ECO2061: Economic Theory-Macroeconomics (MA)
University of Toronto, 2020 Fall
Announcements
Dec 4: Last year's final exam and solutions by Jeremy.
Final exam will be held online on December 18, Friday 9am-12noon.
Midterm: October 26 (not 21st as previously announced), during regular class hours.
Sept 15: We will have in-person classes at BA 1130 with 35 students. Please sign up if you want to attend in person. Here is short slide deck for in-class instruction guidelines.
September 5: Outline is posted.
Assignments
Assignment #2 Due on December, 22 2020 at 5pm.
Markov states and transition matrix for productivity shocks can be found here.
Matlab code that performs the value function iteration for neo-classical growth model.
November 11: Midterm exam and solutions by Jeremy.
November 1: Assignment #1 due is extented to November 6.
October 13: Assignment #1 due on November 2.
October 13: Sample midterm exam and solutions by Guangbin (Jeremy) Hong.
Instructor
Serdar Ozkan: serdar.ozkan[at]utoronto.ca
Lectures: Lectures are delivered both in-person in BA 1130 and streamed online via Zoom synchronously. They are alternate Mondays, 2-4pm (starting on Sept 14) and all Wednesdays, 2-4pm.
Office Hours: W 4-5pm or by appointment online via Zoom (or possibly in person).
Teaching Assistants
Jeremy (Guangbin) Hong: g.hong[at]mail.utoronto.ca
Office Hours: Thursdays 4-5pm online.
Tutorials: Alternate Mondays, 2-4pm, starting on September 21st. Again tutorials will be streamed online via Zoom synchronously.
Course Description
The objective of this course is to introduce you to the study of macroeconomics at the advanced level. This means that we will use rigorous models and employ (dynamic) optimization techniques to present and analyze macroeconomic theories. A common theme across the models we will study is that economic aggregates are the equilibrium result of the optimizing decisions made by rational agents at the individual level. We will employ this rigorous approach, not as an end in itself, but as a means to obtain disciplined insights into the important questions that trouble macroeconomists. The topics we will cover include economic growth, business cycle fluctuations, employment and unemployment, and fiscal and monetary policy.
Remote Learners
If you are a citizen of another country, and/or accessing your courses at the University of Toronto from a jurisdiction outside of Canada, please note that you may be subject to the laws of the country in which you are residing, or any country of which you have citizenship. The University of Toronto has a long-established commitment to freedom of expression, with this right enabled by an environment valuing respect, diversity, and inclusion. In your classes, you may be assigned readings, or discuss topics that are against the law in other jurisdictions. I encourage you to become familiar with any local laws that may apply to you and any potential impact on you if course content and information could be considered illegal, controversial, or politically sensitive. If you have any concerns about these issues, please contact me directly to discuss with them.
Textbooks and Papers
Advanced Macroeconomics (4th Edition), by David Romer, McGraw Hill, 2012.
Frontiers of Business Cycle Research, by Cooley, T. (1995), Princeton University Press.
Big Ideas in Macroeconomics: A Nontechnical View, by Kartik B. Athreya (2014), MIT Press
Evaluation
Scheme A: 2 Assignments: 10% + Midterm: 40% + Final: 50%
Scheme B: Assignment #1: 5% 10%+ Assignment #2: 10% + Midterm: 35% 30%+ Final: 50%
Total: Maximum of Scheme A and B.
The assignments must be handed in on the pre-specified dates. No late submissions will be accepted. If a problem set is not handed in on time, for a justified and documented reason, the weight will shift to the final exam.
The midterm test will be held on October 21 26 during class time. There will be no make-up exam for the midterm test. If you provide appropriate and timely documentation for missing the midterm, the weight will be transferred to the final exam.
The final exam will be held at a date to be set by the University. The final exam will include all the material covered in the course.
Tentative List of Topics, Reading List and Slides
Week #1: Introduction and Modern Macroeconomics Framework
Prescott E.C., The Transformation of Macroeconomic Policy and Research, 2004 Nobel Prize Lecture.
Jesus Fernandez-Villaverde and Dirk Krueger, Macroeconomics Notes: Chapter 4 and Chapter 5.
