Economics 8346 
Dynamic Macroeconomics
Fall 2011



NOTE: I will travel a fair amount in the fall. The class is scheduled for 10-11.30 Mo-We,  but some days we will start in advance. We will like also have some ad hoc make-up classes, in particular the last week of teaching for student presentations.


Scheduling: Classes to be rescheduled so far 8/22, 8/24, 10/3, 10/5.


Make-up: 8/26 1-2.30, 9/19 3.30-5. Friday Oct 14th, 3.00-4.30 and Friday Oct 28th, 3.00-4.30.


Final  --- **** Friday December 2nd at 3pm ****.


Midterm: Monday October 17th.


Midterm exam 2007 (not graded)


Midterm exam 2009


Topics (chapters in Ljungqvist and Sargent, unless otherwise noted):


Davit – growth                                                      10/12

Chris – optimal unemployment insurance             10/14

Emiliano – optimal taxation                                  10/19

Bin – fiscal-monetary theories of inflation           10/24

Jarrod – fiscal pol in the gr model (ch 11)           10/26

Volodomyr – (ch 22, cred govt policy)                 10/28

Wen --- Credit and Currency ch 25, Pt I                10/31

Fatma --  Credit and Currency, ch 25, Pt II            11/2

Amrita – Search, ch 6                                             11/7  

Carlos – asset pricing                                           11/9

Randall  - Obst-Rogoff pp 297-99, 319-32          11/14

Mahboobeh --- RBC…SEE BELOW                  11/16

NOTE: No class on Nov 21st. Double feature on the 28th, Please arrive at 9.30.

Gokce --- Chapter 16, Self-Insurance                     11/28

Mesrur --- Chapter 10, Ricardian Equivlence         11/28


Articles for Mahboobeh presentation (you may have to be on campus to download):


Current Real-Business-Cycle Theories and Aggregate Labor-Market Fluctuations


Time to Build and Aggregate Fluctuations:
Indivisible Labor and the Business Cycle


Course structure:


A midterm and 5+ homeworks followed by in-depth student presentations (a full class each, which in practice means that I do half the talking to help make things understandable to the rest of the class).

(I insist on homeworks and midterm because my experience is that  too many people do not not study properly without these proddings.)


Topics covered (I will start with the first one which is just one lecture to get you to think about the role of empirical work).


1)     Introduction (empirical methods in macro,)

2)     GMM (how to do, applied perspecitive---I will not prove any econometrics results)

3)     VAR (focus on interpretions of structural VARs and applications in macro)

4)     Introduction to dynamic programming (Sargent and Ljungquist)

1)     A Midterm

2)     In previous years, we have done student presentations after midterm – with students choosing a chapter from Sargent-Ljungquist (large chapter can be 2 students) because this is an influential text written in a different style than most students are used to so it is good if we get exposed as much as possible to this. Or a recent working paper that fits with the material of the class. This year I want to have some computational stuff which I haven’t done before so we will decide as we go along how much time to spend on that.



Notes on Empirical Methods in Macro (I don’t cover this, which is a little dated, but you can read it you wish.)

Some papers on IV-estimation that you may want to consult (if you do IV, you SHOULD read):

  1. Instruments of development: Randomization in the tropics, and the search for the elusive keys to economic development byAngus Deaton (go to Deaton’s web-page at Princeton)
  3. Some Comments on Deaton (2009) and Heckman and Urzua (2009), Guido W. Imbens, April 2009

Note on Structural VARs.

Note on Panel Data

Panel Data Program from Ostergaard, Sorensen, Yosha JPE 2002. the data

The data are in GAUSS format and you should download to the PC and unzip. You will need to change the paths for loading and the outfile.

GMM Notes part 1

GMM Notes part 2

GMM Notes part 3 (Revised November 29th. The first 2 pages are the most important. The theory is not going to be on exam.)

Hansen-Singleton GMM program,   the data

Homework 1: Read the article The Scientific Illusion in Empirical Macroeconomics by
Lawrence H. Summers, The Scandinavian Journal of Economics  Vol. 93, No. 2, 
Available from JSTOR, and write one page with a very short summary and a critique of the article. (What is your opinion? Do you agree with Summers? Why is it technically a bad article? Please argue carefully.) Also read, or skim, the articles Mankiw and Villaverde that I mention in my “method’’ note, whose points of view do you like best?

Homework 2. (GMM)

Homework 3. (Panel )   Due Wednesday Sep 21st.

Homework 4. (SVAR)   Due Wednesday Sep 28st.

Homework 5. (Markov Chains)   Due Monday Oct 10th.

Homework 6. Exercise 15.1 in Ljungquist and Sargent, p. 536. Due Monday 10/24.

Homework 7. Exercises 24.1 and  11.1 in Ljungquist and Sargent. Due Monday 10/31.

Homework 8. Exercises 25.1 and 25.2. Due Monday 11/7.

Homework 9. Exercises 6.1 and 13.2. Due Monday 11/14. 

Homework 10. Exercise 6, page 347 in Obstfeld and Rogoff.