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University of Essex Department of EconomicsSession 2014-2015 Christian Ghiglino

EC994 ADVANCED MACROECONOMICSReading list and module outline

This module builds on the notions covered in Macroeconomics (PG). The main topicsare: 1) Innovation and diffusion; 2) Theories of the Real Business Cycle; 3) Fiscal

policy and some monetary policy, 4) Networks.

Assessment: Details of assessment and submission deadlines are contained in thePostgraduate Economics Handbook, available from room 5b.217. Further informationabout the course is contained in the Universitys course catalogue , see;http://www2.essex.ac.uk/courses/.

Classes: Students are required to attend a weekly class. Problem sets will be posted inthe course material repository on a weekly basis. Students are expected to completethem.

Bibliography

The basic references are:

Advanced Macroeconomics, David Romer, 3 rd ed Boston: Mc Graw-Hill,2006

Economic Growth, Robert Barro and Xavier Sala-i-Martin, 2 nd ed., MITPress, 2004.

Introduction to Modern Economic Growth, Daron Acemoglu, PrincetonUniversity Press, 2009.

Lectures in Macroeconomics, Olivier Blanchard and Stanley Fisher, MITPress, 1989.

Recursive Methods in Economic Dynamics, Nancy Stokey and Robert Lucas,Cambridge, Mass.: Harvard University Press, 1989.

Other references are:

Recursive Macroeconomic Theory, Lars Ljungqvist and Thomas Sargent,Cambridge, Mass. : MIT Press, 2000, or 2nd edition, 2004.

Dynamic Economics: Quantitative Methods and Applications, Russel Couperand Jerome Adda, MIT Press, 2003.

Course Outline

1. (Week 2/3) Growth with physical and human capital accumulationa) Exogenous growth

b) Models of human capital accumulation

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References: Romer, Ch. 3

2. (Week 3/4) Endogenous growth models Ia) Models of knowledge accumulation

b) Models with an expanding variety of product (Romer (1990), Grossmanand Helpman (1991))

References: Barro & Sala-i-Martin, Ch. 6 & 7

3. (Week 5) The quality ladder modelsa) The quality ladder model (Aghion and Howitt (1992))

b) The Kortum (1997) Model.

Reference: Barro & Sala-i-Martin, Ch. 8

4. (Week 6) Real Business Cycle Theorya) Facts about business cycles

b) Theories of the Business Cyclec) The RBC models

References: Romer, Ch. 4

5. (Week 7) Real Business Cycle Theory: Solving the modelsa) The model standard with endogenous labour

References: Blanchard and Fisher, various chapters

6. (Week 8) Budget Deficits and Fiscal Policiesa) Optimal taxation

b) Ricardian Equivalencec) Tax smoothing.

References: Romer, Ch. 11, and Blanchard and Fisher Ch. 2 and 11

7. (Week 9) Fiscal policy in the Overlapping Generations modela) The Overlapping Generations model (OLG)

b)

The Ricardian Equivalence in the OLGc) Distortionary taxationd) Social Security and Growth

References: Blanchard and Fisher Ch. 11

The topic of Week 10 and Week 11 will depend on the time available and the interestsof the students. Possible topics are:

8. Inflation and Moneya) Inflation and money growth

b) The term structure of interest ratesc) Dynamic inconstancy

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d) Interest rules

References: Reference: Romer, Ch. 10

9. Networks in Macroeconomicsa) Network Theory

b) Networks and Economic Growthc) Networks and social effects

Reference: Connections, Sanjeev Goyal, Cambridge Press and Research papers