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Advanced Macroeconomics II

5-0-7 units · Graduate

Topics vary from year to year. Often includes coordination failures; frictions in beliefs, such as rational inattention, higher-order uncertainty, certain forms of bounded rationality, heterogeneous beliefs, and ambiguity; implications for business cycles, asset markets, and policy; financial frictions and obstacles to trade; intermediation; liquidity; safe assets; global imbalances; financial crises; and speculation.

Spring 2007

Professor Blanchard will discuss shocks, labor markets and unemployment, and dynamic stochastic general equilibrium models (DSGE models). Professor Lorenzoni will cover demand shocks, macroeconomic effects of news (with or without nominal rigidities), investment with credit constraints, and liquidity with its aggregate effects.

Readings

Spring 2004

Topics

  • Technology, Distribution, and Employment: Competing Technologies Models
  • Technology, Distribution, and Employment: Segregation by Skills and Superstars
  • Technology, Distribution, and Employment: Learning and Market Signals
  • Technology, Distribution, and Employment: Non Homotheticity in General Equilibrium
  • Intellectual Property Rights and Growth
  • Bounded Rationality in Macroeconomics
  • Demographics and Macroeconomics
  • Macro Complementarities/Coordination: Macroeconomic Complementarities, Amplification, Multiple Equilibria
  • Macro Complementarities/Coordination: Global Games, Higher-Order Uncertainty, and Morris-Shin
  • Macro Complementarities/Coordination: Policy and Information Transmission
  • Macro Complementarities/Coordination: Prices and Information Aggregation
  • Macro Complementarities/Coordination: Dynamics, Social Learning, and Other Applications
  • Macro Complementarities/Coordination: Information and Amplification
  • Macro Complementarities/Coordination: More on Complementarities, Dynamic Adjustment, and Business Cycles
  • Incomplete Markets: Recursive Equilibria, Heterogeneous Agents, Precautionary Savings, Non-expected Utility
  • Incomplete Markets: Aiyagari - Steady-State Effects
  • Incomplete Markets: Krusell-Smith - Introducing Business Cycles
  • Incomplete Markets: Idiosyncratic Investment Risk
  • Incomplete Markets: Incomplete Markets and Endogenous Growth

Readings

  • Required Reading
    Listed reading
  • Acemoglu, D. “Technical Change, Inequality, and The Labor Market.” Journal of Economic Literature 40, no. 1 (March 2002): 7-72.
    Listed reading
  • Caselli, F. “Technological Revolutions.” American Economic Review 89, no. 1 (March 1999): 78-102.
    Listed reading
  • Beaudry, Paul, and David Green. “Wages and Employment in the US and Germany: What Explains the Difference?” American Economic Review 93, no. 3 (June 2003): 573-602.
    Listed reading
  • Related Reading
    Listed reading
  • Acemoglu, D. “Why do New Technologies Complement Skills? Directed Technical Change and Wage Inequality.” Quarterly Journal of Economics 113, no. 4 (November 1998): 1055-89.
    Listed reading
  • Zeira, J. “Workers, Machines, and Economic Growth.” Quarterly Journal of Economics 113, no. 4 (November 1998): 1091-1117.
    Listed reading
  • Cooley, T., and M. Yorukoglu. “Innovation and Imitation in an Information Age.” Journal of the European Economic Association 1, no. 2-3 (April-May 2003): 406-18.
    Listed reading
  • Rosen, Sherwin. ‘‘Authority, Control, and the Distribution of Earnings." Bell Journal of Economics 13, no.2 (1982): 311-23.
    Listed reading
  • Cooley, T., and M. Yorukoglu. “The New Economy: Some Macroeconomic Implications of an Information Age.” mimeo, NYU. Murphy, Shleifer, and Vishny. “The Allocation of Talent: Implications for Growth.” Quarterly Journal of Economics 106, no. 2 (May 1991): 503-30.
    Listed reading
  • Kremer, Michael. “The O-Ring Theory of Economic Development.” Quarterly Journal of Economics 108, no. 3 (August 1993): 551-75.
    Listed reading
  • Rosen, Sherwin. ‘‘The Economics of Superstars.’’ American Economic Review 71, no.5 (1981): 845-58.
