Advanced Macroeconomics II
Shanghai University of Finance and Economics
Professor Kevin X.D. Huang
Course Description
This course builds on Advanced Macroeconomics I and contains three interconnected parts. The first part reviews key stylized facts. We will study both time-series and cross-country evidence in eight related areas: (1) growth; (2) real business cycle; (3) monetary business cycle; (4) macro-finance; (5) micro-pricing; (6) inequality; (7) consumption and saving; and (8) technology adoption. The second part uses these facts as a guidance to construct and evaluate various modern macro models to provide a parsimonious description of the real world. The goal here is to learn to construct and use a variety of models that can be used to give quantitative answers to a variety of economic questions. These models can be used to produce time series that can be meaningfully related to the data. The third part uses the fact-consistent models to conduct economic policy analysis.
Particular attention will be given to the role of money, banking, financial markets, and monetary and fiscal policy in macroeconomics, and the feedback between the real and financial sectors. Over the course, we will develop models with financial frictions that are necessary for understanding a variety of monetary and financial issues facing the private sectors and policymakers, such as the external finance premium, balance sheet constraints on borrowing and lending, liquidity crisis, and credit crunch. We will then apply these models and techniques to study the implications of money and finance for economic growth and business cycles.
As the course progresses, both analytical and numerical techniques for solving and estimating stochastic dynamic general equilibrium macro models that have been taught in Advanced Macroeconomics I will be used, so it is useful for students to review those materials before taking this course. Students should come to each lecture prepared to participate in the discussions of related materials. Class discussions are important, and the intention is to have them elaborate and expand upon the materials covered in the class lectures, rather than having the lectures simply replicate these materials.
Reference Books
Though no official textbook is required for this course, the various books listed below can serve as very useful references. We shall also rely on research articles. The reading list below provides you with a good starting point, though articles that are not currently included in the list can be added on later. Required readings are marked with an asterisk.
Note that some of the book chapters are covered in Advanced Macroeconomics I, so it is useful for students to review those materials before coming to the lectures.
1. Sargent, 1987, Dynamic Macroeconomic Theory (Harvard University Press)
2. Stokey and Lucas with Prescott, 1989, Recursive Methods in Economic Dynamics (Harvard University Press)
3. Blanchard and Fisher, 1989, Lectures on Macroeconomics (MIT Press)
4. Mankiw and Romer, 1991, New Keynesian Economics (MIT Press)
5. Hamilton, 1994, Time Series Analysis (Princeton University Press)
6. Kamien and Schwartz, 1995, Dynamic Optimization (North Holland)
7. Barro and Sala-i-Martin, 1995, Economic Growth (McGraw-Hill)
8. Lucas, 1995, Studies in Business-Cycle Theory (MIT Press)
9. Cooley, 1995, Frontiers of Business Cycle Research (Princeton University Press)
10. Aghion and Howitt, 1998, Endogenous Growth Theory (MIT Press)
11. Taylor and Woodford, eds., 1999, Handbook of Macroeconomics 1.
12. Marimon and Scott, 1999, Computational Methods for the Study of Dynamic Economies (Oxford University Press)
13. Ljungqvist and Sargent, 2000, Recursive Macroeconomic Theory (MIT Press)
14. Romer, 2001, Advanced Macroeconomics (McGraw-Hill, the Second Edition)
15. Evans and Honkapohja, 2001, Learning and Expectations in Macroeconomics (Princeton University Press)
16. Woodford, 2003 Interest and Prices: Foundations of a Theory of Monetary Policy (Princeton University Press)
17. Walsh, 2003, Monetary Theory and Policy (MIT Press, 2nd edition)
18. Gali, 2008, Monetary Policy, Inflation, and the Business Cycle: An Introduction to the New Keynesian Framework (Princeton University Press)
19. Wickens, 2008, Macroeconomic Theory: A Dynamic General Equilibrium Approach (Princeton University Press)