&nbs= p;

&= nbsp;

College of Business Administration

Depart= ment of Economics

Macro = Theory

Lectur= er: O. Mikhail

ECO 7205-0001

Fall 2= 004

Course Outline

Time = &nb= sp; : &= nbsp; Tuesday 10:30 a.m. – 1:30 p.m.

Location&nb= sp; : &= nbsp; BA 110.

Office = ; &n= bsp; : &= nbsp; BA2-302.

Office Hours : &= nbsp; Tuesday 2:00 p.m. – 3:00 p.m.

= ; &n= bsp; = ; Thursday 3:00 p.m. – 5:00 p.m.

Web Page&nb= sp; : &= nbsp;

http://www.bus.ucf.edu/omikh= ail/Eco7206/F2004/Eco-7205-f2004.htm

E-Mail = ; <= /span>: &= nbsp; omikhail@hotmail.com

= ; &n= bsp; = ; omikhail@bus.ucf.e= du

Objective:

The goal of macroeconomic= s is twofold. First, it develops positive models to help us understand the dynam= ics of key macroeconomic variables, and second one uses these models to make judgments about what policies to pursue or not to pursue.

The objective of this cla= ss is to present the theory and the programming tools required to study Dynamic Stochastic General Equilibrium (DSGE) models and to apply these to topics in macroeconomics.

We start by presenting the stylized facts and the puzzles in macroeconomics, and then we investigate different types of models proposed to explain and to analyze these facts. Within a general equilibrium framework, we construct artificial economies u= sing Real Business Cycle (RBC) models. The bulk of the class evolves around the theoretical construction, methods of solving and criticisms to RBC models. Finally, we examine the proposed models to answer questions of interests. <= /p>

The class could be divide= d into two parts: Theory and Programming. In the theory part, we will address existence, continuity with respect to the parameters and properties of the solution to deterministic and stochastic dynamic programming. The programmi= ng part will mainly evolve around finding numerical solutions to dynamic programming.

By the end of the class, = students are expected to understand, read, develop and solve stochastic dynamic gene= ral equilibrium models of the Macroeconomy and Finance.

Each student will be assi= gned a Linux account for computational purposes. The Fortran 77 compiler is availa= ble on the server cleopatra.bus.ucf.ed= u

Additional Programming Sessions

Each week on Thursday fro= m 10:30 a.m. to 11:30 a.m., we will meet at the McGruder lab to learn how to write = and solve problems in Matlab and Fortran.

Regarding the reading lis= t and historically, we were only able to get to parts of the Labor Market. Due to class-time limitations and depending on your absorption rate, the part of t= he value of money could not be covered (actually, we never did in past classes= ).

The reading list is to pr= ovide you with a quasi complete set of information needed to understand the mater= ials presented in class. The class materials and the lecture notes are drawn from the reading list. You are responsible for everything covered in class.

General Pre-requisite

1)&n= bsp; An intermediate level of calculus, algebra and statistics.

2)&n= bsp; A fair understanding of Logic and Proof (class notes will be supplied).

3)&n= bsp; A programming language such as: GAUSS, FORTRAN or MATLAB (i.e., concepts such as statements, logical and loop type).

Evaluation

Assignments – Type I - (Weekly Summary) &n= bsp; 10 %
Assignments – Type II &= nbsp; &nbs= p; = 15 %
Mid-Term Exam&nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; 25 %
Final Exam &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; &nbs= p; 50 %

The Type I assignments ar= e a one page weekly summary of one article from Hartley, Hoover and Salyer (1998).

Books

· Azariadis, Costas. (1993) Intertemporal Macroeconomics. Blackwell Publishers, Cambridge, Massachusetts, ISBN: 1-55786-366-0.

· Barro, Robert J. (1989) Modern Business C= ycle Theory. Harvard University Press. I= SBN: 0-674-57860-0.

·<= span style=3D'font:7.0pt "Times New Roman"'> = Black, Fischer. (1995) Exploring Gener= al Equilibrium. MIT Press, Ca= mbridge, Massachusetts, ISBN: 0-262-= 02382-2.

· Becker<= /span>, Robert A. and John Ha= rvey Boyd III. (1997) Capital Theory, Equilibrium Analysis and Recursive Utility. Blackwell Publishers, ISBN: 1-557-86413-6.

