ECO2031: Macroeconomic Theory II (PhD)
University of Toronto, 2020 Winter
University of Toronto, 2020 Winter
Outline PDF Version Weekly Course Schedule
February 1: Last year's final exam and Stephen's solutions.
February 1: Sample exams from my Penn training: 2004 Prelim 2005 Prelim 2006 Prelim
February 1: Final exam is scheduled on February 12, 9am-11am in GE100 in class.
January 5: Outline is posted.
Serdar Ozkan: serdar.ozkan[at]utoronto.ca
Lectures: Mondays, 9-11am at GE100 and Wednesdays, 4-6pm, at WW120
Office Hours: M 11am-12noon or by appointment at GE230
Jeremy (Guangbin) Hong: g.hong[at]mail.utoronto.ca
Office Hours: Tuesday 5-6pm @GE213
Tutorials: Wednesdays, 9-11am at GE 100.
This course is the fourth and the last in 1st year PhD macroeconomics sequence and complements its predecessor ECO2030. The ultimate goal of this course is to learn how to develop a variety of quantitate models (that can be used to generate artificial data of both allocations and prices which can be meaningfully mapped to actual data) to give answers to macroeconomic questions. In this course, most (if not all) of the material will be studied from the strict theoretical point of view and the emphasis is on economic rigor. So, we will neither look at data in any serious manner nor computationally solve the models. Furthermore, this course is not a survey of topics in macroeconomics: The objective is not to give a review of known results of a specific topic but rather to give an example of how to use modern macroeconomic tools to tackle questions.
Frontiers of Business Cycle Research, by Cooley, T. (1995), Princeton University Press.
Recursive Methods in Economic Dynamics, by Stokey and Lucas with Prescott, Harvard University Press.
Recursive Macroeconomic Theory, by Ljungqvist and Sargent, The MIT Press.
None of these books are required. I will post my slides and I will benefit from teaching material of Victor Rios-Rull, Dirk Krueger, Chris Carroll, Fabrizio Perri in my slides.
The papers that I will cite (in a very incomplete form below) are not to be read in general, although some students may find them useful.
There will be a final exam which be held during the regular final exam season announced by the University. The final exam will include all the material covered in the course. It will constitute 90% of the final grade.
In the context of the course, I will occasionally assign some homework questions.
Class participation and assigned homework questions will be 10% of your final grade.
Week #1: Introduction, Modern Macroeconomics Framework
Prescott E.C., The Transformation of Macroeconomic Policy and Research, 2004 Nobel Prize Lecture.
Week #1 and #2: Recursive equilibrium of stochastic and other variants of the neo-classical growth model.
Dirk Krueger, Quantitative Macroeconomics: An Introduction
Gary D. Hansen, "Indivisible labor and the business cycle", JME 1985
Week #3-1: Lucas Tree, Equity Premium Puzzle
Robert E. Lucas, Jr., "Asset Prices in an Exchange Economy", Econometrica, 1978
Rajnish Mehra, "The Equity Premium: Why Is It a Puzzle?"
Week #3-2: Economies with Heterogenous Agents: Measure Theory and Industry equilibrium
Chapter 11 and 12: Recursive Methods in Economic Dynamics, by Stokey and Lucas with Prescott, Harvard University Press.
Hugo A. Hopenhayn, "Entry, Exit, and firm Dynamics in Long Run Equilibrium", Econometrica 1992
Week #4 and #5: Economies with Heterogenous Households: Permanent Income Hypothesis (PIH) and Standard Incomplete Markets (SIM) Models; Bewley, Huggett, Aiyagari and Krusell-Smith Models, Consumption insurance
Hall, Robert E. (1978): “Stochastic Implications of the Life-Cycle/Permanent Income Hypothesis: Theory and Evidence,” Journal of Political Economy, 96, 971–87
Huggett, M. (1993): “The Risk-Free Rate in Heterogeneous-Agent Incomplete-Insurance Economies,” Journal of Economic Dynamics and Control, 17, 953–969.
Aiyagari, S. R. (1994): “Uninsured Idiosyncratic Risk and Aggregate Saving,” The Quarterly Journal of Economics, 659–684.
Jonathan Heathcote, Kjetil Storesletten and Gianluca Violante, "Quantitative Macroeconomics with Heterogeneous Households", Annual Review of Economics, 2009
Fatih Guvenen, "Macroeconomics with Heterogeneity: A Practical Guide", Economic Quarterly, 2011
Week #6: Endogenous Credit Constraints: Economies with Household Default and Unsecured Credit
Fabrizio Perri and Krueger, "Does Income Inequality Lead to Consumption Inequality? Evidence and Theory", 2006, ReStud
Grey Gordon, "Optimal Bankruptcy Code: A Fresh Start for Some", 2015
Chatterjee, Corbae, Nakajima and Ríos-Rull, "A Quantitative Theory of Unsecured Consumer Credit with Risk of Default", Econometrica, 2015
Week #6-2: Midterm Exam.