    Listed reading
  • Saint-Paul, G. “On the Distribution of Income and Worker Assignment Under Intra-firm Spillovers, with an Application to Ideas and Networks.” Journal of Political Economy 109, no. 1 (February 2001): 1-37.
    Listed reading
  • ———. “Information Technologies and the Knowledge Elite.” Working Paper, 2001 (CEPR Discussion Paper: 2761).
    Listed reading
  • Garicano, Luis. “Hierarchies and the Organization of Knowledge in Production.” Journal of Political Economy 108, no. 5 (October 2000): 874-904.
    Listed reading
  • Manasse, Paolo, and Turrini Alessandro. “Trade, Wages, and ‘Superstars’.” Journal of International Economics 54, no. 1 (June 2001): 97-117.
    Listed reading
  • Greenwood, Jeremy, and Mehmet Yorukoglu. “1974.” Carnegie-Rochester Conference Series on Public Policy 46 (June 1997): 49-95.
    Listed reading
  • Greenwood, Jeremy, and Boyan Jovanovic. " The Information-Technology Revolution and The Stock Market." American Economic Review (Papers and Proceedings) 89 (May 1999): 116-122.
    Listed reading
  • Hobijn, Bart, and Boyan Jovanovic. “The IT Revolution and the Stock Market: Evidence.” American Economic Review 91 no. 5 (2001): 1203-20.
    Listed reading
  • Jovanovic, B., and P. Rousseau. “Two Technological Revolutions.” Journal of the European Economic Association 1, no. 2-3 (April-May 2003): 419-28.
    Listed reading
  • Saint-Paul, Gilles. “Distribution and Growth in an Economy With Limited Needs.” CEPR Discussion Paper: 2834, 2001.
    Listed reading
  • Matsuyama, K. “The Rise of Mass Consumption Societies.” Journal of Political Economy 110, no. 5 (October 2002): 1035-70.
    Listed reading
  • ———. “A Ricardian Model with a Continuum of Goods under Nonhomothetic Preferences: Demand Complementarities, Income Distribution, and North-South Trade.” Journal of Political Economy 108, no. 6 (December 2000): 1093-1120.
    Listed reading
  • Zweimuller, Josef. “Schumpeterian Entrepreneurs Meet Engel’s Law: The Impact of Inequality on Innovation-Driven Growth.” Journal of Economic Growth 5, no. 2 (June 2000): 185-206.
    Listed reading
  • Foellmi, Reto, and Josef Zweimuller. “Heterogeneous Mark-ups, Demand Composition, and the Inequality-Growth Relation.” Royal Economic Society Annual Conference 2002.
    Listed reading
  • Matsuyama, K. “Growing Through Cycles in an Infinitely-Lived Agent Economy.” Journal of Economic Theory 100, no. 2 (October 2001): 220-34.
    Listed reading
  • ———. “Growing Through Cycles.” Econometrica 67, no. 2 (March 1999): 335-47.
    Listed reading
  • Cohen, Daniel, and G. Saint-Paul, “Uneven Technical Progress and Job Destruction.” CEPR Working paper, 1994.
    Listed reading
  • Baumol, William. “Macroeconomics of Unbalanced Growth: The Anatomy of Urban Crisis.” In Baumol’s cost disease: The arts and other victims (1997): 51-62, Elgar.
    Listed reading
  • Caballero, R., and A. Jaffe. “How High Are the Giants’ Shoulders: An Empirical Assessment of Knowledge Spillovers and Creative Destruction in a Model of Economic Growth.” NBER Macroeconomics Annual 1993 (1993): 15-74.
    Listed reading
  • De Long, Brad, and A. Michael Froomkin. “Speculative Microeconomics for Tomorrow’s Economy.” In Internet Publishing and Beyond: The Economics of Digital Information and Intellectual Property. Edited by Kahin, Brian; Varian, Hal R., 2000, pp. 6-44.
    Listed reading
  • Boldrin M., and D. Levine. “Perfectly Competitive Innovation.” Federal Reserve Bank of Minneapolis Staff Report: 303, 2002.
    Listed reading
  • Saint-Paul, Gilles. “Growth Effects of Non Proprietary Innovation.” Journal of the European Economic Association 1, no. 2-3 (April-May 2003): 429-39.
    Listed reading
  • ———. “Cumulative Innovation and Information Sharing in Business Networks.” mimeo, U. Toulouse, Sept. 2003.
    Listed reading
  • Aghion, P., and P Howitt. “Competition, Imitation and Growth with Step-by-Step Innovation.” Review of Economic Studies 68, no. 3 (July 2001): 467-92.
    Listed reading
  • Romer, Paul. “When Should We Use Intellectual Property Rights?” American Economic Review 92, no. 2 (May 2002): 213-16.
    Listed reading
  • ———. “Two Strategies for Economic Development: Using Ideas and Producing Ideas.” Supplement to The World Bank Economic Review and The World Bank Research Observer (1993): 63-91.
    Listed reading
  • Raymond, Eric S. The Cathedral and the Bazaar .
    Listed reading
  • Lerner, Josh, and Jean Tirole. “Some Simple Economics of Open Source.” Journal of Industrial Economics 50, no. 2 (June 2002): 197-234.
    Listed reading
  • Jaffe, A., and Trajtenberg, M. Patents, citations, and innovations: A Window on the Knowledge Economy. MIT Press, 2002.
    Listed reading
  • Coe, D., and E. Helpman. “International R&D Spillovers.” European Economic Review 39, no. 5 (May 1995): 859-87.
    Listed reading
  • Kremer, Michael. “Patent Buyouts: A Mechanism for Encouraging Innovation.” Quarterly Journal of Economics 113, no. 4 (November 1998): 1137-67.
    Listed reading
  • Zucker, Darby, and Brewer. “Intellectual Capital and the Birth of U.S. Biotechnology Enterprises.” American Economic Review 88, no. 1 (March 1998): 290-306.
    Listed reading
  • Caselli, Francesco. “Cross-Country Technology Diffusion: The Case of Computers.” American Economic Review 91, no. 2 (May 2001): 328-35.
    Listed reading
  • Goh, Ai-Ting, and Olivier Jacques. “Optimal Patent Protection in a Two-Sector Economy.” International Economic Review 43, no. 4 (November 2002): 1191-1214.
    Listed reading
  • Marcet, A., Nicolini, J. P. “Recurrent Hyperinflations and Learning.” Centre for Economic Policy Research, Discussion Paper: 1875, 1998.
    Listed reading
  • Gersbach, Hans, Schniewind, Achim. “Awareness of General Equilibrium Effects and Unemployment.” IZA working paper 394, 2001.
    Listed reading
  • Hansen, L., Sargent, Thomas. “Robust Control and Model Uncertainty.” American Economic Review 91, no. 2 (May 2001): 60-66.
    Listed reading
  • Hansen, Lars Peter, and Thomas J. Sargent. “Acknowledging Misspecification in Macroeconomic Theory.” Review of Economic Dynamics 4, no. 3 (July 2001): 519-35.
    Listed reading
  • Marimon, Ramon, Ellen McGrattan, and Thomas J. Sargent. “Money as a Medium of Exchange in an Economy with Artificially Intelligent Agents.” Journal of Economic Dynamics and Control 14, no. 2 (May 1990): 329-73.
    Listed reading
  • Arifovic, Jasmina. “The Behavior of the Exchange Rate in the Genetic Algorithm and Experimental Economies.” Journal of Political Economy 104, no. 3 (June 1996): 510-41.
    Listed reading
  • ———. “Evolutionary Algorithms in Macroeconomic Models.” Macroeconomic Dynamics 4, no. 3 (September 2000): 373-414.
    Listed reading
  • Harrington, J.E. “Rigidity of Social Systems.” Journal of Political Economy 107, no. 1 (February 1999): 40-64.
    Listed reading
  • Saint-Paul, Gilles. “Some Evolutionary Foundations for Price Level Rigidity.” CEPR Working Paper, 2001.
    Listed reading
  • Becker, Gary, Murphy Kevin, and Robert Tamura. “Human Capital, Fertility, and Economic Growth.” Journal of Political Economy 98, no. 5 (Part 2, October 1990): S12-37.
