Econ 205B Advanced Macroeconomic Theory II (UCSC - Winter 2010 - Carl Walsh)

 Advanced Macroeconomics Theory II 
  Modern macroeconomic theory: determination of national income; employment, inflation, and exchange rates; theories of growth and business cycle fluctuations; international transmission of inflation and other disturbances; recent developments in the analysis of macroeconomic policy; modern theoretical and empirical analysis of aggregate relationships. Courses must be taken in sequence.

    Carl Walsh    
        Contact & Website
        Course Website

    Class Time and Location
        J Baskin Engr 156
        Tues & Thurs - 10:00-11:45AM
        Office Hours: Wed 1-2, Thurs 8:30-9:30

    Problem Sets   -  from 2009 & 2010
 Note that 2009 Problem Sets include topics 2010 won't cover until the Spring Semester - this reflects a change in class organization. 

Problem Set One  due end of week two

Problem Set Two  due end of week four

Problem Set Three  due end of week six
Problem Set Four  due end of week eight 
    2009 Questions
              MATLAB Code [.txt]
    2010 Questions [View PDF] 

Problem Set Five  due the final week
    2009 Questions
    2010 Questions [View PDF] 

 Ole Timey Mid-Terms 

Professor Walsh is very 'fair' with his exams, in the sense that he asks you exactly what is reasonable on a test, given his lectures & problem sets. Where with other classes a good or poor showing on an exam often feels like the luck of the draw - here, if you do poorly, it feels very much like it was your own fault. 

Problem Sets, book problems and old exams are excellent reviews

 Final Exams 

Winter 2010 Syllabus View [PDF]
File Dump - Notes, Exams, Problem Sets all unorganized
Audio File Dump - All mp3 Recordings. Note audio time stamps in some lecture notes. 

     Lectures Notes & Course Organization 

  Lecture One Jan 5th 2010
Course Outline. Real Business Cycle (RBC) Model Introduced. NeoClassical Growth Model → Solow Growth Model → Finn E. Kydland & Ed C. Prescott. Calibration/Fitting VS Estimation of parameters. RBC Model Specifications. First Order Conditions. Canceling out the Value Function. 
Lecture Notes [PDF]

  Lecture Two  Jan 7th
What is a referee report?  Why Economics Models Matter.  Real Business Cycles Continued. 
Lecture Notes Part 2: Walsh's The Basic RBC Model [PDF] (there may be updates on Walsh's Website)

  Lecture Three  Jan 12th
RBC Model Continued. Social Planner Problem Makes Life Easier. First Order Conditions. Evaluation of the Model: Choose functional forms , Determine the parameters of the model (calibration) (more steps to come later).

  Lecture Four  Jan 14th 
Explanation of the expectation term More on Consumption smoothing. Specifying functional forms and background on many parameters. Intro to basic equilibrium conditions of Real Business Cycle Model. Linearization, Taylor series and more. Referring to Walsh’s (awesome notes on) Approximating the equilibrium conditions in the RBC model.

  Lecture Five  Jan 19th
Solving a simple backward looking model with MATLAB and DYNARE. Looking at how we can expect technology shocks to effect our models. 
Working in Handouts ps1_205b.mps1_205b_dynare
Lecture Notes [PDF] - Audio [mp3]

  Lecture Six  Jan 21st 
Lecture - Audio [mp3]

  Lecture Seven  Jan 26th
Lecture - Audio [mp3]

  Lecture Eight Jan 28th. 
Table of International Comovements, Backus & Kehoe: Historical Properties of Business Cycles. The International RBC Model: Lecture [PDF by Walsh].
Notes [PDF] - Audio [mp3]

  Lecture Nine  Feb 2nd
Problem Set Two Review – on Expectations, on Calibration, on Shocks to Taste. Basic International RBC Model continued [PDF by Walsh].
Lecture  Notes [PDF] - Audio [mp3]

  Lecture Ten  Feb 4th 
Comments on Problem Set 2, Problem 1, linearize with R, (the real rate of return). Finishing up our notes on the International Real Business Cycle - Audio goes well with Walsh's Notes. Introducing Notes on  Asset Prices [PDF by Walsh]  &  International Real Business Cycle [PDF by Walsh]
    Lecture Notes [PDF] - Audio [mp3]    

  Mid-Term Exam
for sounder solutions, look over the Walsh problem Set Solutions

  Lecture Eleven  Feb 16
Mid-Term Recap. Continuing with Asset Price Models. The Equity Premium Puzzle, Simulating in MATLAB
Asset Prices [PDF by Walsh]

  Lecture Twelve  Feb 18
Notes do not exist for this lecture. 
     - Audio [mp3]

  Lecture Thirteen  Feb 23
Money In Utility (MIU) model, very good basic outline. Cash In Advance (CIA) model introduced in detail. 

