ECON5011: Macroeconomics (MA)

University of Washington in St Louis, 2022 Fall

Announcements


Assignments

Instructor

Teaching Assistants

  • Martin Arazi: marazi[at]wustl.edu

  • Office Hours: Wednesdays 9-10am or by appointment at Seigle 354 or via Zoom.

  • Tutorials: During regular class time. Will be announced in advance.

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, but as a means to obtain disciplined insights into the important questions that trouble macroeconomists. The topics we will cover include economic growth, inequality, business cycle fluctuations, employment and unemployment, and fiscal and monetary policy.

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% + Exam#1: 40% + Exam#2: 50%

Scheme B: Assignment #1: 5% + Assignment #2: 10% + Exam#1: 35% + Exam#2: 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 second exam.

  • There will be 2 exams. The first test will be held on October 20 during class time. There will be no make-up exam for the first test. If you provide appropriate and timely documentation for missing it, the weight will be transferred to the second exam.

  • The second exam will be held during the last class of the semester on December. The final exam will include all the material covered in the course.

Tentative List of Topics, Reading List, and Slides


#1: Introduction and Modern Macroeconomics Framework


#2: Solow Growth Model


#3: Neoclassical growth model and Overlapping Generations Model


#4: Decline in Labor Share

  • Slides

  • Elsby, Michael WL, Bart Hobijn, and Ayşegül Şahin. "The decline of the US labor share." Brookings Papers on Economic Activity 2013, no. 2 (2013): 1-63.

  • Karabarbounis, Loukas, and Brent Neiman. "The global decline of the labor share." The Quarterly journal of economics 129, no. 1 (2014): 61-103.

  • Autor, David, David Dorn, Lawrence F. Katz, Christina Patterson, and John Van Reenen. "The fall of the labor share and the rise of superstar firms." The Quarterly Journal of Economics 135, no. 2 (2020): 645-709.

  • Barkai, Simcha. "Declining labor and capital shares." The Journal of Finance 75, no. 5 (2020): 2421-2463.

  • De Loecker, Jan, Jan Eeckhout, and Gabriel Unger. "The rise of market power and the macroeconomic implications." The Quarterly Journal of Economics 135, no. 2 (2020): 561-644.


#8: Business cycle facts and theory.

  • Slides

  • 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.


#9: Real Business Cycle Theory

  • Slides

  • 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.

  • Imrohoroglu, Ayse. "Welfare costs of business cycles." The New Palgrave Dictionary of Economics, (2008)

  • There is a small sub-section on value function iteration here: Dirk Krueger, Macroeconomic Theory: Chapter 3


#10: Cash-In-Advance Model and 3 Equation New Keynesian Model

  • Slides

  • 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

#11: Inequality and Macroeconomics


#12: Economies with Heterogenous Households: Permanent Income Hypothesis (PIH) and Standard Incomplete Markets (SIM) Models

  • 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.


#13: Covid 19 and the Economy


#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.


#6: Cross-country Income Differences


#11: Unemployment and Labor Search Models

  • David Romer, Advanced Macroeconomics: Chapter 10