Colorado State University
Spring 2016 Econ 604
Graduate Macroeconomics
Lecture: 105 Military Sciences, 11.00-11:50am Mon, Wed and Fri.
Course Instructor: Prof. Elisa Belfiori
Office: C320A Clark
Office Hours: 3.00-4.00pm Mon and Wed.
E-mail: 604belfiori@gmail.com (Do not email to my CSU email account)
Website: Canvas
E-mail is the best way to contact me; please allow up to 24 hours for e-mail responses
1. Course Description and Learning Objectives
Econ 604 is the first in a two-course sequence on Graduate Macroeconomics. We will study a variety
of economic models that can be used to give quantitative answers to relevant economic and policy
questions. That is, the models we will study generate artificial data of both allocations and prices and
have implications that can be meaningfully related to actual data. We will be interested in questions
such as: 1) What properties do these models have? 2) What time series can these models generate? 3)
What are the policy implications? 4) What can we learn from these models regarding how policy
should be designed?
We will study these models from a theory point of view, which means that for the most part, we will
not be working with the data, reading current papers or going through computational methods. The
goal of this first year macroeconomic course is for you to learn techniques and tools.
2. Required Textbook:
There is no required textbook for this course. I will base the lectures on some of the following books
and notes, which provide good treatments of modern macroeconomic theory.
(LS) Recursive Macroeconomic Theory, second edition. Lars Ljungqvist and Thomas Sargent. MIT
Press.
(SLP) Recursive Methods in Economic Dynamics. Nancy L. Stokey, Robert E. Lucas, Jr. with
Edward C. Prescott. Harvard University Press.
(PK) Real Macroeconomic Theory. Available online at http://bit.ly/1RLdMUg
(DK) Macroeconomic Theory. Available online at http://bit.ly/1sDhl0M
(C) Cooley, Thomas F., Editor (1995), Frontiers of Business Cycle Research, Princeton University
3. Class Website and Announcements:
All assignments and handouts will be posted on the class web site in Canvas. There will also be a list
of current announcements. Therefore, please check the website regularly.
4. Course requirements
4.1 Problem Sets
There will be 3 problem sets during the course. They will be posted in Canvas. Problem sets are to be
solved in groups of 4. The goal of the teamwork is to encourage collaboration and discussion about
the material covered in class among students. Even though each group must hand in only one copy of
the solution, I encourage you to attempt your own solution of the problem set first before meeting
with your group. The name of each member of the group must be written in the first page of the
assignment.
Problem sets will be posted on Fridays and you will have one week to solve them. Solutions must be
handed in on Fridays before class. The deadlines for the problem sets are included in the syllabus and
no late assignments will be accepted.
4.2 Exams
There will be two midterm exams and one final exam. The final exam is cumulative, and covers all
the material in the course. Exam dates are given in the calendar. There will be no makeup
examination for the midterms. In the case of documented special circumstances (a family or medical
emergency), your final exam score will replace the midterm exam. If any of these circumstances
happen to you, make sure you talk to me before the final exam day.
4.3 Hours per week
Each week students are expected to:
Activity
Attend class
Study material covered in class and assigned readings
Complete problem sets
Study for exams
TOTAL =
5. Grading:
The weights for the final score will be as follows:
Problem sets (average of 3): 30%
Midterm Exams (average of 2): 35%
Final Exam: 35%
Contact hours per week
3.0
3.0
3.0
3.0
11.0
6. Tentative Course Schedule:
1/18/16
1/20/16
1/22/16
1/25/16
1/27/16
1/29/16
2/1/16
2/3/16
2/5/16
2/8/16
2/10/16
2/12/16
2/15/16
2/17/16
2/19/16
2/22/16
2/24/16
2/26/16
2/29/16
3/2/16
3/4/16
3/7/16
3/9/16
3/11/16
3/14/16
3/16/16
3/18/16
3/21/16
3/23/16
3/25/16
3/28/16
3/30/16
4/1/16
4/4/16
4/6/16
4/8/16
4/11/16
4/13/16
4/15/16
4/18/16
4/20/16
4/22/16
Noclass
Introduction.MacroeconomicModeling
Anexampleeconomy
CompetitiveEquilibriumSolution
ArrowDebreuMarketsvsSequentialMarkets
TheSocialPlannerSolution
TheSolowModel
TheNeoclassicalGrowthModel
HW1isposted
EconomicPolicy-RamseyTaxation
EconomicPolicy-RamseyTaxation
EconomicPolicy-RamseyTaxation
MidtermExam1
EconomicPolicy-OptimalTaxationw.lumpsumTaxes
ApplicationtoaClimateExternality
DynamicProgramming
RecursiveCompetitiveEquilibrium
HW2isposted
SpringBreak
SpringBreak
SpringBreak
TheNeoclassicalGrowthModelwithUncertainty
BusinessCycles
MidtermExam2
OverlappingGenerationsModels
HW3isposted
Week1
Week2
Week3
Week4
Week5
Week6
Week7
Week8
Week9
Week10
Week11
Week12
Week13
4/25/16
4/27/16
4/29/16
5/2/16
5/4/16
5/6/16
TheMethodologyofPositiveEconomics
Week14
Week15
FinalExam
May127:30-9:30am
Thefinalexamwillbegiveninthesameroomtheclasshasbeenmeetinginallsemester
7. Suggested Readings
All these books and notes are good references for each of the topics we cover in class. I will be more
specific in recommending background reading for each lecture as we go along.
Part 1.
A. Introduction. Macroeconomic Modeling.
B. The Neoclassical Growth Model. The Social Planner Solution. Competitive Equilibrium
Solution. Arrow Debreu Markets. Sequential Equilibrium.
(LS) Ch. 8
(DK) Ch. 3
(PK) Ch. 5
C. Dynamic Programming.
(SLP) Ch. 2, 3 and 4
(LS) Ch. 3
(DK) Ch. 5
(PK) Ch. 4
D. Recursive Competitive Equilibrium.
(LS) Ch. 7 and 12
(C) Ch. 2
Part 2. Economic Policy. Ramsey Taxation. Non-Distortionary Optimal Taxation. Application
to a Climate Externality.
(LS) Ch. 11 and 15
Chari, V. V. Chari and Kehoe, Patrick J (1999), Optimal Fiscal and Monetary Policy, NBER
working paper No. 6891
Part 3. The Neoclassical Growth Model with Uncertainty. Business Cycles.
(C) Ch. 1
(PK) Ch. 6 and 10
Kydland, Finn E. and Prescott, Edward C. (1982), Time to Build and Aggregate Fluctuations,
Econometrica, Vol 50 No.6 pp.1345-1370
Part 4. Overlapping Generation Models
(LS) Ch. 9
(DK) Ch. 8
(PK) Ch. 13
Part 5. The Methodology of Positive Economics
Friedman, Milton (1966), The Methodology of Positive Economics, in Essays In Positive
Economics, Univ. of Chicago Press, pp. 3-16, 30-43.
8. Academic Integrity
This course will adhere to the Academic Integrity Policy of the Colorado State University General
Catalog and the Student Conduct Code. Please refer to the Academic Integrity and Student Conduct
policies in the General Catalog: http://www.catalog.colostate.edu/FrontPDF/1.6POLICIES1112f.pdf
9. Disabilities
If you have any diagnosed or suspected physical or learning disabilities which may require
reasonable accommodations, please contact the Resources for Disabled Students (RDS) office
http://rds.colostate.edu/accommodation-process as soon as possible.