Economics
502
Macroeconomics/Monetary Theory I
Fall, 2006
Course
Description
This course examines economic theories and evidence about the time series behavior of aggregate economic variables such as output, consumption, investment, interest rates, inflation, and employment. We also present some basic models of the role of money in the economy.
ECON 502 emphasizes the basic economic and analytical tools that are used in macroeconomic research. Subsequent courses, including ECON 505, ECON 506, and ECON 523, examine these tools in greater depth and apply them to other issues.
Another objective of the course is to provide students with an overview of the history of thought on macroeconomics and monetary theory from a somewhat more technical perspective than your undergraduate classes. There will also be some discussion of fiscal and monetary policy. This course is, however, not a comprehensive course in either the history of economic thought regarding macroeconomic and monetary issues or in the theory of economic policy.The textbook Recursive Macroeconomic Theory, by Lars Ljungqvist and Thomas Sargent, MIT Press, 2000 has been ordered as a text for the course. Although it will be used primarily in the follow on course ECON 505, you could buy it now since it provides a good alternative presentation of many of the topics we will cover in class.
Other useful texts:
Barro, R. J., Macroeconomics
(an undergraduate text worth looking at if you have not had a good undergraduate
macro course), MIT Press
Blanchard, O.J. and S. Fischer, Lectures on Macroeconomics, MIT Press
Cooley, T.F., editor, Frontiers of Business Cycle Research, Princeton
University Press
Sargent, T.J., Macroeconomic Theory, Academic Press
Lucas, R.E., Jr. and T.J. Sargent, eds., Rational Expectations and Econometric
Practice, Volumes I and II, University of Minnesota Press
Lucas, R.E., Jr., Studies in Business-Cycle Theory, MIT Press
Lucas, R.E., Jr., Models of Business Cycles, Blackwell
Champ, B. and S. Freeman, Modeling Monetary Economies, Wiley &
Sons
Farmer, R. E., The Macroeconomics of Self-Fulfilling Prophecies, MIT
Press
I will be providing extensive notes of the material covered in class in Adobe pdf format. You can read the notes with Adobe Acrobat Reader. This program is platform independent and enables you to read the notes on-line as well as print off your own hard copy.
The course notes are available below:
1. Introduction
2. A Simple Representative
Agent Economy
3. Solow-Swan
Growth Model
4. Cass-Koopmans
Growth Model
5. Cass-Koopmans
as a Competitive Equilibrium
6. Introduction
to Business Cycles
6a. Graphs
for Lecture Notes 6
6b Keynes on Interest & Money
7. Stochastic
Difference Equations
8. Stochastic
Growth as a Model of a Real Business Cycle
9. Real Business
Cycle Models
10. Unemployment
and other features of labor markets
11. Money and
Growth
12. Overlapping
Generations Models
13. Rational
Expectations
14. Overlapping
Generations Business Cycle Model
15. Cash in Advance
Model of Money Demand
16. Financial
Intermediation
17. Bank Deposits and Cash
18. Inside Money and Investment
The course grade will be based on problem sets (20%) and a final exam (80%). As an example for this year's exam, you might look at last year's final:
2005 Final exam