· Cooley, Thomas, F. (1995) Frontiers of Business Cycle Research. Princeton University Press, I= SBN: 0-691-04323-X.

· Judd, Kenneth L. (1998) Numerical Methods= in Economics. MIT Press, ISBN: 0-262-10071-1.

· Har= tley, James E., Kevin D. Hoover and Kevin D. Slayer (1998) Real Business Cycles, A Reader. Routledge. ISBN: 0-415-17154-7.

· Hildenbrand, W. and A. P. Kirman. (1988) = Equilibrium Analysis. North-Holland, ISBN: 0-444-70511-2.

· Le = Van, Cuong and Rose-Anne Dana (2003) Dynamic Programming in Economics. Kluwer Academic Publishers. ISBN: 1-4020-7409-3

·<= span style=3D'font:7.0pt "Times New Roman"'> = Marimon, Ramon and Andrew Scott (2001) Computational Methods for the Study of Dynamic Economies. Oxford University Press. ISBN: 0-19-924827-3

· McCandless, George T. and Wallace, Neil. (19= 91) Introduction to Dynamic Macroeconomic Theory: An Overlapping Generations Approach. <= st1:place w:st=3D"on">Harvard University Press, ISBN: 0-674-4611= 1-8.

· Roger, Farmer E. (1993) The Macroeconomic= s of Self-Fulfilling Prophecies. MIT Press, Cambridge.

· Romer, David. (1996) Advanced Macroeconom= ics. McGraw-Hill, New York, ISBN: 0-07-053667-8.

·<= span style=3D'font:7.0pt "Times New Roman"'> = Snowdon, Brian and Vane, Howard. (1997) A Macroeconomics Reader. Routledge. I= SBN: 0-415-15716-1.

· Sargent, Thomas J. (1987) Dynamic Macroeconomics Theory. Harvard University Press, Cambridge, ISBN: 0-674-21877-9.

· Stokey, Nancy L. and Robert E. Lucas with Ed= ward C. Prescott (1989) Recursive Methods in Economic Dynamics. Harvard Press.

·<= span style=3D'font:7.0pt "Times New Roman"'> = Ljungqvist, Lars and Thomas Sargent (2000) Recursive Macroeconomic Theory. The MIT Press. ISBN: 0-262-19451-1 [New Ver= sion is in print, it should be available September 2004 (next month)]

OPTIONAL/ADDITIONAL for Finance Students

· Branimarte, Paolo (2002) Numerical Methods in Finance. Wiley Series in Probability and Statistics, Wiley Inter-Science, J= ohn Wiley & Sons, Inc. ISBN: 0-471-39686-9

READING LIST

Introduction

Topics: Advanced Undergra= duate Macroeconomics – Puzzles – Stylized Facts – Constructing Artificial Economies – Methodology and Types of Models – Aspect= s of General Equilibrium – I= ssues in General Equilibrium – Markov Chains – Critique.

Online Macro Notes

· Craig Burnside (Virginia), Macroeconom= ic Theory I

· Jeremy Greenwood (Rochester), Lec= ture Notes on Dynamic Competitive Analysis

· Lars Peter Hansen (Chicago) / Thomas Sargent (NYU), Recursive Models of D= ynamic Linear Economies

· Dirk Krueger (Stanford), Macroeconomic Theor= y

· Lars Ljungqvist (Stockholm School) / Thomas Sargent (NYU), Rec= ursive Macroeconomic Theory

· Rody Manuelli (Wisconsin), Notes on Discrete Time Economic Models: The Growth Model

Online Math Notes

·        Richard Woodward (TAMU), Dynamic Optimiz= ation (Continuous and Discrete Optimization)

·        Stefan Bilaniuk (Trent University, Canada), = A Problem Course = in Mathematical Logic (logic)

·        Douglas Arnold (Penn State), Functi= onal Analysis

·        Lee Larson (University of Louis= ville), Real Analysis Lecture Notes

·        Vitali Liskevich (Bristol), Measure T= heory and Functional Analysis

·        Thomas Ward (University of East = Anglia), Functional Analysis

·        Bert Wachsmuth (Seton Hall University), Interactive Real Analysis

·        Kris Wysocki (Melbourne), Metric = Spaces

·        Aisling McCluskey (York University, CA) / Brian McMa= ster (York University, CA), Topology Course = Notes

·        Sidney Morris (Ballarat University, Australia), T= opology without Tears

·        Oleg Viro et al. (Uppsala University, Sweden), Elementary Topology=

·        Jonathan Levin (Stanford) / Antonio Rangel (Stanford), Useful Math for Microeconomics

·        Efe Ok (NYU), Real Analysis and Probability = with Economic Applications

·        Martin Osborne (Toronto), Math= ematical Methods for Economic Theory

·        Tian Guoqiang (Texas A&M), Mathematical Economics <= /i>

·        Viatcheslav Vinogradov (Charles University, Czech Republic), A Cook-Book of M= athematics

·        Pravin Varaiya (Berkeley), Le= cture Notes on Optimization

Class Notes, Book Chapters, Articles

= ·        Barro, Robert. (2000) Macroeconomics.= MIT Press, Third Edition, ISBN: 0-262-02436-5.

= ·        Black, Fischer. (1995) Parts I, II and III.<= /p>
= ·        Diebold, F. and Rudebusch, G. “Measuri= ng Business Cycles: A modern Perspective.” Review of Economics and Statistics, pp. 67-77.

= ·        Eberwein, Curtis, J. (1996) Lecture Notes, Department of Economics, = McGill University.

= ·        Hendricks, Lutz. (2000) “General Notes – Math Review – Static Optimization - Introduction.” Lect= ure Notes.

= ·        Kydland, Finn E. (1995) “Business Cycl= es and Aggregate Labor Market Fluctuations.” In Frontiers of Business Cycle Research, T. F. Cooley, ed. Princeton Universit= y Press.

·        L= yasoff , Andrew. (2004) “Markov Chains—a Quick Introduction.” Class Notes. Boston Universit= y, Dept. of Mathematics.<= /p>
= ·        Lucas, Robert. (1976) “Understanding Business Cycles.” Carnegie- Rochester Series on Public Policy 6.

= ·        Mankiw, N. G. (1990) “A Quick Refresher Course in Macroeconomics.” Journal of Economic Literature XXVI= II: pp. 1645-1660.

= ·        Romer, David. (1996) Chapter 1.

·        Schlagenhauf, Don. (20= 03) Class Notes ECO 5207. Florida State University. http:= //garnet.acns.fsu.edu/~dschlage/don_schlagenhauf.htm

= ·        Smith, Gregory. (1999) Lecture Notes. Chapte= r 1, pp. 1-18.

= ·        Sims, Christopher A. (1980) “Macroeconomics and Reality.” Econometrica, vol. 48, no.= 1, pp. 1-48.

= ·        Sims, Christopher A. (1995) “Macroeconomics and Methodology.” Journal of Economic Perspectives, vol. 10, pp. 105-120.

·        Srinivasan, Naveen. (2004) Advanced Macro: A primer. Cl= ass Notes. Cardiff University & Liverpool research Group in Macro.

= ·        Young, Eric R. (2004) Lectures in Dynamic General Equilibrium. Class Notes. University of Virginia.

= ·        Waelti, Manuel (2002) Lecture Notes. University of Bern. http://www.vwi.unibe.ch/staf= f/waelti/

Development of Macroeconomics

Woodford, Michael. (1999) “Revolution and Evolution in Twentieth-Century Macroeconomics.” Working Paper, <= st1:place w:st=3D"on">Princeton University.

Akerlof, George A. (2002) “Behavioral Macroeconomics and Macroeconomic Behavior.” American Economic Review, pp. 411-433.

&n= bsp;

The Business Cycle

Romer, Christina D. (1999) “Changes in Busi= ness Cycles: Evidence and Explanations.” National Bureau of Econom= ic Research, Working Paper 6948, http://www.nber.org/papers/w6948

Zarnowitz, Victor. (1998) “Has the Business Cycle Been Abolished?” National Bureau of Economic Research, Working Paper 6367, http://www.nber.org/papers/w= 6367

Filtering and the quest to find the Business Cycle

Cogley and Nason (1995) Journal of Economic Dynam= ics and Control.

Hodrick and Prescott (1997) Journal of Money, Credit and Banking.

Harv= ey and Jaeger (1993) Journal of Applied Econometrics

Pedersen, Torben mark (1999) “Spectral Analysis, Business Cycles, and Filtering of Economic Time Series. A Su= rvey.” Working Paper, Unive= rsity of Copenhagen.=

Discounted Utility and Expectations

Loewenstein, George and Drazen Prelec. (1992) “Anomalies in Intertemporal Choice: Evidence and an Interpretation.” Quarterly Journal of Economics, vol. 107, Issue 2, May, pp. 573-597.

Dynamic Stochastic GE models and Dynamic Program= ming

Topics: Welfare Theorems = – Real Business Cycle – Calibration versus Estimation.

= ·        Azariadis, C. (1993) Chapters 1, 2, 4 and 6.=

= ·        Boileau, Martin. (2000) “A Child’= ;s Guide to Dynamic Programming – Two Period Economies – Optimal Control Theory.” Lecture Notes.

= ·        Campbell, J. (1994) “Inspecting the Mechanism: An Analytical Approach to the Stochastic Growth Model.” Journal of Monetary Economics, vol. 33, no. 3, pp. 463-506.

= ·        Cooper, Russell. (2000) “Dynamic Progr= amming: An Overview.” Lecture Notes.

= ·        Farmer, Roger. (1993) Chapters 2 and 3.

= ·        Hendricks, Lutz. (2000) “Dynamic Programming – Two and Three Period Models – Value Function and One-Sector Growth Model.” Lecture Notes.

= ·        King, Ian P. (1987) “A Simple Introduc= tion to Dynamic Programming in Macroeconomic Models.” Mimeo Queen’s University.

= ·        King, Robert G. Plosser, Charles I. and Rebe= lo, Sergio T. (2000) “Resuscitating Real Business Cycles.” Handbook= of Macroeconomics.

= ·        King, Robert G. Plosser, Charles I. and Rebe= lo, Sergio T. (1988a) “Production, Growth and Business Cycles: I. The basic Neoclassical Model.” Journal of Monetary Economics, = vol. 21, pp. 195-232.

= ·        King, Robert G. Plosser, Charles I. and Rebe= lo, Sergio T. (1988b) “Production, Growth and Business Cycles: II. New Directions.” Journal of Monetary Economics, vol. 21, pp. 309-3= 41.

= ·        Kydland, F. and Prescott, E. (1982) “Time to Buil= d and Aggregate Fluctuations.” Econometrica, vol. 50, pp. 1345-1370.=

= ·        Kydland,&nb= sp; F. and Prescott, E. (1996) “The Computational Experiment: An Econometric Tool.” Journal of Economic Perspectives, vol. 10, no. 1, = pp. 69-85.

= ·        Long, John B. Jr. and Plosser, Charles I. (1983) “Real Business Cycles.” Journ= al of Political Economy, vol. 91, no. 1, pp. 39-69.

= ·        Mankiw, N. G. (1989) “Real Business Cy= cle: a New Keynesian Perspective.” Journal of Economic Perspective,= pp. 79-90.

= ·        Mankiw, N. G. Rotenberg, J. and Summers, L. “Intertemporal Substitution in Macroeconomics.” Quarterly Journal of Economics, vol. 100, pp. 225-253.

= ·        McCallum, Bennett T. (1989) “Real Busi= ness Cycle Models.” In Barro (1989).

= ·        McGrattan, E. (1994) “A Progress Repor= t on Business Cycle Models.” Federal Reserve Bank of Minneapolis, Quarterly Review, v= ol. 18, no. 4.

= ·        Plosser, C. (1989) “Understanding real Business Cycles.” Journal of Economic Perspectives, vol. 3, pp. 51-77.

= ·        Prescott, Edward. (1991) “Real Business Cycle Theories: What Have we Learned?” Working Paper 486, Fede= ral Reserve of Minneapolis.

= ·        Prescott, Edward. (1986) “Theory Ahead= of Business Cycle Measurement.” Minneapolis Quarterly Review, pp. 9-22.

= ·        Quah, Danny T. (1995) “Business Cycle Empirics: Calibration and Estimation.” The Economic Journal, v= ol. 105, pp. 1594-1596.

