416, Fall 2005
Advanced Macroeconomics
Christiano
Outline
In Recent Years Developments in Modeling and in Computational/Econometric Techniques Have Brought us to the Brink of the Point Where Dynamic General Equilibrium Theory Becomes Useful for Providing Practical, Quantitative Policy Advice. The Purpose of this Course is to Survey These Developments. The Course Grade Will be Based on Weekly Homeworks and a Take-home Final.
1. Vector Autoregressions: some theory, some numerical simulations
2. Vector Autoregressions fit to data.
Estimated Vector Autoregressions
Standard Errors
Historical Shock Decompositions and Decompositions of Variance
3. Solution Methods Based on Model Linearization.
Linearization methods: Indeterminacy, Lack of Solution
Computing Impulse Response Functions
Checking for Invertibility
4. Estimating a DSGE Model Using VAR
Detailed Discussion of a DSGE Model That Ends up Fitting the Data Well
The Interface Between Macro Data and Micro Data
A Puzzle: Apparent Inflation Inertia In Aggregate Data and Flexibility in Micro Data
Introducing Financial Frictions and a Banking System into the Model
Why
Have Economic Outcomes in
5. Optimal Monetary and Fiscal Policy (Lecture Notes)
Optimal Policy When the Government’s Intertemporal Budget Constraint Cannot Be Ignored
Woodford’s ‘Timeless Perspective’
Log-linearization versus Minimum Weighted Residuals, versus Perturbation Methods
Optimal Monetary Policy When the Government’s Budget Can Be Ignored
6. Model Solution Methods: Some Issues Motivated by Computation of Optimal Policy
Global Methods: Minimum Weighted Residuals, Projection Methods
Local Methods: Perturbation Methods
7. Analysis of Chari-Kehoe-McGrattan’s ‘Business Cycle Accounting’
Notes on Carlstrom and Fuerst’s Model of Financial Frictions
Lecture Notes on ‘Accounting’ (written with Josh Davis)
8. Analysis of the Operating Characteristics of Various Policy Rules
The Taylor Rule. Lecture Notes.
The Relation Between Monetary Policy and Stock Market Boom-Bust Episodes
Economic Instability and the Zero-Lower Bound Constraint on the Nominal Rate of Interest
Optimal Monetary Policy in a Financial Crisis
Homeworks: