The financial crisis and its macroeconomic repercussions (student seminar Spring 2012)
Themes and references (this list is under dynamic updating)
Useful overviews:
Laibson, 2011, lecture on “Asset prices and economic fluctuations”.
Stiglitz, J.E., 2011, Macroeconomics, monetary policy, and the crisis.
Both can be found here:
http://www.econ.ku.dk/okocg/VM/VM-general/diverse_supplerende_materiale_og_links.htm.
Handbook of Monetary Economics, vol. 3, 2010, online at the Royal Library.
Notation applied in the references below:
“JEP 2010/4” refers to: Journal of Economic Perspectives, vol. 24, no. 4,
Fall 2010.
“Adv. Macro homepage” refers to:
http://www.econ.ku.dk/okocg/VM/VM-general/diverse_supplerende_materiale_og_links.htm
Some of the references below are just introductions/surveys, but their list of references may contain important first-hand sources.
Themes
1. Why does the economy fall to pieces after a financial crisis?
Hall, R., 2010, Why does the economy fall to pieces after a financial crisis?
JEP 2010/4.
Hall. R., 2011, The long slump, AER, vol. 101 (2), 431-469.
Se also http://www.stanford.edu/~rehall/2012AEAMeetings.htm and
2. Theory of effective demand failures (the corridor hypothesis).
Leijonhufvud, A., 2009a, Out of the corridor: Keynes and the crisis, Cambridge Journal of Economics, vol. 33, 741-757.
Leijonhufvud, A., 2009b, Macroeconomics and the crisis: A personal appraisal. CEPR Policy Insight No. 41: http://www.cepr.org/pubs/PolicyInsights/PI.asp
3. What is Say’s law and what does it mean to reject it?
No good reference here. In fact, I regret I added this issue to the list. The two questions raised do not provide enough stuff for a paper as they can be answered very briefly. So let me do that at our meeting the coming Thursday.
4. New Keynesian models.
A workhorse version, see the proposal by Jeppe Druedahl.
Introduction to the NKE model framework: NKE literature
Attempts at extension with:
a) Involuntary unemployment.
Blanchard & Gali, JMCB, 2007, and AEJ Macroeconomics 2010.
b) Financial intermediation.
Cúrdia, V., and M. Woodford, 2009, Credit Frictions and Optimal Monetary Policy, Working Paper; Gertler, M., and N. Kiyotaki, Chapter 11 in Handbook of Monetary Economics, vol. 3A, 2010, is online at the library..
c) Fixed capital investment in a Keynesian context.
Blanchard ??, Kiyotaki ??
Critique of the representative agent DSGE approach:
Pesaran, M.H., and R.P. Smith, 2011, Beyond the DSGE straightjacket, The Manchester School, vol. 79, 5-16.
5. Credit frictions, agency costs, and economic fluctuations:
a) Bank lending channel, bank runs:
Bernanke, Gertler, Mishkin.
D. W. Diamond: Banks and liquidity: A simple exposition of the Diamond-Dybvig model, Economic Quarterly, vol. 93 (2), 189-200.
b) Balance sheet channel. The Kiyotaki and Moore model. Kiyotaki and Moore, J. of Political Economy, 1997.
c) Financial regulation after the crisis. Special issue: Journal of Economic Perspectives, vol. 25 (1), 2011.
d) Ricardo Caballero, MIT.
6. The housing market and macroeconomics.
See Adv. Macro homepage.
7. Theory of asset price bubbles. How to test for bubbles?
Miller and
Stiglitz, 2010, Economic Journal, vol. 120 (4), 500-518.
Laibson, 2011,
lecture on “Asset prices and economic
fluctuations”, see Adv. Macro homepage.
See references in Blanchard,
2009, The state of macro, Annual Review of Economics, 1, 209-228, in
particular on p. 219.
Herding behavior in financial markets, see
Peter Norman Sørensen.
Limits to arbitrage. See Shleifer and Vishny, 1997, in J. of Finance.
Guido Lorenzoni, MIT.
8. Expectation formation:
a) Self-fulfilling expectations.
Farmer, R. 2010, Animal spirits, persistent unemployment and the belief function. NBER Working Paper No. 16522. See also Farmer’s two new books at Adv. Macro homepage.
David Laibson, e.g. in Fuster, A., D. Laibson and B. Mendel, Natural expectations and macroeconomic fluctuations, se JEP 2010/4.
De Grauwe, P., 2010, Top-Down versus Bottom-Up Macroeconomics, CESifo Economic Studies, vol. 56 (4), 465-497.
De Grauwe, P., and Y. Ji, 2012, Mispricing of Sovereign Risk and Multiple Equilibria in the Eurozone, CEPS WD no. 361. Background paper: De Grauwe, 2011.
b) Learning, Taylor rule, and liquidity trap.
Evans and Honkapohja, 2008, European Economic Review, vol. 52, 1438 – 1463. http://pages.uoregon.edu/gevans/
c) Uncertainty vs. risk, animal spirits.
Akerlof &
Shiller, 2009, Animal spirits, Princeton Univ. Press.
d) Imperfect Knowledge
Economics:
Two recent books by
R. Frydman and M. Goldberg.
e) Rational beliefs.
Mordecai Kurz et al.
f) Heterogeneous expectations, learning, and information stickiness.
Damjan Pfajfar and Emilio Santoro.
g) Blanchard, O., Jean-Paul L'Huillier, and Guido Lorenzoni, 2009, News,
noise, and fluctuations: An empirical exploration. NBER WP no. 15015.
9. Leverage and deleverage cycles.
Geanakoplos, J., 2010, Solving the present crisis and managing the leverage cycle, FRBNY Economic Policy Review, August 2010, 101-131.
Fostel and Geanakoplos (AER 2008 no. 4, AER 2012, no. 1), Eggertsson & Krugman, see
He and Xiong, 2010, Dynamic Debt Runs, Princeton WP.
Ivan Werning, MIT.
10. History of financial crises.
Reinhart and Rogoff, 2010, This time is different, Princeton Univ. Press.
11. Wage and price dynamics. Beveridge curve.
a) Wage curve and Phillips curve.
Blanchard, lecture notes, see Blanchard’s website at MIT.
Fuhrer and Moore, 1995, Inflation persistence, QJE, vol. 110, 127-159.
R.J. Gordon, 2011, The history of the Phillips curve: Consensus and
Bifurcation, Economica, vol. 78, 10-50.
b) The
natural range of unemployment.
Lye, J.N., and I.M. McDonald, ...... ,
Australian Economic Papers,
Sept. 2006.
McDonald, I.M., 1990.
R. Farmer, see Adv. Macro homepage. More on the labor market: see Hall
under 1 above.
12. Hysteresis in unemployment.
Acemoglu, Blanchard.
Lawrence Ball, Hysteresis in unemployment: Old and new evidence, NBER
Working Paper
No. 14818.
13. Should monetary policy attempt to intervene if a speculative bubble seems underway? If so, how?
Blanchard, O., Bubbles, Liquidity Traps, and Monetary Policy, February 2000.