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| LEC # | | | | TOPICS | | | | READINGS | |
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| | | | | | 1 | | | | Intertemporal Preferences; Welfare Costs of Business Cycle Fluctuations vs. Growth | | | | Deaton, Angus. Understanding Consumption. New York: Oxford University Press, 1992, chap. 1, sections 1.1, 1.2 and 1.4. Lucas, Jr., Robert E. Models of Business Cycles . Oxford: Blackwell, 1987, chap. 3. Further Readings: Epstein, Larry G., and Stanley E. Zin. "Substitution, Risk Aversion, and the Temporal Behavior of Consumption and Asset Returns: An Empirical Analysis." Journal of Political Economy 99, no. 2 (April 1991): 263-286. Epstein, Larry G., and Stanley E. Zin. “Substitution, Risk Aversion, and the Temporal Behavior of Consumption and Asset Returns: A Theoretical Framework.” Econometrica 57, no. 4 (July 1989): 937-969. Weil, Philippe. “Non-expected Utility in Macroeconomics.” Quarterly Journal of Economics 105, no. 1 (February 1990): 29-42. | | | | | | | | | | | | | 2 & 3 | | | | Certainty Equivalence Permanent Income; Evidence; Excess Sensitivity and Excess Smoothness; Euler Equation Tests | | | | Blanchard, Olivier J., and Stanley Fisher. Lectures on Macroeconomics. Cambridge, Mass.: MIT Press, 1989, section 6.2. Deaton, Angus. Understanding Consumption. Chaps. 2, 3, 4 and 5. Abel, Andrew. "Consumption and Investment." In Handbook of Monetary Economics. Edited by Benjamin M. Friedman and Frank Hahn. Amsterdam: North-Holland, 1990. Vol. II, chap. 14. Attanasio, Orazio P. "Consumption Demand." In Handbook of Macroeconomics. Edited by John B. Taylor and Michael Woodford. Amsterdam: North-Holland, 1999. Vol. 1B, chap. 11. Campbell, John Y., and N. Gregory Mankiw. "Consumption, income and interest rates: reinterpreting the time series evidence." In NBER Macroeconomics Annual 1989. Cambridge, MA: MIT Press, 1989, pp. 185-216. (NBER Working Paper No. w2924.) Carroll, Christopher, and Larry Summers. "Consumption Growth Parallels Income Growth: Some New Evidence." In National Saving and Economic Performance. Edited by B. Douglas Bernheimand and John Shoven. Chicago: The University of Chicago Press, 1991, pp305-343. (NBER Working Paper No. w3090.) Further Readings: Hall, Robert. "Stochastic Implications of the Life Cycle Permanent Income Hypothesis: Theory and Evidence." Journal of Political Economy 86, no. 6 (December 1978): 971-987. Flavin, Marjorie. "The Adjustment of Consumption to Changing Expectations of about Future Income." Journal of Political Economy 89, no. 5 (October 1981): 974-1009. Caballero, Ricardo J. "Durable Goods: An Explanation for Their Slow Adjustment." Journal of Political Economy 101, no. 2 (April 1993): 351-384. Romer, David. Advanced Macroeconomics. 2nd ed. Boston: McGraw-Hill, 2001, chap. 7. | | | | | | | | | | | | | 4, 5 & 6 | | | | Precautionary Savings; Income Fluctuations Problem (Buffer Stock) | | | | Ljungqvist, Lars, and Thomas J. Sargent. Recursive Macroeconomic Theory. Cambridge, Mass.: MIT Press, 2000, chap. 13 and 14. Deaton, Angus. Understanding Consumption, chaps. 6 and 7. Aiyagari, S. Rao. "Uninsured Idiosyncratic Risk and Aggregate Savings." Quarterly Journal of Economics 109, no. 3 (August 1994): 659-684. Krusell, Per, and Anthony A. Smith Jr. "Income and Wealth Heterogeneity in the Macroeconomy." Journal of Political Economy 106, no. 5 (October 1998): 867-896. Further readings: Carroll, Christopher. "A Theory of the Consumption Function, with and without Borrowing Constraints (expanded version)." NBER Working Paper No. w8387. Gourinchas, Pierre Olivier, and Jonathan Parker. "Consumption over the Life Cycle." Econometrica 70, no. 1 (January 2002): 47-91 . Zeldes, Stephen P. "Optimal Consumption with Stochastic Income: Deviations from Certainty Equivalence." Quarterly Journal of Economics 104, no. 2 (May 1989): 275-298. Caballero, Ricardo J. "Earnings Uncertainty and Aggregate Wealth Accumulation." American Economic Review 81, no. 4 (September 1991): 859-871. Huggett, Mark. "The Risk Free Rate in Heterogeneous-Agent Incomplete-Insurance Economies." Journal of Economic Dynamics and Control 17, nos. 5-6 (1993): 953- 969. Huggett, Mark, and Sandra Ospina. "Aggregate Precautionary Savings: When is the Third Derivative Irrelevant?" Journal of Monetary Economics 48, no. 2 (October 2001): 373-396. Kimball, Miles S. "Precautionary Saving in the Small and in the Large." Econometrica 58, no. 1 (January 1990): 53-73. Krusell, Per, and Anthony A. Smith Jr. "On the Welfare Effects of Eliminating Business Cycles." Review of Economic Dynamics 2, no. 1 (1999): 245-272. Schechtman, Jack, and Vera L. Escudero. "Some Results on An Income Fluctuation Problem." Journal of Economic Theory 