Dirk Krueger, Macroeconomic Theory: Chapter 2
Week #2: Solow Growth Model
David Romer, Advanced Macroeconomics: Chapter 1
Mankiw, Gregory, David Romer, and David Weil (1992) "A Contribution to the Empirics of Economic Growth," Quarterly Journal of Economics, vol. 107, pp. 407-437
Week #3: Neoclassical growth model and Overlapping Generations Model
David Romer, Advanced Macroeconomics: Chapter 2
Week #4: Overlapping Generations Model
David Romer, Advanced Macroeconomics: Chapter 2
Week #5: Endogenous Growth Models: The AK Model, Human Capital Model, R&D Model
David Romer, Advanced Macroeconomics: Chapter 3
Jesus Fernandez-Villaverde and Dirk Krueger, Macroeconomics Notes: Chapter 9.
Week #5: Cross-country Income Differences
David Romer, Advanced Macroeconomics: Chapter 4
Mankiw, Gregory, David Romer, and David Weil (1992) "A Contribution to the Empirics of Economic Growth," Quarterly Journal of Economics, vol. 107, pp. 407-437
Pritchett, Lant (1997), “Divergence, Big Time”, Journal of Economic Perspectives, 11(3), pp.3-17.
Acemoglu, Daron, and Robinson, James A. 2000. “Political Losers as a Barrier to Economic Development.” American Economic Review 90 (May): 126–130.
Albouy, David. 2008. “The Colonial Origins of ComparativeDevelopment: An Investigation of the Settler Mortality Data.” National Bureau of Economic Research Working Paper No. 14130.
Caselli, Francesco, and Feyrer, James. 2007. “The Marginal Product of Capital.” Quarterly Journal of Economics 122 (May): 535–568.
Hsieh, Chang-Tai, and Klenow, Peter J. 2009. “Misallocation and Manufacturing TFP in China and India.” Quarterly Journal of Economics, 124 (4): 1403-1448.
Jones, Benjamin F., and Olken, Benjamin A. 2005. “Do LeadersMatter? National Leadership and Growth since World War II.” Quarterly Journal of Economics 120 (August): 835–864.
David Lagakos 2013. “Explaining Cross-Country Productivity Differences in Retail Trade”, Journal of Political Economy
Pritchett, Lant. 2000. “The Tyranny of Concepts: CUDIE (Cumulated, Depreciated, Investment Effort) is Not Capital.” Journal of Economic Growth 5 (December): 361–384.
Schmitz, James A., Jr. 2005. “What Determines Productivity? Lessons from the Dramatic Recovery of the U.S. and Canadian Iron Ore Industries Following Their Early 1980s Crisis.” Journal of Political Economy 113 (June): 582–625.
Week #6: Review of midterm material and midterm exam.
Sample midterm exam and solutions.
Week #7: Business cycle facts and theory.
David Romer, Advanced Macroeconomics: Chapter 5
Cooley, Thomas, and Edward Prescott (1995), “Economic Growth and Business Cycles,” Ch.1, in Frontiers of Business Cycle Research, by T.Cooley (ed), Princeton University Press.
Week #8,9: Real Business Cycle Theory
Dirk Krueger, Quantitative Macroeconomics: An Introduction
David Romer, Advanced Macroeconomics: Chapter 5
Cooley, Thomas, and Edward Prescott (1995), “Economic Growth and Business Cycles,” Ch.1, in Frontiers of Business Cycle Research, by T.Cooley (ed), Princeton University Press.
Week #10: Real Business Cycle Theory, Value function iteration
There is a small sub-section on value function iteration here: Dirk Krueger, Macroeconomic Theory: Chapter 3
Dirk Krueger, Quantitative Macroeconomics: An Introduction
Week #10: Cash-In-Advance Model
Cooley, Thomas F., and Gary D. Hansen (1995), “Money and the Business Cycle,” Ch.7, in Frontiers of Business Cycle Research, by T.Cooley (ed), Princeton University Press.
David Romer, Advanced Macroeconomics: Chapter 6 & 7
Week #10 and #11 : 3 Equation New Keynesian Model
David Romer, Advanced Macroeconomics: Chapter 6 & 7
Eichenbaum, Martin S., Sergio Rebelo, and Mathias Trabandt. The Macroeconomics of Epidemics. No. w26882. National Bureau of Economic Research, 2020.
Week #12: Covid 19 and the Economy
Here is a short list of studies that have come out during the pandemic (thanks to Roozbeh Hosseini).
Veronica Guerrieri, Guido Lorenzoni, Ludwig Straub, and Iván Werning, "Macroeconomic Implications of COVID-19: Can Negative Supply Shocks Cause Demand Shortages?", 2020