ECO-2031, 2017 Winter, U of Toronto

University of Toronto

Macroeconomic Theory II (PhD)

ECO2031H 2017 Winter

Outline PDF Version     Weekly Course Schedule

Announcements

• February 2: Final exam will be held in class on February 14, 2017.

• Last year's final exam and Swapnika's solutions and Stephen's solutions.

• Sample exams from my Penn era (circa mid 2000s): 2004 Prelim  2005 Prelim  2006 Prelim

• January 4: Outline is posted. 

Course Description

This course is the third in 1st year PhD macroeconomics sequence and complements its predecessor ECO2030. The ultimate goal of this course is to learn how to develop a variety of quantitate models (that can be used to generate artificial data of both allocations and prices which can be meaningfully mapped to actual data) to give answers to macroeconomic questions. In this course, most (if not all) of the material will be studied from the strict theoretical point of view and the emphasis is on economic rigor. So, we will neither look at data in any serious manner nor computationally solve the models. Furthermore, this course is not a survey of topics in macroeconomics: The objective is not to give a review of known results of a specific topic but rather to give an example of how to use modern macroeconomic tools to tackle questions. 

Textbooks and Papers

•    Frontiers of Business Cycle Research, by Cooley, T. (1995), Princeton University Press.

•    Recursive Methods in Economic Dynamics, by Stokey and Lucas with Prescott, Harvard University Press.

•    Recursive Macroeconomic Theory, by Ljungqvist and Sargent, The MIT Press.

•    None of these books are required. I will post my slides and I will benefit from teaching material of Victor Rios-Rull, Dirk Krueger, Chris Carroll, Fabrizio Perri in my slides.

•    The papers that I will cite (in a very incomplete form below) are not to be read in general, although some students may find them useful.

Evaluation

•    There will be a final exam which be held during the last class (February 14, 2017, Tuesday 9-11am in GE100). The final exam will include all the material covered in the course. 

•    In the context of the course, I will occasionally assign some homework questions. But these are not required. 

•    Class participation may affect your final grade in some special circumstances.  

Tentative List of Topics, Reading List and Slides 

Week #1: Introduction, Modern Macroeconomics Framework, Exogenous Growth Models (Solow and Neo-classical growth models)

•    Introduction Slides

•    Exogenous Growth Models Slides

•     Prescott E.C., The Transformation of Macroeconomic Policy and Research, 2004 Nobel Prize Lecture.

Week #2: Endogenous Growth Models (AK Model, Human Capital Model, Romer's R&D Model)

•    Endogenous Growth Models Slides

•    HW Solutions by Stephen

•    Robert E. Lucas, Jr., Why Doesn't Capital Flow from Rich to Poor Countries? The American Economic Review Vol. 80, No. 2

•    PM Romer, Endogenous Technological Change, Journal of Political Economy, 1990

Week #2 and #3: Business Cycle Facts, real business cycle theory, variants of the neo-classical growth model. 

•    Stochastic Growth Model Slides

•    HW Solutions by Stephen

•    Dirk Krueger, Quantitative Macroeconomics: An Introduction

•    Gary D. Hansen, "Indivisible labor and the business cycle", JME 1985

•    Nicholas Bloom, "THE IMPACT OF UNCERTAINTY SHOCKS", Econometrica, 2009

Week #4: Lucas tree

•    Lucas Tree Slides

•    HW Solutions by Stephen

•    Chris Carroll's notes on Lucas tree

Week #5: Economies with Heterogenous Agents: Measure Theory and Industry equilibrium

•    Heterogeneity Slides

•    HW Solutions by Stephen

•    Chapter 11 and 12: Recursive Methods in Economic Dynamics, by Stokey and Lucas with Prescott, Harvard University Press.

•    Hugo A. Hopenhayn, "Entry, Exit, and firm Dynamics in Long Run Equilibrium", Econometrica 1992

Week #6: Life-Cycle models with heterogeneous agents and standard incomplete markets (SIM) model, consumption insurance, idiosyncratic labor income risk.

•    SIM Slides

•    Default Models Slides

•    HW Solutions by Stephen

•    Fatih Guvenen, "Macroeconomics with Heterogeneity: A Practical Guide", Economic Quarterly, 2011

•    Jonathan Heathcote, Kjetil Storesletten and Gianluca Violante, "Quantitative Macroeconomics with Heterogeneous Households", Annual Review of Economics, 2009

•    Grey Gordon, "Optimal Bankruptcy Code: A Fresh Start for Some", 2015

•    Chatterjee, Corbae, Nakajima and Ríos-Rull, "A Quantitative Theory of Unsecured Consumer Credit with Risk of Default", Econometrica, 2015

•    Fabrizio Perri and Krueger, "Does Income Inequality Lead to Consumption Inequality? Evidence and Theory", 2006, ReStud