Monetary Economics 2
Course Type: Graduate (2nd Year Elective)
Course Description: This course introduces various topics in macroeconomics
Note 1: Computer codes will be provided in class
Note 2: No appointment, no meeting
Grades: Class Participation (20%), Midterm Exam (40%), Final Exam (40%)
Old Courses:
For 2023: The course is on identification in empirical macroeconomics and macro-finance. We will spend the first few weeks on the big picture, discussing key ideas and issues. And then we will go through the materials below carefully to further our understanding.
A. Causality in Empirical Research
B. Stock Market's Assessment of Monetary Policy Transmission: The Cash Flow Effect
C. The Economic Impact of Recession Announcements
D. Exchange Rate and Inflation under Weak Monetary Policy: Turkey Verifies Theory
F. The Ends of 27 Big Depressions
F.1. History of Fiscal Inflation in Turkey
The replication materials for these are available on my research page.
Before 2019:
Lecture Slides:
1. Motivations for Robust Control Theory
2. Introduction to Robust Control Theory
2.1 Linear Quadratic Dynamic Programming
2.3.1 Permanent Income Model
2.3.2 Permanent Income Model with Habit Persistence
3. Robust Control in Continuous Time
3.1 Continuous Time Stochastic Dynamic Programming
4. Robustness and New Keynesian Models
5. Robust Control under Learning
5.1 Robust Linear Quadratic Dynamic Programming with a Hidden State
6.1 Welfare Cost of Business Cycles
7. Introduction to Rational Inattention
8. Portfolio Choice under Rational Inattention
9.1 Consumption and Asset Prices
Readings:
A. Robust Control:
Chapters 1, 2, 3, 4, 5, 9, 10, 14, 18 of Hansen, L. P. and Sargent, T. J. (2008). “Robustness,” Princeton University Press.
Chapter 9 of Miao, J. (2014). “Economic Dynamics in Discrete Time,” The MIT Press Books, The MIT Press.
Anderson, E. W., Hansen, L. P., and Sargent, T. J. (2012). “Small Noise Methods for Risk-sensitive/Robust Economies,” Journal of Economic Dynamics and Control, Elsevier, vol. 36(4), pages 468-500.
Cogley, T., Colacito, R., Hansen, L. P., Sargent, T. J. (2008). “Robustness and U.S. Monetary Policy Experimentation,” Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(8), pages 1599-1623, December.
Ellison, M. and Sargent, T. J. (2015). “Welfare Cost of Business Cycles with Idiosyncratic Consumption Risk and a Preference for Robustness,” American Economic Journal: Macroeconomics, American Economic Association, vol. 7(2), pages 40-57, April.
Giordani, P. and Soderlind, P. (2004). “Solution of Macromodels with Hansen-Sargent Robust Policies: Some Extensions,” Journal of Economic Dynamics and Control, Elsevier, vol. 28(12), pages 2367-2397, December.
Hansen, L. P. and Sargent, T. J. (2001). “Robust Control and Model Uncertainty,” American Economic Review, American Economic Association, vol. 91(2), pages 60-66, May.
Hansen, L. P. and Sargent, T. J. (2008). “Fragile Beliefs and the Price of Model Uncertainty,” Working Paper (Discrete Time Formulation).
Hansen, L. P. and Sargent, T. J. (2010). “Wanting Robustness in Macroeconomics,” in Handbook of Monetary Economics, Elsevier.
Hansen, L. P., Sargent, T. J., and Tallarini, T. D. (1999). “Robust Permanent Income and Pricing,” Review of Economic Studies, Wiley Blackwell, vol. 66(4), pages 873-907, October.
Kasa, K. (2002). “An Information-Theoretic Approach to Robust Control,” Mimeo.
Walsh, C. E. (2004). “Robustly Optimal Instrument Rules and Robust Control: An Equivalence Result,” Journal of Money, Credit and Banking, vol. 36(6), pages 1105-1113, December.
Martin Ellison's lecture slides: http://users.ox.ac.uk/~exet2581/robust/robust.html
B. Rational Inattention:
Mackowiak, B. and Wiederholt, M. (2009). “Optimal Sticky Prices under Rational Inattention,” American Economic Review, vol. 99(3), pages 769-803.
Mackowiak, B. and Wiederholt, M. (2014). “Inattention to Rare Events,” Working Paper.
Mondria, J. (2010). “Portfolio Choice, Attention Allocation, and Price Comovement,” Journal of Economic Theory, vol. 145(5), pages 1837-1864.
Sims, C. A. (2015). “Rational Inattention and Monetary Economics,” Working Paper.
C. Rare Disasters:
Barro, R. J. (2006). “Rare Disasters and Asset Markets in the Twentieth Century,” The Quarterly Journal of Economics, Oxford University Press, vol. 121(3), pages 823-866.
Barro, R. J. (2009). “Rare Disasters, Asset Prices, and Welfare Costs,” American Economic Review, American Economic Association, vol. 99(1), pages 243-64, March.