    Listed reading
  • Galor, O., and O. Moav. “Natural Selection and the Origin of Economic Growth.” Quarterly Journal of Economics 117, no. 4 (November 2002): 1133-91.
    Listed reading
  • Kremer, M., and Chen. “Income Distribution Dynamics with Endogenous Fertility.” (National Bureau of Economic Research Working Paper: 7530), American Economic Review 89, no. 2 (May 1999): 155-60.
    Listed reading
  • ———. “Population Growth and Technological Change: One Million B.C. to 1990.” Quarterly Journal of Economics 108, no. 3 (August 1993): 681-7.
    Listed reading
  • Barro, R., and G. Becker. “Fertility Choice in a Model of Economic Growth.” Econometrica 57, no. 2 (March 1989): 481-501.
    Listed reading
  • Moav, O. “Cheap Children and the Persistence of Poverty.” CEPR Discussion Paper: 3059, 2003.
    Listed reading
  • Galor, O., and D. Weil. “Population, Technology, and Growth: From Malthusian Stagnation to the Demographic Transition and Beyond.” American Economic Review 90, no. 4 (September 2000): 806-28.
    Listed reading
  • Cooper, R. Coordination Games: Complementarities and Macroeconomics. Chapters 1-3 and 7, Cambridge University Press, 1999.
    Listed reading
  • Cooper, Russell, and Andrew John. “Coordinating Coordination Failures in Keynesian Models.” Quarterly Journal of Economics 103 (1988): 441–463.
    Listed reading
  • Cooper, R., and J. Haltiwanger. “Evidence on Macroeconomic Complementarities.” Review of Economics and Statistics 78 (1996): 78-93.
    Listed reading
  • Obstfeld, Maurice. “Models of Currency Crises with Self-Fulfilling Features.” European Economic Review 40 (1996): 3-5, 1037-47.
    Listed reading
  • Bartelsman, E., R. Caballero, and R. Lyons. “Customer- and Supplier-Driven Externalities.” American Economic Review 84 (1994): 1075-84.
    Listed reading
  • Acemoglu, Daron. “Learning About Others’ Actions and the Investment Accelerator.” Economic Journal 103 (1993): 318-328.
    Listed reading
  • Bryant, John. “A Simple Rational Expectations Keynes-Type Model.” Quarterly Journal of Economics 98, no. 3 (1983): 525-28.
    Listed reading
  • Caballero, R., and R. Lyons. “External Effects in U.S. Procyclical Productivity.” Journal of Monetary Economics 29 (1992): 209-225.
    Listed reading
  • Cole, Harold, and Timothy Kehoe. “Self-fulfilling Debt Crises.” Federal Reserve Bank of Minneapolis Staff Report 211, 1996.
    Listed reading
  • Diamond, Douglas, and Philip Dybvig. “Bank Runs, Deposit Insurance, and Liquidity.” Journal of Political Economy 91 (1983): 401-19.
    Listed reading
  • Diamond, Peter. “Aggregate Demand Management in Search Equilibrium.” Journal of Political Economy 90, no. 5 (1982): 881-94.
    Listed reading
  • Howitt, P., and P. McAffee. “Stability of Equilibria with Externalities.” Quarterly Journal of Economics 103 (1988): 261-277.
    Listed reading
  • Katz, M., and C. Shapiro. “Technology Adoption in the Presence of Network Externalities.” Journal of Political Economy 94 (1986): 822-841.
    Listed reading
  • Kiyotaki, N., and J. Moore. “Credit Cycles.” Journal of Political Economy (1997).
    Listed reading
  • Kiyotaki, Nobuhiro. “Multiple Expectational Equilibria under Monopolistic Competition.” Quarterly Journal of Economics 103 (1988): 695 - 713.
    Listed reading
  • Murphy, Kevin M., Andrei Shleifer, and Robert Vishny. “Industrialization and the Big Push.” Journal of Political Economy 97, no. 5 (1989): 1003-26.
    Listed reading
  • Obstfeld, Maurice. “Rational and Self-Fulfilling Balance-of-Payments Crises.” American Economic Review 76, no. 1 (1986): 72-81.
    Listed reading
  • Romer, P. M. “Increasing Returns and Long-Run Growth.” Journal of Political Economy 94 (1986): S1002- S1037.
