Graduate Macroeconomics

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The purpose of this graduate course is to provide an overview of macroeconomic theories. The students will get acquainted with standard mathematical and analytical methods used in modern macroeconomics. The aim is to enable the students to read and work with journal-based literature within the field. The course gives an overview of the most important topics in modern macroeconomics: growth theory, including new growth theory, with research and development; Keynesian as well as modern micro-based theories of economic fluctuations; unemployment, monetary policy and fiscal policy.

Due to the latest changes in structure of graduate studies in Estonia, the course is taught as an obligatory part of the program for both MA students, and PhD students of Economics in Tartu University.

Structure and lecture notes (in Estonian):

1. Economic growth: Solow model (Slides, Problem Set 1)
2. Economic growth: Ramsey model (Slides, Problem Set 2)
3. Economic Growth: Overlapping-Generations Models (Slides, Problem Set 3)
4. Economic Growth: Endogenous Growth Models (Slides, Problem Set 4)
5. Business Cycles: Real-Business-Cycle Theory (Slides, Additional Material: Dynamic Programming, Problem Set 5)
6. Business Cycles: Keynesian Theories (Slides, Problem Set 6)
7. Business Cycles: Incomplete Nominal Adjustment (A) (Slides, Problem Set 7)
8. Business Cycles: Incomplete Nominal Adjustment (B) (Slides)
9. → Midterm exam
10. Unemployment: Efficiency-Wage Model (Slides, Problem Set 8)
11. Unemployment: Search and Matching Models (Slides, Problem Set 9)
12. Consumption: Permanent Income Hypothesis, Risky Assets (Slides, Problem Set 10)
13. Investments: Cost of Capital, Tobin's q (Slides, Problem Set 11)
14. Inflation and Monetary Policy (Karsten Staehr) (Problem Set 12)
15. Budget Deficit and Fiscal Policy (Karsten Staehr) (Problem Set 13)
16. Problem Sets Tutorial

• → Final exam in June

• Obligatory course for MA and PhD students in Departpent of Economics and Business Administration, University of Tartu
• Official information (from Studies Information Database): Advanced Advanced Macroeconomics for MA students (MJRI.10.004) and Advanced Advanced Macroeconomics for PhD students (MJRI.10.007)
• Lecturers: Raul Eamets, Marit Hinnosaar and Toomas Hinnosaar
• Course homepage: http://moodle.mtk.ut.ee/course/view.php?id=10 (restricted)
• Course takes place in Spring semester 2006 and lasts 16 weeks.
• Course gives 6 CP and ends with written exam. Grade is a sum of: midterm exam (30%) and final exam (70%).

The course follows mainly David Romer's textbook «Advanced Macroeconomics», which is required reading for everyone (link to library, link to bookshop). Some topics are complemented with sections from other textbooks and articles. Detailed list of required and supplementary readings will be available at the homepage.

References and other useful books

1. Allais, M. Economie et Interet. -- (1947).
2. Bellman, Richard. Dynamic programming. -- (1957).
3. Blackwell, David. Discounted Dynamic Programming. -- The Annals of Mathematical Statistics, Vol. 36, No. 1. (1965), pp. 226-235.
4. Blanchard, Olivier; Lawrence Summers. Hysteresis and the European Unemployment Problem. -- NBER Working Paper, No. 1950. (1987).
5. Blanchard, Olivier. European Unemployment: The Evolution of Facts and Ideas. -- Economic Policy, Vol. 21, No. 45. (2005).
6. Caplin, Andrew; Daniel Spulber. Menu Costs and the Neutrality of Money. -- The Quarterly Journal of Economics, Vol. 102, No. 4. (1987), pp. 703-25.
7. Cass, David. Optimum Growth in an Aggregative Model of Capital Accumulation. -- The Review of Economic Studies, Vol. 32, No. 3. (1965), pp. 233-240.
8. Diamond, Peter. National Debt in a Neoclassical Growth Model. -- The American Economic Review, Vol. 55, No. 5. (1965), pp. 1126-1150.
9. Fischer, Stanley. Long-Term Contracts, Rational Expectations, and the Optimal Money Supply Rule. -- Journal of Political Economy, Vol. 85, No. 1. (1977), pp. 191-205.
10. Hall, Robert. Stochastic Implications of the Life Cycle-Permanent Income Hypothesis: Theory and Evidence. -- The Journal of Political Economy, Vol. 86, No. 6. (1978), pp. 971-987.
11. Koopmans, Tjalling. On the Concept of Optimal Economic Growth. -- No. 163. (1963).
12. Lucas, Robert. Some International Evidence on Output-Inflation Tradeoffs. -- American Economic Review, Vol. 63, No. 3. (1973), pp. 326-34.
13. Lucas, Robert. Expectations and the neutrality of money. -- Journal of Economic Theory, Vol. 4, No. 2. (1972), pp. 103-124.
14. Phelps, Edmund. Microeconomic foundations of employment and inflation theory. -- (1970).
15. Pontryagin, ; VG Boltyanskii; RV Gamkrelidze; E Mishchenko. The mathematical theory of optimal processes (International series of monographs in pure and applied mathematics). -- (1962).
16. Ramsey, FP. A Mathematical Theory of Saving. -- The Economic Journal, Vol. 38, No. 152. (1928), pp. 543-559.
17. Romer, David. Advanced Macroeconomics. -- (01 May 2001).
18. Samuelson, Paul. An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money. -- The Journal of Political Economy, Vol. 66, No. 6. (1958), pp. 467-482.
19. Shapiro, Carl; Joseph Stiglitz. Equilibrium Unemployment as a Worker Discipline Device. -- The American Economic Review, Vol. 74, No. 3. (1984), pp. 433-444.
20. Solow, Robert. Technical Change and the Aggregate Production Function. -- The Review of Economics and Statistics, Vol. 39, No. 3. (1957), pp. 312-320.
21. Solow, Robert. A Contribution to the Theory of Economic Growth. -- The Quarterly Journal of Economics, Vol. 70, No. 1. (1956), pp. 65-94.
22. Solow, Robert. Another possible source of wage stickiness. -- Journal of Macroeconomics, Vol. 1, No. 1. ( 1979), pp. 79-82.
23. Stokey, Nancy; Robert Lucas. Recursive Methods in Economic Dynamics. -- (01 November 1989).
24. Taylor, John. Staggered Wage Setting in a Macro Model. -- The Journal of Economic Review, Vol. 69, No. 2, Papers and Proceedings of the Ninety-First Annual Meeting of the American Economic Association. (1979), pp. 108-113.
25. Tobin, James. A General Equilibrium Approach To Monetary Theory. -- Journal of Money, Credit and Banking, Vol. 1, No. 1. (1969), pp. 15-29.

Electronic materials

1. Video: Ed Prescott ja Finn Kydland.
2. Every Breath You Take - Hubbard vs Bernanke.
3. George Akerlof - Lecture in World Bank.
4. Benjamin Friedman - Lecture in World Bank.
5. Daron Acemoglu - Lecture in World Bank.
6. L'Hospital's Rule (MathWorld).
7. L'Hôpital's rule (Wikipedia).
8. Poisson Distribution (MathWorld).
9. Poisson distribution (Wikipedia).
10. Unemployment Cartoon - TIME.com.

Background reading:

• It is also assumed, that all the students have the basic knowledge of Mathematical Economics, to refresh it, one could read Anneli Kaasa's textbook Majandusteaduse matemaatilised alused or web-based material Matemaatilised meetodid majandusteaduses1).
• English-Estonian-English Dictionary of Economics.