Macroeconomic Theory, Econ. 511b, Spring 1998

Faculty:

Updated 4/8/98.  Newest items are in red.

Reading List

Commentary on the reading list:  You should concentrate on understanding models discussed in class as you study for the exam.  The readings are to serve as references or to expand on what we did in class, but you should not expect to have to answer analytical questions about models in the readings but not discussed in class.  Note that the paper on linear rational expectations models that you were assigned goes well beyond what we covered in class.  However you should be completely in command of the methods discussed in its section III.1, discrete time analysis based on the Jordan decomposition.  Additional comments about the relative importance of readings may be posted early next week.

Previous Year's Course Materials

Viewers for pdf and ps files.

Notes

5/15/98
Commentary on blue book answers to the first two problems

5/12/98
Suggested answers for the first two problems of the final.
Online copy of the exam itself.  Note that on some printers minus signs in subscripts and superscripts do not print for the last three questions on the exam in this version.  There should be no problems in screen viewing, though.

5/14/98
I have made some corrections to the suggested answers for the last three problems of the final. The changes are on page 5 (problem 2). You can obtain the corrected version by clicking here. Hardcopies will be available from Diane.

4/25/98
Notes on a sticky-price model
Hard copy probably available from Diane by Monday, 4/27

4/23/98
Some practice problems for the final and the comps are available by clicking here. Hardcopies should be available from Diane by the end of the day.

4/18/98
My lectures on policy games will follow chapters 3 and 4 of Thomas Sargent's, Marshall Lectures The Conquest of American Inflation: Ideas or Regressions? . This is a large document (over 100 pages). Since we are only covering two chapters, you may wish to just photocopy the two relevent chapters. A paper version is available from Diane Bowman. We will be going over "stripped down" versions of Kydland and Prescott (1977), Barro and Gordon (1983) and Abreu, Pearce, and Stacchetti (1990). Copies of these papers are also available from Diane Bowman.

4/17/98:  Notes.  Discrete time stochastic model of price determination without money. Paper version available from Diane Bowman in the main department office at 28HH. This version contains a minor correction, in equation (16), compared to the original version posted 4/13.

4/8/98:  Exercise due 4/15/98
4/29/98:  Answer to problem 1 of 4/15/98 exercise

4/8/98:
New and improved random Lagrange multiplier notes, including (finally) a careful statement and proof of a correct transversality condition.

4/1/98:

Solutions to the Bewley models problem set are here

3/24/98:

On 3/25/98 we will discuss Krusell and Smith's paper "Income and Wealth Heterogeneity in the Macroeconomy."
You may get the paper from Anthony Smith's homepage

3/23/98:

Some Matlab programs that solve Bewley-style models(2/28/98)

Suggested answers to the Levhari-Srinivasan problem are here(2/23/98)

Suggested answers to the second dynamic programming problem set are here(2/21/98)

Notes on Decentralizing with Asset Markets:  Firms and Owners
Asset Market Equilibrium Exercise  Optional. To be graded by 3/4 if handed in by 3/2.
 Notes on Decentralizing with Asset Markets:  Insurance.  For lecture 2/15
        These notes have been updated to expand an obscure passage around equations (6)-(10). 4/19/98

Three Matlab programs I will discuss on 2/4/98:
markov.m
sims_prob.m
brock.m(2/3/98)
Overheads for lecture on Monday, February 2, 1998(2/1/98)

Exercise solving linearized growth model due Monday, 2/9/98.  Important correction, adding a missing equation, posted 2/1/98.
Answers to the linearized growth model exercise.  (2/25/98)

m files implementing the answers:  P31.M P32.M (3/4/98)
This exercise uses matlab, but only in the simplest way.  You need to translate ordinary, non-matrix, algebra expressions for the steady state into matlab expressions, and store the results in matrix coefficients.  You should be able to figure out how to do this -- easily if you have used Gauss, a closely related language -- from the matlab manuals, available in statlab, possibly also in the basement of 30HH, and in the basement of 37HH.  However there will be some introductory discussion of matlab at the section meeting 2/4, and students who feel they need that to begin the problem set may turn the problem set in 2/9.  Bear in mind that there is likely to be an overlapping problem set handed out 2/4, due 2/11.
Notes:  Linear Approximation to NeoClassical Growth (1/28/98)
    (Minor update 2/4/98:  A(t) in the third equation of (2) should have been A(t+1).)

Lecture Notes on Deterministic Dynamic Programming(1/27/98)

January 20:  The paper on solving linear rational expectations models (98k pdf) has been updated.  The version reached via the reading list before 1/20/98, 9PM, has a correct treatment of discrete time models, but does not discuss the simple Jordan decomposition special case that will be most helpful on the exercise below.

Two typos in the problem set below have been corrected 1/23, 1:25PM.  Changes are marked in red, and are small enough that you will probably want simply to mark them on your existing copy, not print it out again.  The errors were that A as well as C should be maximized over in the main problem statement, and that the two cases to examine were (2) binding, (3) not, and (3) binding, (2) not.
Exercise on solving a linear rational expectations model.  Due Wednesday, 1/28.
Answer to linear rational expectations exercise.  Posted 2/11.
January 20:  The two sets of notes below have been significantly updated.  Most changes in them are marked in red.
Random Lagrange Multipliers, 1/20
Random Lagrange Multipliers:  Examples and Exercise due 1/21
Answers to the exercise above.  Posted 1/30/98.  The fonts in this answer may not display legibly on a computer screen unless you magnify the page as much as possible.  Have your Acrobat reader fill the screen, and use the "View|Fit Visible" option.  There should be no problem with readability of a printed version.