    Listed reading
  • Morris, Stephen, and Hyun Song Shin. “Unique Equilibrium in a Model of Self-Fulfilling Currency Attacks.” American Economic Review 88, no. 3, (1998): 587-597.
    Listed reading
  • ———. “Rethinking Multiple Equilibria in Macroeconomics.” NBER Macro Annual (2000).
    Listed reading
  • Carlsson, Hans, and Eric van Damme. “Global Games and Equilibrium Selection.” Econometrica 61, no. 5 (1993): 989-1018.
    Listed reading
  • Hellwig, Christian. “Public Information, Private Information and the Multiplicity of Equilibria in Coordination Games.” Journal of Economic Theory 107 (2002): 191-222.
    Listed reading
  • Morris, Stephen, David Frankel, and Ady Pauzner. “Equilibrium Selection in Global Games with Strategic Complementarities.” Journal of Economic Theory 108 (2003): 1-44.
    Listed reading
  • Morris, Stephen, and Hyun Song Shin. “Global Games - Theory and Applications.” In Advances in Economics and Econometrics, 8th World Congress of the Econometric Society. Edited by M. Dewatripont, L. Hansen, and S. Turnovsky. Cambridge, UK: Cambridge University Press, 2001.
    Listed reading
  • Yildiz, Muhamet, and Jonathan Weinstein. “Impact of Higher-Order Uncertainty.” MIT mimeo, 2003.
    Listed reading
  • Angeletos, George-Marios, Christian Hellwig, and Alessandro Pavan. “Coordination and Policy Traps.” MIT Working Paper, 2003.
    Listed reading
  • Morris, Stephen, and Hyun Song Shin. “Catalytic Finance: When Does It Work?” 2004.
    Listed reading
  • Corsetti, G., A. Dasgupta, S. Morris, and H. Shin. “Does One Soros Make a Difference? The Role of a Large Trader in Currency Crises.” Review of Economic Studies 71 (2004): 87-114.
    Listed reading
  • Edmond, Chris. “Information and the Limits to Autocracy.” UCLA Working Paper, 2003.
    Listed reading
  • Grossman, Sanford, and Joseph Stiglitz. “Information and Competitive Price Systems.” American Economic Review 66, (1976): 246-253.
    Listed reading
  • Atkeson, Andrew. “Discussion on Morris and Shin.” NBER Macro Annual, 2000.
    Listed reading
  • Angeletos, George-Marios, and Ivan Werning. “Information Aggregation and Equilibrium Multiplicity: Morris-Shin Meets Grossman-Stiglitz.” MIT/UCLA/Northwestern Working Paper, 2004.
    Listed reading
  • Grossman, Sanford. “The Existence of Futures Markets, Noisy Rational Expectations and Informational Externalities.” Review of Economic Studies 44 (1977): 431-449.
    Listed reading
  • ———. “An Introduction to the Theory of Rational Expectations under Asymmetric Information.” Review of Economic Studies 48 (1981): 541-559.
    Listed reading
  • Grossman, Sanford, and Joseph Stiglitz. “On the Impossibility of Informationally Efficient Markets.” American Economic Review 70 (1980): 393-408.
    Listed reading
  • Hellwig, Martin. “On the Aggregation of Information in Competitive Markets.” Journal of Economic Theory 22 (1980): 477-498.
    Listed reading
  • Chamley, Christophe. “Coordinating Regime Switches.” Quarterly Journal of Economics 114, no. 3 (1999): 869-905.
    Listed reading
  • Angeletos, George-Marios, Christian Hellwig, and Alessandro Pavan. “Crises.” MIT Working Paper, 2004.
    Listed reading
  • Caplin, Andrew, and John Leahy. “Business as Usual, Market Crashes, and Wisdom After the Fact.” American Economic Review 84, no. 3 (1994): 548-565.
    Listed reading
  • Bernardo, Guimaraes, and Stephen Morris. “Risk and Wealth in a Model of Self-Fulfilling Currency Crises.” Yale Working Paper, 2004.
    Listed reading
  • Dasgupta, Amil. “Coordination, Learning and Delay.” LSE Working Paper, 2003.
