Macroeconomic Theory I Economic Growth (and Introduction to Dynamic General Equilibrium Economies)
The first half of the semester will focus on models of economic growth. This will serve also as an introduction to the analysis of dynamic general equilibrium economies.
As organized below, the material is supposed to take 14 lectures, which of course violates our budget constraint.
There are seven sections. In each section, the basic readings are indicated by stars. The non-star items are selected for your reference, but are not required for the course.
Why growth theory?; stylized facts on world growth and world income distribution; the Solow Model; steady state, golden rule, and transitional dynamics; productivity shocks and policy effects; conditional convergence; exogenous technological change; two sectors, AK, and the general convex growth model; nonconvexities and poverty traps.
The Neoclassical Growth Model (Ramsey-Cass-Koopmans-Brock-Mirman); discrete-time dynamic programming; continuous-time optimal control; steady state, the modified golden rule, and transitional dynamics; productivity and taste shocks; Ricardian equivalence and policy shocks; log-linearized dynamics; open economies; adjustment costs; money.
The Ramsey model with aggregate uncertainty; complete markets; the Consumption-CAPM; the equity-premium puzzles; tax smoothing; optimal fiscal policy.
The life-cycle hypothesis and bequests; finite horizons in the Ramsey model (Blanchard); OLG economies (the Diamond model); public debt; bubbles; social security; hyperbolic discounting.
The general AK model; endogenizing A; externalities and spillovers (Romer); public goods (Barro); human capital and learning-by-doing (Lucas); macroeconomic complementarities; policy effects (Rebelo).
Expanding varieties (Romer); Schumpeterian growth and quality ladders; directed technological change; international trade and growth; technology diffusion.
Financial markets and growth; self -insurance and precautionary savings; risk sharing and risk taking; incomplete markets and wealth distribution; institutions and growth.