416, Fall 2003
Advanced Macroeconomics
Christiano
Outline
1. Model Solution Methods
a. Local Approximations: the Perturbation Method
i. First order perturbations (linearization
methods)
ii. Higher order perturbations.
b. Global Approximations.
c. Shooting (Application to analysis of small open
economy in wake of financial crisis.)
2. Some Time Series Tools
a. Vector Autoregressions: Estimation and Identification
b. Encompassing tests
c. The Kalman Filter: Projections and Maximum Likelihood
Estimation
3. Estimation of a General Equilibrium Model for Policy Analysis
a. Fitting a Model to the 1920s and 1930s
b. Would a Better Monetary Policy Have Prevented the Great
Depression?
4. Analysis of Models:
a. Ramsey Outcomes, With and Without Various Frictions
b. Difficulties Achieving Ramsey Outcomes: the case of lack
of commitment. Can this explain the observed periods of high and low
inflation?
5. Other Possible Topics:
a. Evaluation of Alternative Policy Rules
i. Analysis of 'Global' Properties of Equilibrium in Monetary Models
ii.'Escape Clauses' as a Device for Ensuring Good Outcomes.
b. Theories of TFP.
Homeworks: