advanced macroeconomics- 3 question-with reference books and slide

Prof. Andrzej Cieślik Department of Macroeconomics and International Trade Theory, Faculty of Economic Sciences, University of Warsaw, 44/50 Długa St., 00-241 Warsaw, email: cieslik@wne.uw.edu.pl Office hours: Thursday 15.00-16.30, room 409/410.

A d v a n c e d M a c r o e c o n o m i c s C o u r s e S y l l a b u s - S p r i n g 2 0 1 3 : M i c r o f o u n d a t i o n s , E c o n o m i c G r o w t h , B u s i n e s s C y c l e s a n d L a b o r M a r k e t

1. Description: This is a 60-hour graduate course in advanced macroeconomics that focuses on dynamic real dynamic macroeconomics. The topics will cover microeconomic foundations of macroeconomics, growth theories, business cycles and selected labor market issues. This is an obligatory course for MA Programs in International Economics and Quantitative Finance. Foreign students visiting the Faculty of Economic Sciences at the University of Warsaw are also welcome to participate. Polish students with good knowledge of English from other specialization fields can enroll subject to instructor’s approval. The course is offered only in the spring semester. The class meets twice a week on Tuesdays and Thursdays for two hours (9.45- 11.20) in room A. The class is accompanied by a non-obligatory tutorial classes that meet on Mondays (9.45- 11.20) in room 203 every fortnight starting February 25, 2013. 2. Objectives: The main objective of this course is to familiarize students with key analytical models in real macroeconomics. The course consists of four parts. The first part is devoted to microfoundations of macroeconomic models such as consumption, investment and the government sector. The second part focuses on exogenous and endogenous growth theories and covers neoclassical models such as Solow-Swan, Ramsey and OLG models as well as newer models such as AK, Lucas-Uzawa, Romer and Grossman- Helpman models. The third part concentrates on business cycles and covers real business cycle and new Keynesian theories. The fourth part is devoted to various labor market issues. 3. Required reading: There is no single textbook for this course. Materials for this course come from various textbooks and articles. All assigned readings are required readings. Most often reference will be made to the selected chapters from the following six books: [1] Acemoglu D., 2009, Introduction to Modern Economic Growth, Princeton University Press, Princeton, [2] Adda J., Cooper R., 2003, Dynamic Economics, The MIT Press, Cambridge, M.A., [3] Bagliano F.C., Bertola G., 2004, Models for Dynamic Macroeconomics, Oxford University Press, Oxford, [4] Barro R.J., Sala-i-Martin X., 2004, Economic Growth, Second Edition, The MIT Press, Cambridge, M.A., [5] Blanchard O.J., Fischer S., 1989, Lectures on Macroeconomics, The MIT Press, Cambridge, M.A., [6] Romer D., 2001, Advanced Macroeconomics, Second Edition, McGraw-Hill, New York. 4. Prerequisites: The main prerequisite for this course is knowledge of both macro and microeconomics at the undergraduate level, microeconomics and mathematical methods in economics at the graduate level. 5. Exam: The grading will be based on the final written exam offered on June 13 (starting 9.00 and ending 12.00) in room A.

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Detailed course program description: Part I. Microeconomic Foundations Topic 1. Consumption Adda J., Cooper R., 2003, ch. 6, Consumption, 139-164. Bagliano F.C., Bertola G., 2004, ch. 1, Dynamic consumption theory, 1-46. Romer D., 2001, ch. 7, Consumption, 331-362. Topic 2. Government sector Romer D., 2001, ch. 11, Budget deficits and fiscal policy, 531-582. Topic 3. Investment theory Adda J., Cooper R., 2003, ch. 8, Investment, 187-214. Bagliano F.C., Bertola G., 2004, ch. 2, Dynamic models of investment, 47-101. Romer D., 2001, ch. 8., Investment, 367-409. Sala-i-Martin X., 2000, Internal and external adjustment costs in the theory of fixed investment, lecture notes. Hall R., Jorgenson D., 1967, Tax policy and investment behavior, American Economic Review 57, 391-414. Hayashi F., 1982, Tobin's marginal q and average q: A neoclassical interpretation, Econometrica 50, 213-224. Part II. Growth Theory A. Neoclassical growth theory Topic 4. Solow-Swan model Acemoglu D., 2009, ch. 2., The Solow growth model, 26-76. Barro R.J., Sala-i-Martin X., 2004, ch. 1, Growth models with exogenous saving rates, The neoclassical model of Solow and Swan, 23-59. Romer D., 2001, ch. 1, The Solow growth model, 5-43. Topic 5. Ramsey-Cass-Koopmans (RCK) model Acemoglu D., 2009, ch. 8., The neoclassical growth model, 287-326. Barro R.J., Sala-i-Martin X., 2004, ch. 2, Growth models with consumer optimization, 85-133. Romer D., 2001, ch. 2, Infinite horizon and overlapping generation models, Part A: The Ramsey- Cass-Koopmans model, 47-74. Blanchard O.J., Fischer S., 1989, Lectures on Macroeconomics, ch. 2, Consumption and investment: Basic infinite horizon models, section 2.3, Government in the decentralized economy, 52-58. Topic 6. Overlapping generations (OLG) model Acemoglu D., 2009, ch. 9., Growth with overlapping generations, 327-358. Romer D., 2001, ch. 2, Infinite horizon and overlapping generation models, Part B: The Diamond model, 75-90. Blanchard O.J., Fischer S., 1989, Lectures on Macroeconomics, ch. 3, The overlapping generations model, section 3.2, Social security and capital accumulation, 110-114.

