Yale University, Department of Economics
526b. Advanced Macroeconomics II
Spring 2002
First Half
William C. Brainard
28 Hillhouse, 201
(203) 432-3585
Second Half
Giuseppe Moscarini
28 Hillhouse, 310
(203) 432-3596
william.brainard@yale.edu
giuseppe.moscarini@yale.edu
OH: ??
OH: Wed 4-6 pm
Classes: Tue and Thu, 10:30-11:50 am
28 Hillhouse Avenue, 108
The course is taught in collaboration. Bill will lead the first part of the term, from January 14 to
February 25, and Giuseppe the second part from February 27 to April 24.
To obtain credit for this course you must attend classes, give one presentation (subject to limited
enrollment) and write a term paper on a topic of your choice related to those discussed in class.
The paper must be handed in by May 15, 2001, no extensions or exceptions allowed.
The reading and topics list follows. A copy of the relevant papers for the second part of the
course will be available in late February from Natalie White in Room 101, 28 Hillhouse. You
may borrow them for the time that is strictly necessary to make a copy for yourself.
Alternatively, you may go to the Library to copy them, but the unpublished papers will not be
there. Many of those papers are also available online, but remember that Yale printers cannot be
used to this purpose (everyone has a strict quota on pages printed per year).
Part I (Bill)
TBA
Part II (Giuseppe)
II.A Implications of Uninsurable Idiosyncratic Labor Income Risk
Preliminaries and Overview
Ljungqvist, Lars and Thomas J. Sargent, 1998, Recursive Macroeconomic Theory, MIT Press,
Chapter 14.
Saving and Wealth Inequality without Aggregate Risk
Ayiagari, S. Rao, 1994, “Uninsured Idiosyncratic Risk and Aggregate Saving”, Quarterly
Journal of Economics, 109(3), Augus, 659-684.
Huggett, Mark, 1993, “The Risk-Free Rate in Heterogeneous-Agent Incomplete-Insurance
Economies”, Journal of Economic Dynamics and Control, 17, 953-969.
Huggett, Mark, 1997, “The One-Sector Growth Model with Idiosyncratic Shocks”, Journal of
Monetary Economics, 39:3, 385-403.
Saving and Wealth Inequality with Aggregate Risk. Cost of Business Cycles.
Krusell, Per and Anthony Smith Jr, 1998, “Income and Wealth Heterogeneity in the
Macroeconomy”, Journal of Political Economy; 106(5), October, 867-96.
Krusell, Per and Anthony Smith Jr, 1999, “On the Welfare Effects of Eliminating Business
Cycles”, Review of Economic Dynamics; 2(1), 245-72.
2-3 more papers on costs of business cycles
Asset Pricing Implications
Davis, Steven and Paul Willen, 2000, “Using Financial Assets to Hedge Labor Income Risk:
Estimating the Benefits”, mimeo.
Kocherlakota, Narayana, 1996, “The Equity Premium: It’s Still a Puzzle”, Journal of Economic
Literature, 34, March, 42-71.
Heaton, John and Deborah Lucas, “Stock Prices and Fundamentals”, and discussions by Annette
Vissing-Jorgensen and John Campbell. In: Ben Bernanke, Julio Rotemberg (eds.) NBER
Macroeconomics Annual 1999. The MIT Press.
II.B Labor Markets and Equilibrium Search
Aggregate Job and Worker Flows: the Facts
Blanchard, Olivier and Peter Diamond, 1990, “The Cyclical Behavior of the Gross Flows of U.S.
Workers”, Brookings Papers on Economic Activity; 1990(2), 85-155. Washington DC,
Brookings Institution.
Davis, Steven J., John C. Haltiwanger, and Scott Schuh, Job Creation and Destruction. 1996,
The MIT Press.
Burda, Michael and Charles Wyplosz, 1994, “Gross worker and job flows in Europe'', European
Economic Review, 38.
Theory
Pissarides, Christopher, Equilibrium Unemployment Theory, 2nd Edition, 2000, MIT Press.
Diamond, Peter, 1982, “Aggregate Demand Management in Search Equilibrium”, Journal of
Political Economy; 90(5), 1982, 881-94.
Hosios, Arthur J., 1990, “On the Efficiency of Matching and Related Models of Search and
Unemployment”, Review of Economic Studies; 57(2), April, 279-98.
Mortensen, Dale and Christopher Pissarides, 1994, “Job Creation and Job Destruction in the
Theory of Unemployment”, Review of Economic Studies; 61(3), July, 397-415.
Blanchard, Olivier Jean and Peter Diamond, 1994, “Ranking, Unemployment Duration, and
Wages”, Review of Economic Studies; 61(3), 1994, 417-34.
Moscarini, Giuseppe, 2001, “Skill and Luck in the Theory of Turnover”, mimeo Yale University.
Sectoral Shifts, Search and Unemployment
Lucas, Robert E., Jr. and Edward C. Prescott, 1974, “Equilibrium Search and Unemployment”,
Journal of Economic Theory; 7(2), February, 188-209.
Jovanovic, Boyan, 1979, “Job Matching and the Theory of Turnover'”, Journal of Political
Economy; 87(5), 972-990.
Lilien, David, 1982, “Sectoral Shifts and Cyclical Unemployment”', Journal of Political
Economy, 90(4), August, 777-793.
Murphy, Kevin and Robert Topel “The Evolution of Unemployment in the United States: 19681985'', in Stanley Fischer (ed.), NBER Macroeconomic Annual 1987, MIT Press.
McLaughlin, Kenneth and Mark Bils, 2000, “Inter-industry mobility and the Cyclical Upgrading
of labor”, Journal of Labor Economics, ??
Brainard, S. Lael and David Cutler, 1993, “Sectoral Shifts and Cyclical Unemployment
Reconsidered'', Quarterly Journal of Economics, 108(1), February, 219-43
Moscarini, Giuseppe, 2001, “Excess Worker Reallocation”, Review of Economic Studies, July,
68(3), 593-612
Search and the Business Cycle
Merz, Monika, 1996, “Search in the Labor Market and the Real Business Cycle”, Journal of
Monetary Economics; 36(2), February, 269-300.
Andolfatto, David, 1996, “Business Cycles and Labor Market Search”, American Economic
Review; 86(1), March, 112-32.