= ·        Romer, Davis. (1996) Chapter 4.

= ·        Sargent, Thomas. (1987) Chapter 1.

= ·        Smith, Gregory. (1999) Lecture Notes. Chapte= r 2, pp. 19-85 and Chapter 4. pp. 124-226.

= ·        Stadler, George W. (1994) “Real Busine= ss Cycles.” Journal of Economic Literature, vol. XXXII, December,= pp. 1750-1783.

= ·        Summers, Lawrence. (1986) “Some Skeptical Observations on Real Business Cycle Theory.= 221; Quarterly Review, Federal Reserve Bank of Minneapolis.

Solution Methods

Online

·        Ian King (Auckland), A Simple Introduction to Dynamic Programming in Macroeconomic Models = ;

·        Paul Klein (Penn), Solving the G= rowth Model by Linearizing the Euler Equations

·        Harald Uhlig (Humboldt Universität Berlin), A Toolkit= for Analyzing Nonlinear Stochastic Models Easily

Articles

·        Benitez-Silva, Hugio. George Hall, Gunter J. Hitsch, Giorgio Pauletto, John Rust (2000) “A Comparison of Discrete = and Parametric Approximation Methods for Continuous-State Dynamic Programming Problems.” Yale University and University of Geneva= .

·        Christiano (1998) “Solving Dynamic Equilibrium Models by a Method of Undetermined Coefficients.” Working Paper 9804, Federal Reserve Bank of= Cleveland.

= ·        De La Fuente, A. (2000) Mathematical Meth= ods and Models for Economists. Cambridge University Press, Chapters 12 and 13. “Discrete and Continuous Time Intertemporal Optimization.”

= ·        Letendre, Marc-Andre (2001) “Estimating Parameters of RBC Models using GMM.” Lecture Notes. McMaster University= .

= ·        Ramon, Marimon and Scott, Andrews. (1999) “Computational Methods for the Study of Dynamic Economies.” Oxford University Press.

= ·        Sims, Christopher. (2000) “Linearized Stochastic Modes.” Lecture Notes.

= ·        Smith, Gregory. (1999) Lecture Notes. Chapte= r 3, pp. 86-123.

= ·        Taylor, John B. and Uhlig, Harald. (1990) “Solving Nonlinear Stochastic Growth Models: A Comparison of Alternat= ive Solution Methods.” Journal of Business and Economic Statistics, vol. 8, no. 1, pp. 1-17.

= ·        Uhlig, Harald. (1997) “A Toolkit for A= nalyzing Nonlinear Dynamic Stochastic Models Easily.” Memo, CentER, University of Tilburg and CPER.

Genetic Algorithms versus Evolutionary Programming

Duffy, John and Paul D. McNelis (1997) “Approx= imating and Simulating the Stochastic Growth Model: Parameterized Expectations, Neural Networks, and the Genetic A= lgorithm.” University of= Pittsburgh and Georgetown Uni= versity.

·        Gomme, Paul. (1996) “Evolutionary Programming as a Solution Technique for the Bellman Equation.” Mimeo,= Simon Fraser University.

&n= bsp;

Analytical versus Numerical: 101 for Beginn= ers

· Uhlig, Taylor (2001) “A Toolkit for Analysing Nonlinear Dynamic Stochastic Models Easily.” in Ramon Marimon and Andrew Scott (2001) Computational Methods for the Study of Dynamic Economies. Oxford University Press, footnote 3, p. 30.

&n= bsp;

Accuracy of the Numerical Solution?

· S. Boragan Aruoba, Jesus Fernandez-Villaverd= e, and Juan Francisco Rubio-Ramirez (2003) Comparing Solution Methods for Dynamic Equilibrium Economies. Working Paper 2003-27. Federal Reserve Bank of Atlanta.

· Den Hann, W. J. and Marcet, A. (1994) “Accuracy in Simulations.” Review of Economic Studies, v= ol. 61, pp. 3-17.

· Judd, Kenneth L. (1998) Numerical Dynamic Programming. Chapter 12.

· Santos, M.S. and J. Vigo. (1996) “Error Bounds for a Numerical Solution for Dynamic Economic Models.” Applied Math. Lett. Vol. 9, No. 4, p= p. 41-45.

