Macroeconomics II

Avisos:

30/07/2025: página atualizada.

Syllabus

Objective

Introduction to classic developments in macroeconomics. Students will deepen their knowledge to formulate and solve stochastic dynamic economic models and apply these techniques to several substantive issues in consumption, asset pricing, business cycle theory, monetary economics, and labor economics. The subject will also cover dynamic models with heterogeneous households and will use these models to analyze a range of issues, including income and wealth inequality.

Grading

• Test (75%): 

• Presentation of a paper (25%): 

Programa

Lectures

1 and 2 - Equity Premium Puzzle

• Notes

• Code

• Readings:

  • Mehra, R., & Prescott, E. C. (1985). The equity premium: A puzzle. Journal of Monetary Economics, 15(2), 145-161.

  • Ljungqvist & Sargent - Chap. 13 and 14 (Asset pricing). 

3, 4, 5, and 6 - Incomplete Markets and Heterogeneous Agents in Steady State

• Notes: Huggett (1993), Aiyagari (1994)

• Codes: 

  • Huggett: this code does not solve the model's equilibrium but computes the value, policy functions, and implied stationary distribution. Students should work to replicate the original results. Visit Mark Huggett´s page for some important information. 

  • Bisection: slides, code

  • Aiyagari: Simple version with 2 shocks.

• Readings

  • İmrohoroğlu, A. (1992). The welfare cost of inflation under imperfect insurance. Journal of Economic Dynamics and Control, 16(1), 79-91.

  • Huggett, M. (1993). The risk-free rate in heterogeneous-agent incomplete-insurance economies. Journal of Economic Dynamics and Control, 17(5-6), 953-969.

  • Aiyagari, S. R. (1994). Uninsured idiosyncratic risk and aggregate saving. The Quarterly Journal of Economics, 109(3), 659-684.

  • Heathcote, J., Storesletten, K., & Violante, G. L. (2009). Quantitative macroeconomics with heterogeneous households. Annu. Rev. Econ., 1(1), 319-354.

  • Kirkby, R. (2019). Bewley–Huggett–Aiyagari models: computation, simulation, and uniqueness of general equilibrium. Macroeconomic Dynamics, 23(6), 2469-2508.

  • Ljungqvist & Sargent - Chap 18 (Incomplete Market Models). 

7 and 8 - Extensions of the Aiyagari model

• Endogenous labor and taxes

• OLG - Huggett (1996)

• Readings:

  • Huggett, M. (1996). Wealth distribution in life-cycle economies. Journal of Monetary Economics, 38(3), 469-494.

  • Pijoan-Mas, J. (2006). Precautionary savings or working longer hours? Review of Economic Dynamics, 9(2), 326-352.

  • Aiyagari, S. R., & McGrattan, E. R. (1998). The optimum quantity of debt. Journal of Monetary Economics, 42(3), 447-469.

9 - Transitions and Aggregate Risk

• Notes

• Readings:

  • Ríos-Rull, J. V. (1997). Computation of equilibria in heterogeneous agent models (No. 231). Federal Reserve Bank of Minneapolis.

10 - Introduction of Search Theory

• Notes

• Code

• Readings

  • Ljungqvist & Sargent - Chap 6 (search, matching, and unemployment).

11 and 12 - Equilibrium Search and Matching

• Notes

• Code: Equilibrium, Calibration

• Readings:

  • Ljungqvist & Sargent - Chap 28 (Equilibrium Search and Matching).

  • Mortensen, D. T., & Pissarides, C. A. (1994). Job creation and job destruction in the theory of unemployment. The review of economic studies, 61(3), 397-415.

  • Pissarides, C. A. (2000). Equilibrium unemployment theory. MIT Press.

  • Pissarides, C. A. (2011). Equilibrium in the labor market with search frictions. American Economic Review, 101(4), 1092-1105.

Presentations

• Each pair of students should choose a paper from the list above (soon).  

• 30 minutes of presentation. 

• Mandatory topics:

  • Research Question

  • Method

  • Contribution

  • Challenges of implementation

• Please send me the slides by September XX.

September X

• Boppart, T., Krusell, P., & Mitman, K. (2018). Exploiting MIT shocks in heterogeneous-agent economies: the impulse response as a numerical derivative. Journal of Economic Dynamics and Control, 89, 68-92.

  • XX

  • Slides

• Heathcote, J., Storesletten, K., & Violante, G. L. (2010). The macroeconomic implications of rising wage inequality in the United States. Journal of Political Economy, 118(4), 681-722.

  • XX

  • Slides

• Krusell, P., Mukoyama, T., Şahin, A., & Smith Jr, A. A. (2009). Revisiting the welfare effects of eliminating business cycles. Review of Economic Dynamics, 12(3), 393-404.

  • XX

  • Slides

September XX

• Kaplan, G., & Menzio, G. (2016). Shopping externalities and self-fulfilling unemployment fluctuations. Journal of Political Economy, 124(3), 771-825.

  • XX

  • Slides

• Shimer, R. (2005). The cyclical behavior of equilibrium unemployment and vacancies. American Economic Review, 95(1), 25-49.

  • XX

  • Slides

• Hagedorn, M., & Manovskii, I. (2008). The cyclical behavior of equilibrium unemployment and vacancies revisited. American Economic Review, 98(4), 1692-1706.

  • XX

  • Slides

Assignments

• Lista 1 

• Lista 2

• Lista 3

• Lista 4

• Lista 5: assignments 28.8, 28.9, and 28.10 Ljungqvist & Sargent - Chapter 28 (Equilibrium Search and Matching). 3ª ed.