Introduction to Dynamic Macroeconomics - Tor Vergata a.a. 2007 - 2008
Prof. Francesco Lippi
Università di Sassari
DYNAMIC MACROECONOMICS
1.
-
Preliminaries
Stochastic linear difference equations
Analysis of linear systems (variance decomposition; IRFs)
Continuous time differential equations
2.
-
Introduction to Dynamic optimization
Statement of general dynamic optimization problem
The Lagrangian approach (Euler’s equation method)
Dynamic programming (Bellman equation)
The linear quadratic case
3.
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Partial equilibrium (Single agent problems)
Optimal savings
Inventory money demand
McCall Search model
Remarks on structural estimation
4.
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Competitive Equilibria
Complete markets model (Arrow-Debreu)
Decentralized solution (Time-zero and sequential asset trading)
The planners problem: Welfare theorems
Discussion: Solution methods
5.
-
More on the Euler equation approach
Computation of steady state
log linearization
Solution (Blanchard Kahn)
Pathology: The problem of indeterminacy
System analysis on a computer (Using DYNARE or Uhlig’s Toolkit)
6. Strategic problems (when timing matters)
- Markov perfect & commitment equilibria
- Solving the linear quadratic case (by hand and using GL Toolkit)
7. Taking models to the data
- The Kalman filter
- Estimating a state space model using the KF
Introduction to Dynamic Macroeconomics - Tor Vergata a.a. 2007 - 2008
Prof. Francesco Lippi
Università di Sassari
Textbooks
Ljungqvist L. and T.J. Sargent, Recursive Macroeconomic Theory, 2nd edition, Chapters 2-8
Krueger, Dirk , Macroeconomic Theory, Available on the web. http://www.econphd.net/notes.htm
Other useful references
Collard, F. and M. Juillard. “Stochastic simulations with DYNARE. A practical guide” (see DYNARE
website for many useful tutorials and the code).
Hamilton, Time Series Analysis, Chapter 13 on "The Kalman Filter"
Gerali, Andrea and Francesco Lippi, Optimal Control and Filtering in Linear Forward-Looking Economies:
A Toolkit, downloadable at http://francescolippi.googlepages.com/home (under research/tools)
Ireland, P. “A method for taking models to the data”, mimeo 2003, Boston College.
Svensson, Lars E.O. and Michael Woodford, Indicator Variables for Optimal Policy, Journal of Monetary
Economics, 50:691–720, 2003.
Uhlig, H. “A toolkit for analyzing non linear stochastic models easily”, (code and paper available on the
web http://www.econphd.net/notes.htm).
Some papers with applications (incomplete and strongly biased towards my own work)
Abel, A. , J, Eberly, S. Panages, 2007 “Optimal inattention and the stock market”, AER papers and
proceedings.
Alvarez, Fernando and Francesco Lippi, 2007, “Financial innovation and the transactions demand for
cash”, NBER WP 13416.
Backus, David
Backus David and Mario Crucini, 2000, “Oil prices and the terms of trade”, Journal of International
Economics, vol. 50, 185-213.
Cukierman, Alex and Francesco Lippi, “Endogenous Monetary Policy with Unobserved Potential Output”,
Journal of Economic Dynamics and Control, 2005, Vol. 29:1951-1983.
Clarida, Richard, Jordi Galì and Mark Gertler, The Science of Monetary Policy: A New Keynesian
Perspective, Journal of Economic Literature, 37:1661–1707, 1999.
Ehrmann, Michael and Frank Smets, “Uncertain potential output: implications for monetary policy”, Journal
of Economic Dynamics and Control, 27:1611–38, 2003.
Fuchs, William and Francesco Lippi, “Monetary Union with Voluntary Participation”, Review of Economic
Studies, 2006, Vol. 73: 437-57.
Lippi, Francesco and Stefano Neri, “Information variables for monetary policy in an estimated structural
model of the euro area”, Journal of Monetary Economics, 2007, Vol. 54 (4): 1256-70.
Lippi Francesco and Andrea Nobili, “Oil and the macroeconomy: a structural VAR analysis with sign
restrictions”, mimeo.
Svensson Lars E.O., “Inflation Forecast Targeting: Implementing and Monitoring Inflation Targets”,
European Economic Review, 41:1111–46, 1997.