Evaluating DSGE

= · Bauwens, Luc. Lubrano, Michel. and Richard, Jean-Francois. (1999) Bayesian Inference in Dynamic Econometric Models.<= /i> Advanced Texts in Econometrics, Ed. Granger. C.W.J. and Mizon, G.E. Oxford University Press; New York.

·        DeJong, David N. Ingram, Beth F. and Whitema= n, Charles H. (1997) “A Bayesian Approach to Dynamic Macroeconomics.R= 21; Manuscript.

·        Landon-Lane, John. (1999) “Evaluating = Real Business Cycle Models: The Data Transformation Problem.” Working P= aper, School of Economics, The University of New South Wales, Sydney, Australia.

·        Schorfheide, Frank. (2000) “Loss Funct= ion Based Evaluation of DSGE Models.” Working Paper, University of Penns= ylvania, Department of Economics, June.

= ·        Sims, Christopher. (2000) “Choosing Priors.” Lecture Notes.

= ·        Sims, Christopher. (2000) “The Calibra= tion Debate.” Lecture Notes.

= ·        Watson, Marc. (1993) “Measures of Fit = for Calibrated Models.” Journal of Political Economy, vol. 101, pp. 1011-1041.

= ·        Zellner, Arnold. (1971) An Introduction to Bayesian Inference in Econometrics. John Wiley & Sons, Inc., New York.

Consumption-Based Models and Finance<= /span>

Topics: Economics versus = Finance. Asset Prices. Asset Prices and Habit Formation. The Equity Premium Puzzle. = Levels of asset returns versus volatility of returns (e.g., Bomfim and Reinhart (2000), Kuttner (1999), Roley and Sellon (1998), Thornton (1998), and Reinhart and Simin (1997)), Consumption Models.

Online Macro-Finance

·        Tyler Shumway (Michigan), Introduction to Finance

·        Tyler Shumway (Michigan), Introduction to Continuous-Time Asset Pricing

Articles=

·        Bomfim, Antulio N. (2000) “Pre-Announcement Effects, News, and Volatility: Monetary Policy and = the Stock Market.” Finance and Economics Discussion Series, Divisi= on of Research, Statistics and Monetary Affairs, Federal Reserve Board, Washington, D.C.

·        Buiter, William H. (2004) A Small Corne= r of Intertemporal Public Finance – New Developments in Monetary Economics: Two Ghosts, Two Eccentricities, A Fallacy, A Mirage and a Mythos. NBER Work= ing Paper No. 10524.

·        Carroll, C. (1997) “Death to the Log-L= inearized Consumption Euler Equation.” NBER Working Paper #6298.

·        Castanias, Richard P. II (1979) “Macroinformation and the Variability of Stock market Prices.” = Journal of Finance, vol. 34, pp. 439-450.

·        F. Cooley, ed. Princeton Universit= y Press. Chapter 10.

·        Cooper, Russell. (2000) “Consumption a= nd Investment.” Lecture Notes.

·        Deaton, Angus. (1992) Understanding Consumption. Clarendon Lectures in Economics. Oxford University Press, ISBN: 0198288247.

·        Fernandez-Villaverde, Jesus and Dirk Krueger (2002) “Consumption over the Life Cycle: Some Facts from Cons= umer Expenditure Survey Data.” NBER Working Paper No. 9382

·        Grant, Simon and John Quiggin (2001) “= The Equity Premium Puzzle: Explanations= and Implications.” <= st1:place w:st=3D"on">Australian National University= , Working Paper No. 407.=

·        H= all, Robert. (1989) “Consumption.” In Barro (1989).

·        H= all, Robert. (1978) “Stochastic Implications of the Life-Cycle Permanent Income Hypothesi= s: Theory and Evidence.” Journal of Political Economy, vol. 86, p= p. 971-987.

·        Kocherlakota, Narayana R. (1996) “The Equity Premium: It’s Still a Puzzle.” Journal of Economic Literature, vol. XXXIV, March, pp. 42-71.

·        Mankiw, N. G. (1982) “Hall’s Consumption Hypothesis and Durable Goods.” Journal of Monetary Economics, vol. 10, pp. 417-425.

·        Mehra, Rajnish (2001) “The Equity Prem= ium Puzzle.” University of California, Santa Barbara= and University of Chicago.