    Listed reading
  • Goldstein, Itay, and Ady Pauzner. “Demand Deposit Contracts and the Probability of Bank Runs.” Working Paper, Duke University and Tel Aviv University, 2000.
    Listed reading
  • Morris, Stephen, and Hyun Song Shin. “A Theory of the Onset of Currency Attacks.” In The Asian Financial Crisis. Edited by P.-R. Agenor, M. Miller, D. Vines and A. Weber. Cambridge University Press, 1999.
    Listed reading
  • ———. “Coordination Risk and the Price of Debt.” Forthcoming in European Economic Review, 2003.
    Listed reading
  • ———. “Liquidity Black Holes.” Forthcoming in Review of Finance , 2004.
    Listed reading
  • Morris, Stephen, and Hyun Song Shin. “The Social Value of Public Information.” American Economic Review 92 (2002): 1521-1534.
    Listed reading
  • Angeletos, G. M., and A. Pavan. “Transparency of Information and Coordination in Economies with Investment Complementarities.” Forthcoming American Economic Review (P&P) (2004).
    Listed reading
  • Woodford, Michael. “Imperfect Common Knowledge and the Effects of Monetary Policy.” In Knowledge, Information and Expectations in Modern Macroeconomics: in Honor of Edmund S. Phelps. Edited by P. Aghion, R. Frydman, J. Stiglitz, and M. Woodford, 2003.
    Listed reading
  • Allen, Franklin, Stephen Morris, and Hyun Song Shin. “Beauty Contests and Iterated Expectations in Asset Markets.” 2003.
    Listed reading
  • Amato, Jeffery, and Hyun Song Shin. “Public and Private Information in Monetary Policy Models.” 2003.
    Listed reading
  • ———. “Imperfect Common Knowledge and the Information Value of Prices.” 2004.
    Listed reading
  • Hellwig, Christian. “On the Aggregate Effects of Information Heterogeneity.” UCLA mimeo, 2003.
    Listed reading
  • Lorenzoni, Guido. “Imperfect Information and Aggregate Demand.” Princeton University mimeo, 2003.
    Listed reading
  • Beaudry, P., and F. Portier. “Stock Prices, News and Economic Fluctuations.” 2004.
    Listed reading
  • Cabalero, R., and E. Engel. “Heterogeneity and Output Fluctuations in a Dynamic Menu-Cost Economy.” 2004.
    Listed reading
  • Frankel, David and Ady Pauzner. “Resolving Indeterminacy in Dynamic Settings: The Role of Shocks.” Quarterly Journal of Economics 115 (2000): 283-304.
    Listed reading
  • Frankel, David. “Shocks and Business Cycles.” Forthcoming in Journal of Political Economy, 2004.
    Listed reading
  • Baxter, M., and R. King. “Production Externalities and Business Cycles.” Minneapolis Fed. (1991)
    Listed reading
  • Beaudry, P., and M. Devereux. “Monopolistic Competition, Price Setting, and the Effects of Real and Monetary Shocks.” 1993.
    Listed reading
  • Benhabib, J., and R. Farmer. “Indeterminacy and Increasing Returns.” Journal of Economic Theory 63," (1994).
    Listed reading
  • Burdzy, Krzysztof, David Frankel, and Ady Pauzner. “Fast Equilibrium Selection by Rational Players Living in a Changing World.” Econometrica 68 (2001): 163-190.
    Listed reading
  • Shleifer, A. “Implementation Cycles.” Journal of Political Economy 94 (1986): 1163-1190.
    Listed reading
  • Hansen, G., and E. Prescott. “Recursive Methods for Computing Equilibria.” Chapter 2 in Frontiers of Business Cycle Research. Edited by T. Cooley. Princeton University Press, 1995.
    Listed reading
  • Rios-Rull, J. -V. “Models wih Heterogeneous Agents.” Chapter 4 in Frontiers of Business Cycle Research . Edited by T. Cooley. Princeton University Press, 1995.
    Listed reading
  • Ljungqvist, L., and T.J. Sargent. Chapter 13 in Recursive Macroeconomic Theory , 2001.
    Listed reading
  • Weil, P. “Nonexpected Utility in Macroeconomics.” Quarterly Journal of Economics 105, (1990): 29-42.