My Contribution to Economics

  Lecture Fourteen  Feb 25
Cash In Advance model continued. Swenson Timing Model. Focus on Nominal Interest Rate and Inflation. 

  Lecture Fifteen  March 2
Tips on Referee Report. Invite to Potluck! -Lecture continues with Deeper Analysis of CIA and MIU models. Consider How Good These Models are of the Business Cycle, talking about Gali & Rabanal paper (below).

  Lecture Sixteen  March 8
Gali & Rabanal paper continued. Back to RBC model, know Adding Sticky Wages to Labour Market.  
Introducing the "Central Banker Game", Inflation Bias, Unemployment & Output, given Central Bank Discretion or Rules Based Decision Making. 

  Lecture Seventeen  March 9th
Central Bank Inflation Bias Continued - Discretion vs Rules.

  Lecture Eighteen  March 11
Inflation Bias Continued - Review for Final Exam. 


Macroeconomic Theory, by Wicken - [View PDF]



Resuscitating Real Business Cycles
King, R. G. and S. T. Rebelo
in J. Taylor and M. Woodford (eds.), Handbook of Macroeconomics, Chapter 14, vol. 1B, 1999, 927-1007 (also NBER working paper 7534, Feb. 2000).

Chari, V. V., P. J. Kehoe and E. R. McGrattan, 
Econometrica, 2007, 75, 781-836.

International Evidence on the Historical Properties of Business Cycles 
Backus, D.K. and P.J. Kehoe
American Economic Review
, 82 (4), Sept. 1992, 864- 888.

International Real Business Cycles 
Backus, D. K. and P. J. Kehoe, and F. E. Kydland, 
Journal of Political Economy
, 100 (4), Aug. 1992, 745-775.

Fiscal Policy in General Equilibrium
Baxter, M. and R. King
American Economic Review
 83 (3), June 1993, 315-334.

Learning about Monetary Policy Rules 
Bullard, J. and K. Mitra
Journal of Monetary Economics
, 49 (6), Sept. 2002, 1105-1129.

Labor Hoarding and the Business Cycle
Burnside, C., M. Eichenbaum, and S. Rebelo
Journal of Political Economy, 1993, 101, 245-273.

Current Real Business Cycle Theories and Aggregate Labor-Market Fluctuations
Christiano, L. and M. Eichenbaum
American Economic Review , June 1992, 430-450.

Liquidity Effects and the Monetary Transmission Mechanism
Christiano, L. and M. Eichenbaum
American Economic Review, May 82 (2), 1992, 346-353.

Nominal Rigidities and the Dynamic Effects of a Shock to Monetary Policy
Christiano, L., M. Eichenbaum, and C. Evans
JPE forthcoming.

The Science of Monetary Policy: A New Keynesian Perspective
Clarida, R., J. Gali, and M. Gertler
J. of Economic Perspectives 37(4), 1999, 1661-1707.

Markups, Gaps, and the Welfare Costs of Business Fluctuations
Gali, J., M. Gertler, and D. Lopez-Salido
NBER Working Paper No. 8850, March 2002.

Technology Shocks and Aggregate Fluctuations: How Well Does the RBC Model Fit the Postwar U.S. Data?
Gali, J. and P. Rabanal
NBER Macroeconomic Annual 2004.

An Optimizing IS-LM Specification for Monetary Policy and Business Cycle Analysis
McCallum, B. T. and E. Nelson
Journal of Money, Credit, and Banking, 31(3), pt. 1, Aug. 1999, 296-316.

Changes in Business Cycles: Evidence and Explanation
Romer, C and D. Romer
NBER Working Paper No. 6948, Feb. 1999.

Aggregate Dynamics and Staggered Contracts
Taylor, J.B.
Journal of Political Economy, 88 (1), 1980, 1-24.

Revolution and Evolution in 20th Century Macroeconomics
Woodford, Mike -
 June 1999.