·        Melino, Angelo and Alan X. yang (2004) “State Dependent Preferences Can Explain the Equity Premium Puzzle.” Working Paper. University of Toronto.

·        Muellbauer, John and Lattimore, Ralph. (1995) “The Consumption function: A Theoretical and Empirical Overview.̶= 1; Handbook of Applied Econometrics: Macroeconomics. Ed. Pesaran and Wickens, Black= well publishers Ltd.

·        Romer, David (1996) Chapters 7 and 8.

·        Sargent, Thomas. (1987) Chapter 3.

·        Weber, Christian E. “ Intertemporal non-separability and ‘rule of thumb’ Consumption.” Journa= l of Monetary Economics.

Empirical Saving

·        Peach, Richard and Charles Steindel. (2000) “A Nation of Spendthrifts? An Analysis of Trends in Personal and Gross Saving.” Current Issues in Economics and Finance, Federal Rese= rve Bank of New York, vol. 6, no. 10, September.

&n= bsp;

Asset Pricing

·        Breeden, D. T. (1986) “Consumption, Production, Inflation and Interest Rates: A Synthesis.” Journal of Financial Economics, vol. 16, pp. 3-39.

·        Campbell, J. “Asset Pricing, Consumpti= on and the Business Cycle.” Handbook of Macroeconomics, Chapter 1= 9, Elsevier.

·        Cochrane, John H. (2001) Asset Pricing. Princeton University Press, ISBN: 0691074984, Chapter 2.

·        Cox, Ingersoll and Ross (1985) “An Intertemporal General Equilibrium Model of Asset Prices.” Econometric= a, vol. 53, pp. 363-384.

·        Jermann, Urban J. (1998) “Asset Pricin= g in production Economies.” Journal of Monetary Economics.

·        Ljungqvist, Lars and Sargent, Thomas. (2000)= Recursive Macroeconomic Theory. MIT Press, ISBN:0262194511, Chapters 7 and 10.

·        Lucas, Robert E. Jr. (1978) “Asset Pri= ces in an Exchange Economy.” Econometrica, vol. 46, no. 6, pp. 1429-1445.

·        Lior Menzly, Lior. Tano Santos, and Pietro Veronesi (2002) “The Time Series of the Cross Section of Asset Prices.” NBER Working Paper No. 9217

·        Rouwenhorst, Geert K. (1995) “Asset Pricing Implications of Equilibrium Business Cycle Models.” In Fro= ntiers of Business Cycle Research.

·        Walti, Manuel (2001) A Primer on Asset Prici= ng. Class Notes.

Asset Prices, Incomplete Markets

Gu= venen, Fatih M. (2002) “Reconciling Conflicting Evidence on the Elastic= ity of Intertemporal Substitution: A Macroeconomic Perspective.” Wor= king Paper. Department of Economics, University of Rochester.<= span style=3D'mso-bidi-font-weight:bold'>

Qi Zeng (2002) “Stock Market and Consumer D= ebt.” Finance Department, The Wharton School Universi= ty of Pennsylvania.

&n= bsp;

Asset prices and the Cost of Business Cycle= s

·        Alvarez, Fernando and Urban J. Jermann. (200= 0) “Using Asset Prices to Measure the Cost of Business Cycles.” National Bureau of Economic Research, Working Paper 7978, http://www.nber.org/papers/w7978

CAPM

·        Jagannathan, Ravi and Ellen R. McGrattan. (1995) “The CAPM Debate.” Federal Reserve Bank of Minneapolis Quarterly Review, vol. 19, no.4, Fall, pp. = 2-17.

The Labor Market

Topics: Real Business Cycle, the Labor Market, Gover= nment and Policy, Sectoral versus Aggregate Shocks.

= ·        Aiyagari, R. Christiano, L. and Eichenbaum, Martin. (1992) “The Output, Employment and Interest Rate Effects of Government Consumption.” Journal of Monetary Economics, vol. 30, pp. 73-86.

·        Barro, Robert J. (1990) “The Ricardian Approach to Budget Deficits.” Journal of Economic Perspectives, vol. = 3, pp. 32-54.