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Barro R., 1974, Are government bonds net wealth?, Journal of Political Economy 82, 1095-1117. Diamond P., 1965, National debt in a neoclassical growth model, American Economic Review 55, 1126-1150. Samuelson P.A., 1958, An exact consumption-loan model of interest with or without the social contrivance of money, Journal of Political Economy 66, 467-482. Abel A., Mankiw N.G., Summers L., Zeckhauser R., 1989, Assessing dynamic inefficiency: Theory and evidence, Review of Economic Studies 56, 1-20. Topic 7. Convergence debate Acemoglu D., 2009, ch. 3., The Solow model and the data, 77-108. Barro R.J., Sala-i-Martin X., 2004, ch. 11, Empirical analysis of regional datasets, 461-496. Barro R.J., Mankiw N.G., Sala-i-Martin X., 1995, Capital mobility in neoclassical models of growth, American Economic Review 85, 103-115. Islam N., 1995, Growth empirics: A panel data approach, Quarterly Journal of Economics 110, 1127-1170. Mankiw N.G., Romer D., Weil D.N., 1992, A contribution to the empirics of economic growth, Quarterly Journal of Economics 107, 407-437. B. New growth theory Topic 8. AK models and externalities Acemoglu D., 2009, ch. 11., First-generation models of endogenous growth, 387-410. Barro R.J., Sala-i-Martin X., 2004, ch. 1, Growth models with exogenous saving rates, Models of endogenous growth, 61-71. Barro R.J., Sala-i-Martin X., 2004, ch. 4, One sector model of endogenous growth, 205-232. Rebelo S., 1991, Long-run policy analysis and long-run growth, Journal of Political Economy 99, 500-521. Romer P., 1986, Increasing returns and long run growth, Journal of Political Economy 94, 1002- 1037. Romer D., 2001, ch. 3, New growth theory, Part B, Cross-country income differences, 120-122. Topic 9. Lucas-Uzawa model Barro R.J., Sala-i-Martin X., 2004, ch. 5., Two-sector models of endogenous growth, 239-271. Romer D., 2001, ch. 3, New growth theory, Part A, Research and development models, 98-160. Lucas R.E., 1988, On the mechanics of economic development, Journal of Monetary Economics 22, 3-42. Topic 10. Expanding product variety models Acemoglu D., 2009, ch. 13., Expanding variety models, 433-457. Barro R.J., Sala-i-Martin X., 2004, ch. 6, Technological change: Models with an expanding product variety, 285-313. Grossman G., Helpman E., 1993, Innovation and growth in the global economy, MIT Press, Cambridge MA, ch. 3, Expanding product variety, 45-76. Topic 11. Quality ladder models Barro R.J., Sala-i-Martin X., 2004, ch. 7, Technological change: Models with improvements in the quality of products, 317-343. Grossman G., Helpman E., 1993, Innovation and growth in the global economy, MIT Press, Cambridge MA, ch. 4, Rising product quality, 86-109.

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Topic 12. Growth empirics Barro R.J., Sala-i-Martin X., 2004, ch. 10, Growth accounting, 433-460. Barro R.J., Sala-i-Martin X., 2004, ch. 11, Empirical analysis of regional datasets, 461-496. Part III. Business Cycle Theory Topic 13. Real business cycles Acemoglu D., 2009, ch. 16., Stochastic growth models, 566-610. Barro R.J., Sala-i-Martin X., 2004, ch. 9, Labor supply and population, 9.3, Labor/Leisure choice, 422-428. Romer D., 2001, ch. 4, Real business cycle theory, 168-212. Campbell J.M., 1994, Inspecting the mechanism: An analytical approach to the stochastic growth model, Journal of Monetary Economics 33, 463-506. Ritter J.A., 1995, An outsider’s guide to real cycle modeling, Federal Reserve Bank of St. Louis Review, 49-60. Christiano L., Eichenbaum M., 1992, Current real business cycle theories and aggregate labor market fluctuations, American Economic Review 82, 430-450. Topic 14. Coordination failures and macroeconomic policy Bagliano F.C., Bertola G., 2004, ch. 5, Coordination and externalities in macroeconomics, 170-187. Cooper R., 1999, Coordination games: Complementarities and Macroeconomics, Cambridge University press, Cambridge. Cooper R., John A., 1988, Coordinating coordination failures in Keynesian models, Quarterly Journal of Economics 103, 441-463. Diamond P., 1982, Aggregate demand management in search equilibrium, Journal of Political Economy 90, 881-894. Topic 15. Imperfect competition and real rigidities Romer D., 2001, ch. 6, Microeconomic foundations of incomplete nominal adjustment, Part B, Staggered price adjustment, 279-324. Blanchard O., Kiyotaki N., 1987, Monopolistic competition and the effects of aggregate demand, American Economic Review 77, 647-666. Mankiw N.G., 1988, Imperfect competition and the Keynesian cross, Economics Letters 26, 7-13. Rotemberg J.J., Saloner G., 1986, A supergame-theoretic model of price wars during booms, American Economic Review 76, 390-407. Weitzman M., 1982, Increasing returns and the foundations of unemployment theory, Economic Journal 92, 787-804. Part IV. Labor Market Topic 16. Efficiency wage models of unemployment Romer D., 2001, ch. 9, Unemployment, 410-432. Yellen J.L., 1984, Efficiency-wage models of unemployment, American Economic Review 74, 200- 205. Shapiro C., Stiglitz J.E., 1984, Equilibrium unemployment as a worker-discipline device, American Economic Review 74, 433-444. Topic 17. Search models of unemployment Bagliano F.C., Bertola G., 2004, ch. 5, Coordination and externalities in macroeconomics, 188-206. Romer D., 2001, ch. 9, Unemployment, 444-461.

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