LECTURES AND CLASS EXERCISES IN ADVANCED MACROECONOMICS 2

AUTUMN 2008.      LECTURER:    CHRISTIAN GROTH

Normally lecture notes (usually in the form of chapter drafts) will be available here at the latest at noon two days before the lecture in question. You are supposed to download and print out yourself these lecture notes. Exercise problems to be discussed in class on Fridays will be available at the latest Monday morning the same week.

I very much welcome comments and suggestions. Please, let me know of errors, confusions, and limitations in the lecture notes and exercise problems.

Date Topic Read (solve)                       Comments
        before        after
5/9 Introduction (there is no lecture 2/9) General Description of the Course, Course Plan and Syllabus. Chapter 1. § 3.2.1 of Chapter 3 of Lecture Notes. Chapter 1 and 3.2.1 are introductions to the terminology used in the course.  
9/9 Endogenous labor supply and retirement in Diamond's OLG model. Effects of an early retirement scheme. § 3.2.2 of Chapter 3, which is available in your download for 5/9.   See Correction List 1
12/9 Exercises:
discrete time OLG models.		 Solve I.1 and I.5 in Problem Set I. If time allows, we will do also I.4.    
16/9 Intertemporal substitution of labor supply. A bequest motive. The Barro model. § 3.3 of Ch. 3.
§ 4.1 of Ch. 4. App. A to Ch. 4 is cursory.		 Cursory reading: Adding technical progress: § 4.2 of Ch. 4, plus App. B. See Short Note 1. The remainder of Ch.4 (outside syllabus) is here for those who are interested.
19/9 Exercises:
employer's contribution, taxation, and labor supply in a SOE. Ricardian equivalence in a SOE with PAYG pensions.		 Solve II.7 and II.11 in Problem Set II.   Comment. An answer to II.11 is here. If you have questions about it, we discuss them Friday 30/9. Further comment on II.7.
23/9 An OLG model in continuous time. § 8.1-2 of Chapter 8, first part is here, second part here. A refresher on continuous time analysis: Short Note 2. The Blanchard model looks relatively complicated to begin with. But in the end it is easy to use.
26/9 Exercises: Comparing Diamond and Barro. Life annuities, actuarial fairness Solve II.10, III.1, and III.2. These are all rather short questions. e) in III.2 was postponed until 4/10.
30/10 Aggregation and dynamics in the Blanchard model. Adding retirement. Theory of the rate of return in the long run. Wealth and debt of a SOE. § 8.3-6 of Chapter 8   § 8.5 postponed to 4/10 as a brief survey, otherwise left for self-tuition. At 4/10 the main focus is on fiscal sustainability.
4/10 Exercises: Effects of technology shocks. Solve e) in III.2 and IV.3 and IV.4 in Problem set IV. See Correction list 2
Remember Internal evaluation at Absalon		 Answer to IV.4 here. More on the financial crisis.
7/10 National wealth and foreign debt. Fiscal sustainability. Debt arithmetic. GE effects of public debt. § 8.5 of Ch. 8. § 9.1-4 of Ch. 9; first part here, second part here; third part (up to and incl. p. 352) here.    
10/10 No class exercises. Do the midterm paper.   A refresher on linear diff. eq's: Short Note 3.
21/10 Some rough estimates of the long-run effect of government debt. On optimal debt policy. Elmendorf and Mankiw, primarily § 3 and 5 (Course Material). The last part of Ch. 9 is here. § 9.4.2-3  is self-tuition. § 9.5 is cursory. We decided to postpone the q-theory of investment
24/10 Exercises: Fiscal sustainability Solve VI.2 and VI.1. We postpone V.1 and V.2.   We did VI.2. On the basis of that, VI.1 is easy and left for self-tuition.
28/10 The q-theory of investment. Is money superneutral (the Sidrauski model)? Chapter 10. Chapter 12. Chapter 13A. Ch. 12 is a refresher on money and left for self-tuition.  
31/10 Exercises: the housing market and Tobin's q. Solve Problem VII.2. A suggested solution to VII.2.  
4/11 The Sidrauski model cont.
Introduction to a dynamic IS-LM model		 Chapter 13A p. 455-69. Ch. 14 cursory. The last part of Ch. 13 is here and is only cursory.   
7/11 Exercises: business fixed capital investment and Tobin's q. Solve V.2.   Midterm papers were handed back and discussed together with V.2.
11/11 A dynamic IS-LM model with short-term and long-term bonds Chapter 15 (§15.2 only cursory). The remainder of Ch. 15 is here.    
14/11 Exercises: fast-moving asset markets and slow-moving goods markets. Solve Problem VIII.1 and VIII.2.    
18/11 A macro model with monopolistic competition and menu costs. This lecture will be given by Emiliano Santoro. Chapter 17, pp. 593-607 only cursory. Slides for Emeliano's lecture. Ch. 16 on floating exchange rates and overshooting is postponed until 25/11.  
21/11 Exercises: New Keynesian stuff Solve Problem IX.6, IX.7, and if time allows IX.9.   We did IX.9, a)-d) indirectly via the discussion of IX.7. Correction
25/11 Monetary transmission mechanisms. Fixed vs. floating exchange rates under RE. Mishkin; Blanchard p. 780-93 (Course Material, p. 782-86 only cursory) (all self-tuition). Ch. 16.A; Ch. 16.B. Section 1 of Ch. 16 is just a refresher (cursory reading).  
28/11 Exercises: New Keynesian stuff. Exchange rate overshooting. Solve IX. 9, e), IX. 4, and IX.1   On the exchange rate as a forward-looking variable, see Short Note 4.
2/12 Business cycles. Concepts and stylized facts. The RBC model. Abel and Bernanke (Course Material). Ch. 23. Ch. 24, § 24.2 and 24.3.1 only cursory. See also tables and graphs in King and Rebelo pp. 927-74 as well as Table 1.22 from Handbook of Labor Economics (both in Course Material)  
5/12 Exercises: First-order conditions and business cycle facts. Solve X.2 and, if time allows, X.4 and X.5.   Suggested solution to X.2 was handed out.
9/12 Credit and business cycles. This lecture will be given by Emiliano Santoro. Slides for the lecture. Bernanke and Blinder (1988). Background material: Kiyotaki and Moore (1997). Walsh: Monetary Theory and Policy, 2nd ed., Ch. 7. Emiliano's updated slides.
12/12 Exercises: Precautionary saving. The credit market in an extended IS/LM model. Solve XI.1 and XI.2 (sorry about the many delays) Short Note 5 is likely to be of help for Problem XI.2.  
16/12 Keynesian perspectives, vicious and virtuous circles, precautionary saving Chapter 25.   Correction List 3 is here. Solution to V.1.
Solution to V.2.
Follow-up on VII.2.
24/12 Merry Christmas      
31/12     There will be no more follow-ups here on the course website.  
5/1 Exam preparation meeting 14:15-16:00. Større Øvelsessal, Econ. Dept., 2nd floor to the left. You are most welcome to send emails with questions to be answered at the meeting.  
8/1 Exam. Four hours. Closed book      
9/1   The exam problem set is here with supplement here. A suggested solution is here.