= ·        Benassi, Corrado. Chirco, Alessandra. and Colombo, Caterina.= (1994) The New Keynesian Economics. Basil Blackwell, Inc. Ox= ford U.K., and Cambridge U.S.

= ·        Burnside, Craig. Eichenbaum, Martin. and Fis= her, J. “Assessing the Effects of a Fiscal Policy Shock.” Manuscript= .

= ·        Chari, V.= V. Christiano, L. J. and Kehoe, P. J. (1995) “Policy Analysis in Business Cycle Models.” In Frontiers of Business Cycle Research, T. F. Cooley, ed. Princeton University Press.
= ·        Christiano, L. and Eichenbaum, M. (1992) “Current real Business Cycle Theories and Aggregate labor Market Fluctuations.” American Economic Review, vol. 82, pp. 430-450.=

= ·        Hall, Robert E. (1998) “Labor-Market Frictions and Unemployment Fluctuations.” National Bureau of Econo= mic Research, Working Paper Series no. 6501.

= ·        Hansen, G. and Wright, R. (1992) “The Labor Market in Real Business Cycle Theory.” Quarterly Review, Federal Reserve Bank of Minnea= polis, Spring.

= ·        Lilien, David M. (1982) “Sectoral Shif= ts and Cyclical Unemployment.” Journal of Political Economy, vol.= 90, no. 4, pp. 777-793.

= ·        Ljungqvist, Lars and Sargent, Thomas. (2000)= Recursive Macroeconomic Theory. MIT Press, ISBN:0262194511, Chapters 9 and 12.

= ·        Long, John B. Jr. and Plosser, Charles I. (1= 987) “Sectoral versus Aggregate Shocks in the Business Cycle.” Am= erican Economic Review: Papers and Proceedings, vol. 77, pp. 333-336.

= ·        Lucas, Robert E. (1976) “Econometric Policy Evaluation: A Critique.” Carnegie-Rochester Series on Public Policy.

= ·        Millard, Stephen. Scott, Andrew and Sensier, Marianne. (1999) “Business Cycles and the Labour Market: Can the Theo= ry Fit the Facts?” Working Paper Series no. 93, Bank of England= .

= ·        Mulligan, Casey B. (1999) Microfoundations a= nd Macro Implications of Indivisible Labor.” NBER, Working Paper 7116, http://www.nber.org/papers/w7116

= ·        Mulligan, Casey B. (2001) “Aggregate Implications of Indivisible Labor.” Advances in Macroeconomics. Vol. 1, issue 1, article 4.

= ·        Romer, David (1996) Chapters 5, 6 and 10.

= ·        Sims, Christopher. (2000) “Dynamic Fis= cal Policy.” Lecture Notes.

Empirical Hours Worked

·        McGrattan, Ellen R. and Richard Rogerson. (1= 998) “Changes in Hours Worked Since 1950.” Federal Reserve Bank of Minneapolis Quarterly Review, vol. 22, no. 1, winter, pp. 2-19.

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Is the model wrong or is it bad empirical measurements?

·        Abraham, Katherine G. (1995) “Real Wag= es and the Business Cycle.” Journal of Economic Literature, Vol. XXXIII, September, pp. 1215-1264.

Equilibrium Employment

·        Pissarides, Christopher A. (2000) Equilibrium Unemployment Theory. The MIT Press. ISBN: 0-262-16187-7

·        Shimer, Robert (2002) Equilibrium Unemployme= nt Fluctuations. Working paper. Princeton University. http://www.princeton.edu/~Eshimer/wp/fluctuations.pdf

Value of Money

Topics: Real Business cycle and Money, Currency in t= he Utility Function, cash in Advance and OLG.

= ·        Cooley, T. F. and Hansen, Gary D. (1995) “Money and the Business Cycle.” In Frontiers of Business Cyc= le Research, T. F. Cooley, ed. Princeton University Press.
= ·        Cooper, Russell (2000) “Overlapping Generations Models.” Lecture Notes.

= ·        Hendricks, Lutz. (2000) “Money in OLG Models – Cash in Advance Models.” Lecture Notes.

= ·        McCandless, G. T. and Wallace, N. (1991) Chapters 1, 2, 3, 4, 5 and 6.

= ·        Sargent, Thomas. (1987) Chapters 4, 5, 6 and= 7.