum, and S. Rebelo, “When Is the
Government Spending Multiplier Large?” NBER Working Paper no. 15394, October
2009.
III. Financial Stability and Economic Stability
Lectures
14 Financial Factors in Business
Fluctuations
* Diamond, D. and Philip Dybvig, (1983), "Bank Runs, Deposit Insurance, and Liquidity",
Journal of Political Economy, Vol. 91, No. 3. (Jun., 1983), pp. 401-419.
* Eggertsson, Gauti, B. and Paul Krugman, “Debt, Deleveraging and the
Liquidity Trap: A Fisher-Minsky-Koo Approach,” Quarterly Journal of Economics,
forthcoming. [Available at http://www.ny.frb.org/research/economists/eggertsson/EggertssonKrugmanR2.pdf]
Bernanke, B. and M. Gertler (1989), "Agency Costs, Net Worth, and Business Fluctuations,"
American Economic Review, Vol. 79. No.1, p. 13-31.
Kiyotaki, N. and J. Moore, (1997), "Credit Cycles," Journal of Political
Economy, vol. 105, no.2.
Hall, Robert E., “The High
Sensitivity of Economic Activity to Financial Frictions,” Economic Journal, forthcoming 2011. [Available at http://www.stanford.edu/~rehall/HSEA120909.pdf]
Gilchrist, Simon, Vladimir Yankov,
and Egon Zakrajsek, “Credit Market Shocks and Economic Fluctuations: Evidence
from Corporate Bond and Stock Markets,” NBER Working Paper no. 14863, April
2009.
Bernanke, Ben S., Mark Gertler, and Simon
Gilchrist, “The Financial Accelerator in a Quantitative Business Cycle
Framework,” in J.B. Taylor and M. Woodford, eds., Handbook of Macroeconomics, vol. 1C, Elsevier, 1999.