    Listed reading
  • Caballero, R. “Consumption Puzzles and Precautionary Saving.” Journal of Monetary Economics 25 (1990): 113-136.
    Listed reading
  • Chamberlain, G., and C. A. Wilson. “Optimal Intertemporal Consumption under Uncertainty.” Review of Economic Dynamics 3 (2000): 365-395.
    Listed reading
  • Epstein, L.G., and S. E. Zin. “Substitution, Risk Aversion, and the Temporal Behavior of Consumption and Asset Returns: A Theoretical Framework.” Econometrica 57 (1989): 937-969.
    Listed reading
  • Kimball, M. S. “Precautionary Saving in the Small and in the Large.” Econometrica 58 (1990): 53-73.
    Listed reading
  • Prescott, E., and R. Mehra. “Recursive Competitive Equilibrium: The Case of Homogeneous Households.” Econometrica 48 (1980): 1365-79.
    Listed reading
  • Weil, P. “Precautionary Savings and the Permanent Income Hypothesis.” Review of Economic Studies 60 (1993): 367-383.
    Listed reading
  • Aiyagari, S. R. “Uninsured Idiosyncratic Risk and Aggregate Saving.” Quarterly Journal of Economics 109 (1994): 659-84.
    Listed reading
  • Ljungqvist, L., and T. J. Sargent. Chapter 14 in Recursive Macroeconomic Theory .
    Listed reading
  • Castaneda, A., J. Diaz-Gimenez, and J.-V. Rios-Rull. “Accounting for the U.S. Earning and Wealth Heterogeneity.” Journal of Political Economy, 2003.
    Listed reading
  • Aiyagari, S. R. “Macroeconomics with Frictions.” FRB Minneapolis Quarterly Review 18 (1994): 24-40.
    Listed reading
  • ———. “Optimal Capital Income Taxation with Incomplete Markets, Borrowing Constraints, and Constant Discounting.” Journal of Political Economy 103 (1995): 1158-75.
    Listed reading
  • Banerjee, A., and A. F. Newman. “Occupational Choice and the Process of Economic Development.” Journal of Political Economy, 1993.
    Listed reading
  • Bewley, T. “The Optimum Quantity of Money.” In J. H. Kareken and N. Wallace ed., Models of Monetary Economies , FRB Minneapolis, 1980, pp. 169-210.
    Listed reading
  • Constantinides, G., and D. Duffie. “Asset Pricing with Heterogeneous Consumers.” Journal of Political Economy 104 (1996): 219-240.
    Listed reading
  • Heaton, J., and D. J. Lucas. “Evaluating the Effects of Incomplete Markets on Risk Sharing and Asset Pricing.” Journal of Political Economy 104 (1996): 443-487.
    Listed reading
  • Huggett, M. “The Risk-Free Rate in Heterogeneous-Agent Incomplete-Insurance Economies.” Journal of Economic Dynamics and Control 17 (1993): 953-969.
    Listed reading
  • Huggett, M. “The One-Sector Growth Model with Idiosyncratic Shocks.” Journal of Monetary Economics 39, (1997): 385-403.
    Listed reading
  • Weil, P. “Equilibrium Asset Prices in Economies with Undiversifiable Labor Income Risk.” Journal of Economic Dynamics and Control 16 (1992): 769-790.
    Listed reading
  • Krusell, P., and A. Smith. “Income and Wealth Heterogeneity in the Macroeconomy.” Journal of Political Economy 106 (1998): 867-896.
    Listed reading
  • Ljungqvist, L., and T. J. Sargent. Chapter 14 in Recursive Macroeconomic Theory. 2001.
    Listed reading
  • Imrohoroglu, A. “The Costs of Business Cycles with Indivisibilities and Liquidity Constraints.” Journal of Political Economy 97 (1989): 1364-83.
    Listed reading
  • Krusell, P., and A. Smith. “On the Welfare Effects of Business Cycles.” Review of Economic Dynamics 2 (1999): 247-272.
    Listed reading
  • ———. “Revisiting the Welfare Effects of Eliminating Business Cycles.” CMU Working Paper, 2002.