16, no. 2 (1977): 151-166. Weil, Philippe. "Precautionary Savings and the Permanent Income Hypothesis." Review of Economic Studies 60, no. 2 (April 1993): 367-383. | | | | | | | | | | | | | 7 | | | | Risk Sharing; Complete Market Perfect Risk Sharing; Evidence | | | | Ljungqvist, Lars, and Thomas J. Sargent. Recursive Macroeconomic Theory. Chap. 7. Townsend, Robert M. "Consumption Insurance: An Evaluation of Risk-Bearing Systems in Low-Income Economies." Journal of Economic Perspectives 9, no. 3 (Summer 1995): 83-102. Further Readings: Townsend, Robert M. The Medieval Village Economy: A Study of the Pareto Mapping in General Equilibrium Models. Princeton, N.J.: Princeton University Press, 1993, chap. 4. Townsend, Robert M. "Risk and Insurance in Village India." Econometrica 62, no. 3 (May 1994): 539-591. | | | | | | | | | | | | | 8, 9 & 10 | | | | Insurance Vs. Incentives: History Dependence; Long Run Implications | | | | Ljungqvist, Lars, and Thomas J. Sargent. Recursive Macroeconomic Theory. Chap. 15 [especially pp. 401-409 ("Social insurance without commitment"), pp. 413-418 ("A closed system"), pp. 427-435 ("Optimal Unemployment Compensation.")] Alvarez, Fernando, and Urban Jermann. "Quantitative Implications of Endogenous Solvency Constraints." NBER Working Paper No. w6953, February 1999. Sections 2 and 4 and subsection 5.1. Townsend, Robert M. The Medieval Village Economy: A Study of the Pareto Mapping in General Equilibrium Models. Chaps. 5 and 6. Further readings: Lucas, Jr., Robert E. "On Efficiency and Distribution." Economic Journal 102, no. 411 (March 1992): 233-247. Atkeson, Andrew, and Robert E. Lucas, Jr. "On Efficient Distribution with Private Information." Review of Economic Studies 59, no.3 (July 1992): 427-453. Green, Edward J. "Lending and the Smoothing of Uninsurable Income." In Contractual arrangements for intertemporal trade. Edited by Edward C.Prescott and Neil Wallace. Minnesota Studies in Macroeconomicsseries, vol. 1. Minneapolis: University of Minnesota Press, 1987, pp. 3-25. Kocherlakota, Narayana R. "Implications of Efficient Risk Sharing without Commitment." Review of Economic Studies 63, No. 4 (October 1996): 595-609. | | | | | | | | | | | | | 11, 12 & 13 | | | | Asset Prices; Arbitrage; State Prices; CCAPM; Evidence and Puzzles | | | | Ljungqvist, Lars, and Thomas J. Sargent. Recursive Macroeconomic Theory. Chaps. 7 and 10 (excluding section on Government Debt). Cochrane, John H., and Lars Peter Hansen. "Asset Pricing Explorations for Macroeconomics." NBER Macroeconomics Annual 1992. Cambridge, MA: MIT Press, 1992, pp. 115-165. (NBER Working Paper No. w4088.) Further Readings: Mehra, Rajnish, and Edward C. Prescott. "The Equity Premium: A Puzzle." Journal of Monetary Economics 15, no. 2 (1985): 145-162. Cochrane, John. "Where is the Market Going? Uncertain Facts and Novel Theories." Economic Perspectives: A Review from Federal Reserve Bank of Chicago XXI, no. 6 (November/December 1997): 3-37. (NBER Working Paper No. w6207). Kocherlakota, Narayana R. "The Equity Premium Puzzle: It's Still a Puzzle." Journal of Economic Literature 34, no. 1 (1996): 42-71. Alvarez, and Jermann. "Using Asset Returns to Estimate the Costs of Business Cycle Fluctuations." In Mimeo. | | | | | | | | | | | | | 13a | | | | Investment; Q-Theory; Evidence | | | | Blanchard, Olivier J., and Stanley Fisher. Lectures on Macroeconomics. Section 6.3. Abel, Andrew B. "Consumption and Investment." In Handbook of Monetary Economics. Edited by Benjamin M. Friedman and Frank Hahn. Amsterdam: North-Holland, 1990. Vol. II, chap. 14. Hayashi, Fumio. "Tobin's Marginal q and Average q: A Neo-Classical Interpretation." Econometrica 50, no. 1 (January 1982): 213-224. Romer, David. Advanced Macroeconomics. Chap. 8, 2nd ed. (Chap. 7, 1st ed.). | | | | | | | | | | | | | 14, 15 | | | | Irreversibility, Fixed-Costs; Infrequent and Lumpy Investment; (s,S) Rules; Aggregation; GE | | | | Caballero, Ricardo J. "Aggregate Investment." In Handbook of Macroeconomics. Edited by John B. Taylor and Michael Woodford. Amsterdam: North-Holland, 1999. Vol. 1B, chap. 12. Dixit, A. K., and R. S. Pindyck. Investment Under Uncertainty. Princeton, N.J.: Princeton University Press, 1994. Chap. 2. Thomas, Julia K. "Is Lumpy Investment Relevant for the Business Cycle?" Journal of Political Economy 110, no. 3 (June 2002): 509-534. Further Readings: Caballero, Ricardo J., and Eduardo M. R. A. Engle. "Explaining Investment Dynamics In U.S. Manufacturing: A Generalized (s,S) Approach." Econometrica 67, no. 4 (July 1999): 783-826. Caballero, Ricardo J., and John V. Leahy. "Fixed Costs: The Demise of Marginal q." NBER Working Paper No. w5508, March 1996. | | | | | | |
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