Description
Professor Blanchard will discuss shocks, labor markets and unemployment, and dynamic stochastic general equilibrium models (DSGE models). Professor Lorenzoni will cover demand shocks, macroeconomic effects of news (with or without nominal rigidities), investment with credit constraints, and liquidity with its aggregate effects.
Prerequisites
The prerequisites for this course are 14.461 Advanced Macroeconomics I, 14.122 Microeconomic Theory II, and 14.452 Macroeconomic Theory II.
Textbooks
There are no official textbooks for this course. Please refer to the readings list.
Grading
The grade is based on the successful completion of 7 graded problem sets.
Recommended Citation
For any use or distribution of these materials, please cite as follows:
Olivier Blanchard and Guido Lorenzoni, course materials for 14.462 Advanced Macroeconomics II, Spring 2007. MIT OpenCourseWare (http://ocw.mit.edu/), Massachusetts Institute of Technology. Downloaded on [DD Month YYYY].
Course Outline
Part 1 - Professor Blanchard
Shocks
Vector autoregression models (VARs). Wold representations and their limits
Structural VARs
A few major shocks or many?
Technology versus demand shocks
The great moderation
Unemployment, institutions, and shocks
Basic (non-cyclical) facts about unemployment flows
Flows, bargaining, and unemployment
Role of institutions I: Employment protection and the labor market
Role of institutions II: Trust, hold-ups, and bargaining
Cyclical movements in unemployment
Productivity growth versus unemployment. Trying to put things together
Dynamic stochastic general equilibrium models (DSGE models)
Part 2 - Professor Lorenzoni
- Imperfect information and demand shocks
- Financial frictions and investment
- Financial frictions: Limited pledgeability and richer models
- Q theory
- Bubbly asset prices and investment
- Liquidity and aggregate activity
- Limited supply of liquidity
- Search models
- Countercyclical liquidity premia
- Liquidation and asset prices