Finance 30220 Macroeconomic Analysis Spring 2007
John Stiver 231 Mendoza College of Business Notre Dame, IN 46556 Phone: (574) 631-2803 Fax: (574) 631-5255 Email: [email protected] Web: www.nd.edu/~jstiver
Office Hours: M, T, W, and TH: 2:00 – 4:00. Other times by appointment
Teaching Assistants: Kim Lorenzen ([email protected])
Lizzie Reed ([email protected]) Objectives:
• To analyze the key empirical properties of the US economy • To develop an analytical framework for analysis of the macroeconomy.
Reading: • Abel, Andrew and Ben Bernanke, Macroeconomics 5th Ed, Addison, Wesley, 2001 • The Wall Street Journal • The Economist • Business Week
Other Sources: • Blanchard, Olivier, Macroeconomics, Prentice Hall, 1997 • Hall, Robert and John Taylor, Macroeconomics 5th Ed., W.W Norton &Co.,1997 • Gordon, Robert, Macroeconomics 8th Ed., Addison-Wesley2000, 1997 • Landsburg, Steven and Lauren Feinstone, Macroeconomics, McGraw Hill, 1997 • Mankiw, N. Gregory, Macroeconomics 3rd Ed., Worth Publishers, 1997.
Grading: There will be three non-cumulative exams given during the course as well as weekly quizzes (generally on Wednesdays). Quiz questions will be based on the problem sets posted on the class web site. Bonus points will be awarded for exceptional class participation. The final grade will be computed as follows:
Highest two midterms = 200 Quizzes = 100 Total = 300
The median score (out of 300 points) will receive a ‘B’ for the course. The ranges for other grades will be at various intervals around the median based on the standard deviation of scores. For example, if the median score for the class is 250, a possible grade distribution could be as follows:
280 - 300: A 270 - 280: A- 260 - 270: B+ 250 - 260: B 240 - 250: B- 230 - 240: C+ 220 - 230: C 210 - 220: C- 200 - 210: D <200 : F
Honor Code: This course, like all other courses at Notre Dame, is subject to the Academic Code of Honor. Please read the Handbook to refresh your understanding of the code.
(Note: The books/articles listed below are NOT required reading. They are only intended to offer additional sources of information in case you would like to learn more about a particular subject)
I: Methodological Issues in Macroeconomics • Abel/Bernanke, Chapter 1 • Lucas, Robert E. , "Methods and Problems in Business Cycle Theory", Journal of Money, Credit and Banking, 12, November 1980, 696-715 • Lucas, Robert E., "Understanding Business Cycles", in Carnegie- Rochester Series on Public Policy, 1977, 7-29. • Lucas, Robert E., "Econometric Policy Evaluation: A critique", in Carnegie-Rochester Series on Public Policy, 1:19-46.
II: Empirical Regularities of the Business Cycle • Abel/Bernanke, Chapters 2, 8 • Kydland, Finn and Edward Prescott, "Business Cycles: Real Facts and a Monetary Myth", Carnegie-Rochester Series on Public Policy • King, Robert and Charles Plosser, "Real Business Cycles and the Test of The Adelmans", mimeo, University of Rochester, 1989 • King, Robert, and Sergio Rebelo, "Low Frequency Filtering and Real Business Cycles", Journal of Economic Dynamics and Control, 17, 207- 231
III: Labor Markets • Abel/Bernanke, Chapter 3 • Hansen, Gary (1985), Indivisible Labor and The Business Cycle, Journal of Monetary Economics, 16: 309-327. • Burnside, Craig , Martin Eichenbaum and Sergio Rebelo,(1992) "Labor Hoarding and the Business Cycle", Journal of Political Economy • Lilien, David (1982), "Sectoral Shifts and Cyclical Unemployment", Journal of Political Economy, 777-792 • Lucas, Robert and Edward Prescott (1974), "Equilibrium search and Unemployment", Journal of Economic Theory, 7: 188-209.