    Listed reading
  • Kocherlakota, N. “Creating Business Cycles Through Credit Constraints.” Federal Reserve Bank of Minneapolis Quarterly Review (2000).
    Listed reading
  • Storesletten, K., C. Telmer, and A. Yaron. “The Welfare Cost of Business Cycles Revisited: Finite lives and Cyclical Variations in Idiosyncratic Risk.” European Economic Review (2001).
    Listed reading
  • Ríos-Rull, V. “Life-Cycle Economies and Aggregate Fluctuations.” Review of Economic Studies 63 (1996): 465-490.
    Listed reading
  • Angeletos, G. M. “Idiosyncratic Investment Risk in the Neoclassical Growth Model.” MIT mimeo. 2003.
    Listed reading
  • Meh, C., and V. Quadrini. “Uninsurable Investment Risks.” NYU mimeo, 2004.
    Listed reading
  • Angeletos, G. M., and L. Calvet. “Idiosyncratic Production Risk, Growth, and the Business Cycle.” MIT mimeo, 2003.
    Listed reading
  • Carroll, C. “Portfolios of the Rich.” In Household Portfolios . Edited by L. Guiso, M. Haliassos, and T. Jappelli. MIT Press, 2001.
    Listed reading
  • Gentry, W. M., and R. G. Hubbard. “Entrepreneurship and Household Saving.” Columbia University mimeo, 2000.
    Listed reading
  • Heaton, J., and D. J. Lucas. “Portfolio Choice and Asset Prices: The Importance of Entrepreneurial Risk.” Journal of Finance 105 (2000): 1163-1198.
    Listed reading
  • Moskowitz, T., and A. Vissing-Jørgensen. “The Returns to Entrepreneurial Investment: A Private Equity Premium Puzzle?” American Economic Review 92 (2002): 745-778.
    Listed reading
  • Quadrini, V. “The Importance of Entrepreneurship for Wealth Concentration and Mobility.” Review of Income and Wealth 45 (1999): 1-19.
    Listed reading
  • Acemoglu, D., and F. Zilibotti. “Was Prometheus Unbound by Chance? Risk, Diversification, and Growth.” Journal of Political Economy 105 (1997): 709-751.
    Listed reading
  • Bencivenga, and B. Smith. “Financial Intermediation and Endogenous Growth.” Review of Economic Studies . 1991.
    Listed reading
  • Krebs, Tom. “Human Capital Risk and Economic Growth.” Quarterly Journal of Economics (2003).
    Listed reading
  • Obstfeld, M. “Risk-Taking, Global Diversification, and Growth.” American Economic Review 84 (1994): 310-1329.
    Listed reading
  • Devereux, M. B., and G. W. Smith. “International Risk-Sharing and Economic Growth.” International Economic Review 35 (1994): 535-550.
    Listed reading
  • Galor, O., and J. Zeira. “Income Distribution and Macroeconomics.” Review of Economic Studies 60 (1993): 35-52.
    Listed reading
  • Greenwood, J., and B. Jovanovic. “Financial Development, Growth, and the Distribution of Income.” Journal of Political Economy 98 (1990): 219-240.
    Listed reading
  • King, R. G., and R. Levine. “Finance and Growth: Schumpeter Might Be Right.” Quarterly Journal of Economics (1993): 717-737.
    Listed reading
  • Khan, A., and B. Revikumar. “Growth and Risk-Sharing with Private Information.” Journal of Monetary Economics 47 (2001): 499-521.
    Listed reading
  • Levine, R. “Financial Development and Economic Growth: Views and Agenda.” Journal of Economic Literature 35 (1997): 688-726.
    Listed reading
  • Krebs, T. “Growth and Welfare Effects of Business Cycles in Economies with Idiosyncratic Human Capital Risk.” Brown University Working Paper. 2003.
    Listed reading
  • Matsuyama, K. “The Rise and Fall of Class Societies.” Northwestern University mimeo, 2002.
    Listed reading
  • Rajan, R., and L. Zingales. “Financial Dependence and Growth.” American Economic Review 88 (1998): 559-586.
    Listed reading

Prerequisites & course information

Prereq: 14.461 G (Spring) 5-0-7 units

Sources