ECON 582 - 850 Macroeconomic Theory II (Winter 2022)
Instructor: Haifang HuangClassroom: Online
Class Time: Tuesdays 12:30PM - 3:20PM
Office Hours: Zoom meetings by appointment: [email protected].
Course Description: This course extends the analysis of ECON 581 and introduces students to more advanced issues. It uses two important types of dynamic general equilibrium (DGE) models -- neoclassical and new Keynesian -- to organize its course materials, and will cover both modeling techniques as well as important debates/current trends related to financial prices, monetary and fiscal policies. Prerequisite: ECON 581 or equivalent..
Remote Delivery: The course is delivered online via Zoom meetings at the scheduled class times.
There is no required textbook.
Tools You Need for Remote Learning: You need internet access, Zoom, and access to University of Alberta’s email and eClass. If you have difficulty accessing UofA eClass/email, please visit https://www.ualberta.ca/information-services-and-technology/services/email- calendaring/index.html.
Contents
1. Neoclassical General Equilibrium Models a. A review: model and solution
b. Interest rates: Short run and long run determinants c. Stock prices and investment: Tobin’s q
2. New Keynesian General Equilibrium Models a. The 3-equation new Keynesian model
b. Financial prices and monetary policy in the model 3. Equity Premium in General Equilibrium Models (if time allows)
a. Equity premium in standard models b. Equity premium puzzle
c. Alternative models to explain the premium
Text: There is no required textbook. I will provide lecture notes and other materials in the eClass. When combined with in-class notes, those lecture notes and materials cover most of the math that we will use. In addition, there is a list of suggested readings. Those that have a
“*”either are more relevant. You are not required to read all of them, many of which are already cited and quoted in the lecture notes anyway. But you are certainly more than welcome to read them, especially those with a “*”.
Interest Rates in Neoclassical Models
• * Distributed slides; more details in Chapters 3 and 4 of lecture notes
• Chapter 2 and the math appendix on phase diagram (page 471-481) in Barro and Sala-i- Martin (1995), Economic Growth (the first edition of the book is available online through the University Library website).
• * Baker, DeLong, and Krugman. 2005, "Asset Returns and Economic Growth," Brookings Papers on Economic Activity, at https://www.brookings.edu/wp-
content/uploads/2005/01/2005a_bpea_baker.pdf
• * Lawrence H. Summers (2014) “U.S. Economic Prospects: Secular Stagnation, Hysteresis, and the Zero Lower Bound”, Business Economics, at http://larrysummers.com/wp-
content/uploads/2014/06/NABE-speech-Lawrence-H.-Summers1.pdf.
• * Lawrence H. Summers and Martin Wolf (April 11, 2021) “I’m concerned that what is being done is substantially excessive’, FT Economists Exchange,
https://www.ft.com/content/380ea811-e927-4fe1-aa5b-d213816e9073
• Lunsford and West (2019), ``Some Evidence on Secular Drivers of US Safe Real Rates,”
American Economic Journal: Macroeconomics, Vol. 11, Issue 4, October 2019
Stock Prices in Neoclassical Models: Tobin’s q
• * Distributed slides; more details in Chapter 8 of the lecture note
• Tobin, J. and Brainard,W. C. (1976). Asset markets and the cost of capital.
• Hayashi, F. (1982). Tobin’s marginal q and average q: A neoclassical interpretation.
Econometrica, 50(1):213–24.
New Keynesian Model and Central Banking
• * Distributed slides; more details in Chapter 8 of the lecture note
• * Ben Bernanke (April, 2015), “The Taylor Rule: A benchmark for monetary policy?” Ben Bernanke's Blog, Brookings, https://www.brookings.edu/blog/ben-
bernanke/2015/04/28/the-taylor-rule-a-benchmark-for-monetary-policy/
• * Ben Bernanke (March, 2015), "Why are interest rates so low?" Ben Bernanke's Blog, Brookings, https://www.brookings.edu/blog/ben-bernanke/2015/03/30/why-are-interest- rates-so-low/
• * Janet L. Yellen (September 24, 2015), “Inflation Dynamics and Monetary Policy”, at the Philip Gamble Memorial Lecture, University of Massachusetts, Amherst, Amherst,
Massachusetts. https://www.federalreserve.gov/newsevents/speech/yellen20150924a.htm
• * Janet L. Yellen (August 26, 2016) “The Federal Reserve's Monetary Policy Toolkit: Past, Present, and Future”, at "Designing Resilient Monetary Policy Frameworks for the Future,"
a symposium sponsored by the Federal Reserve Bank of Kansas City, Jackson Hole, Wyoming. https://www.federalreserve.gov/newsevents/speech/yellen20160826a.htm Equity Premium
• * Distributed slides; more details in Section 7.1-7.5, 7.7 of the lecture note
• * Mehra (2003). “The equity premium: Why is it a puzzle?” Financial Analysts Journal, Volume 59 Issue 1.
• Prescott and Mehra (1985). “The Equity Premium: A Puzzle,” Journal of Monetary Economics, 15, 145-161.
Assessment
Mid-term exam: Weight 50%; March 1, 2022 (in class)
Final exam (not cumulative): Weight 50%; Take home exam due April 20, 2022
Resources that students may want to access, available at http://www.ualberta.ca/current-students Accessibility Resources: If you have a condition that may require some classroom or exam modifications, please contact Accessibility Resources to obtain a determination as to what accommodations should be made.
Academic Success Centre: The Academic Success Centre offers a variety of learning resources, including a variety of workshops in learning effective study and exam strategies.
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Students can request consultation for a writing project at any stage of development.
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