Advanced Economic Theory

Course Type: Undergraduate (Elective)

Course Description: This course introduces graduate level macroeconomics to advanced undergraduate students

Mathematical Prerequisites: Calculus, Linear Algebra, Basic Probability Theory

Note 1: Computer codes will be provided in class (if applicable)

Note 2: I do not take attendance

Note 3: You are not allowed to use electronic devices (e.g., mobile phones, tablets, laptops, etc.) in class

Note 4: No appointment, no meeting. Some suggestion (click here) 

Grades: Class Participation (20%), Midterm Exam (40%), Final Exam (40%)

Old Courses:

For 2020: This academic year, the course will be on capital account policy with a focus on international reserve management. Due to the pandemic and the resulting changes in teaching arrangements, notes 2 and 3 are not applicable this year. Here are the links to the papers:

• International Reserves by Aizenman 

• LDC Foreign Borrowing and Default Risk: An Empirical Investigation, 1976-1980 by Edwards

• International Reserves: Precautionary Versus Mercantilist Views, Theory and Evidence by Aizenman and Lee

• International Reserves in Emerging Market Countries: Too Much of a Good Thing? by Jeanne

• The Social Cost of Foreign Exchange Reserves by Rodrik

• International Reserves and Rollover Risk by Bianchi, Hatchondo and Martinez 

• Precaution Versus Mercantilism: Reserve Accumulation, Capital Controls, and the Real Exchange Rate by Choi and Taylor 

• Financial Stability, the Trilemma, and International Reserves by Obstfeld, Shambaugh and Taylor 

• Trade Invoicing, Bank Funding, and Central Bank Reserve Holdings by Gopinath and Stein

• Has the Dollar Lost Ground as the Dominant International Currency? by Prasad

• The Asian Financial Crisis and International Reserve Accumulation: A Robust Control Approach by Lee and Luk

For 2018: This academic year, the course will deviate from the contents below and focus on open economy macroeconomics instead. The required textbook is "Open Economy Macroeconomics" by Martin Uribe and Stephanie Schmitt-Grohe (click here and here). We will cover chapters 1 to 5 which develop quantitative small open economy Real Business Cycle (RBC) models piece-by-piece.

Before 2018:

1. Introduction

2. New Keynesian Model

2.1 Short Notes on the Lucas Critique

2.2 Other Models of Price Rigidities

2.3 Information Rigidities

2.4 Solving Linear Rational Expectations Models Using Generalized Schur Decomposition 

3. Monetary Policy

3.1 Derivation of Quadratic Loss Function

4. A Small Open Economy Model

4.1 Dornbusch's Model of Exchange Rate

4.1.1 Analyzing Dornbusch's Model with a Phase Diagram 

5. Ricardian Equivalence

6. Optimal Taxation

7. Welfare Cost of Business Cycles and the Equity Premium Puzzle

7.1 Short Notes on the Permanent Income Hypothesis

8. Various Models of Money and Prices

9. Unemployment

10. The Modigliani-Miller Theorem and Financial Business Cycles

11. Crises

12. Learning in Macroeconomics

13. Empirical Macroeconomics

14. Using Luminosity Data