III: Capital Markets: Consumption, Savings and Investment • Abel/Bernanke, Chapter 4 • Attanasio, O., and G. Weber, "Consumption Growth and Sensitivity to Income: Evidence from U.S. Micro Data" 1993. • Campbell, John, and Angus Deaton, "Why is Consumption so Smooth?", Review of Economic Studies, 56, 1989, 357-374 • Gali, Jordi, "Finite Horizons, Life Cycle Savings, and Time Series Evidence on Consumption", Journal of Monetary Economics 26, 1990, 433-452. • Hall, Robert, "Consumption" in Robert Barro (Ed), Modern Businesss Cycle Theory, Harvard University Press, 1989. • Abel, Andrew (1983), "Optimal Investment Under Uncertainty", American Economic Review, 73: 228-233. • Modigliani, Franco and Merton Miller (1958), "The Cost of Capital, Corporate and the Theory of Investment", American Economic Review, 48:261-97
IV: Money Markets and Nominal Prices • Abel/Bernanke Chapter 7 • Baumol, William (1952), "The Transactions Demand For Cash", Quarterly Journal of Economics, 67: 545-556. • Cooley, Thomas and Gary Hansen, "Money and The Business Cycle", in Thomas Cooley (ed.), Frontiers of Business Cycle Research, Princeton University Press • King, Robert and Charles Plosser, "Money and Credit in a Real Business Cycle Model", American Economic Review, 74: 363-380, 1984 • Stockman, Alan, "Anticipated Inflation and the Capital Stock in a Cash in Advance Economy", Journal of Monetary Economics, 8: 387-393, 1981. • Grossman, Sanford and Laurence Weiss (1983), "Transactions Based Model of the Monetary Transmission Mechanism", American Economic Review, 73: 8710880.
V: Putting it All Together: The Basic Real Business Cycle Model • Abel/Bernanke, Chapters 9,10, 11,12 • Cooley, Thomas and Edward Prescott, "Economic Growth and Business Cycles", in Thomas Cooley (ed.), Frontiers of Business Cycle Research • Long, John and Charles Plosser, "Real Business Cycles", Journal of Political Economy, 91, 1345-1370. • King, Robert, Charles Plosser and Sergio Rebelo, "Production, growth, and Business Cycles", Journal of Monetary Economics, 21-195-231. • Plosser, Charles, "Understanding Real Business Cycles", Journal of Economic Perspectives, 3:51-78. • Mankiw, Gregory, "Real Business Cycles: A New Keynsian Perspective", Journal of Economic Perspectives, 3: 79-90, 1989.
VI: Fiscal Policy: Government Spending, Taxation and Deficit Finance • Abel/Bernanke, Chapter 15 • Barro, Robert, :"The Neoclassical Approach to Fiscal Policy", in Robert Barro (ed.), Modern Business Cycle Theory, Harvard University Press, 1989. • Barro, Robert, "Are Government Bonds Net Wealth?", Journal of Political Economy, 82, 1095-1117. • Baxter, Marianne and Robert King, "Fiscal Policy in General Equilibrium", American Economic Review, 83, 315-334, 1993 • Blanchard, Olivier, "Debt, Deficits, and Finite Horizons", Journal of Political Economy, 93, 223-247. • Braun, Anton and Ellen McGratten, "The Macroeconomics of War and Peace", NBER Macroeconomics Annual, 1993.
VIII: The Federal Reserve and Monetary Policy • Abel/Bernanke, Chapters 14 • Friedman, Milton (1969), The Optimum Quantity of Money and Other Essays, Chicago: Aldine • Friedman, Milton (1968), "The Role of Monetary Policy", American Economic Review, 58: 1-17. • Kydland, Finn and Edward Prescott (1977), "Rules Rather than Discretion: The Inconsistency of Optimal Plans", Journal of Political Economy • Fischer, Stanley (1986), "Monetary Rules and Commodity Schemes Under Uncertainty", Journal of Monetary Economics, 17: 21-35.
IX: Economic Growth • Abel/Bernanke, Chapter 6 • Barro, Robert, "Economic Growth in a Cross Section of Countries", Quarterly Journal of Economics, 106, 407-444 • Barro, Robert, "Government Spending in a Simple Model of Economic Growth", Journal of Political Economy, 98, S103-125, 1990 • Barro, Robert and Sala-I-Martin, "Convergence", Journal of Political Economy, 100, 223-51. • Rebelo, Sergio, "Long Run Policy Analysis and Long Run Growth", Journal of Political Economy, 99, 500-521. • Solow, Robert, "Technical Change and the Aggregate Production Function", Review of Economic Studies, 39, 312-320. • Becker, Gary, Kevin Murphy and Robert Tamura, "Human Capital, Fertility, and Economic Growth", Journal of Political Economy, 98, 12- 37, 1990.
X: International Macroeconomics • Abel/Bernanke, Chapter 5, 13 • Backus, David, Patrick Kehoe and Finn Kydland, "International Real Business Cycles", Journal of Political Economy, 100, 745-75, 1992. • Baxter, Marianne, "International Trade and Business Cycles", in Gene Grossman and Kenneth Rogoff eds., Handbook of International Economics vol. III, Elsevier Science, 1995. • Mendoza, Enrique, "Business Cycles in a Small Open Economy", American Economic Review, 81:4, 1991. • Stockman, Alan and Linda Tesar, "Tastes and Technology in a Two Country Model of The Business Cycle: Explaining International Co- movements", American Economic Review, 85:1, 1995.