Readings

Part II

Lecture notes

Week 1: Part 1

Week 3, 4, 5: Part 2, 3, 4, 5, 6, 7

Week 6, 7: Part 8, 9

 

Texts used

Costas Azariadis, Intertemporal Macroeconomics, Blackwell 1993 (IM): Chapters (or parts): 1-4, 5-6, 11, 12, 15, 19, 24

John Cochrane, Asset Pricing, Rev. ed., Princeton 2005 (AP): Chapters 1 and 2

David Romer, Advanced Macroeconomics, 3rd ed, McGraw-Hill 2006 (AM): pp. 48-62 and 76-87.

David del la Croix and Philippe Michel, A Theory of Economic Growth, Cambridge University Press 2002 (DM)

Rabi Bhattacharya and Mukue Majumdar, Random Dynamical Systems, Cambridge University Press 2007 (BM)

 

Readings

1) Dynamical Systems and Applications

a) The dynamical systems approach to DGE. Linear and non-linear deterministic systems in continuous and discrete time. Steady states and cycles. Hyperbolicity, stability and determinacy of equilibria.

IM, chs. 1-4, 6-8. AM, pp. 48-62 and 76-87. BM, pp. 1-45. DM, pp. 314-325.

b) Stochastic dynamical systems and Markov chains. Stationarity and ergodicity.

BM, pp. 119-142, 245-266

2) Overlapping Generations

a) Equilibria and optima in exchange economies. Multiperiod lifecycles.

IM, chs 11,12 and pp. 245-246.

Azariadis, C., J. Bullard, and L. Ohanian (2004), "Trend-Reverting Fluctuations in the Life-Cycle Model", Journal of Economic Theory, 119(2), 334-356.

b) Growth and public debt. The golden rule.

IM, pp. 195-206, chs. 19 and 20.1. AM, pp. 76-92. DM, pp. 1-64, 72-90, 179-237.

c) Money and inflation.

IM, chs. 24, 26.1, 26.2.

Sargent, T., and N. Wallace (1981), "Some unpleasant monetarist arithmetic", Quarterly Review of the Federal Reserve Bank of Minneapolis, Fall, 1-17.

Gottardi, P. (1996), "Stationary monetary equilibria in overlapping generations models with incomplete markets", Journal of Economic Theory, 71, 75-89.

3) Asset Prices

Arrow securities. Asset prices in exchange economies with and without complete markets. Asset return anomalies. Imperfect financial markets.

AP, chs. 1-3.

Lucas, R. (1978) "Asset prices in an exchange economy", Econometrica, 46, 1429-1445.

Mehra, R., and E. Prescott (1985), "The equity premium: a puzzle", Journal of Monetary Economics, 15, 145-161.

Mankiw, G., and S. Zeldes (1991), "The consumption of stockholders and non-stockholders", Journal of Financial Economics, 29, 97-112.

Alvarez, F., and U. Jermann (2000), "Efficiency, equilibrium and asset pricing with risk of default", Econometrica, 68, 775-797.