This book describes some general equilibrium models that are dynamic, that have been built to help interpret timeseries of observations of economic aggregates and to predict the consequences of alternative government interventions. These notes summarize the material of a rst semester graduate course in macroeconomic theory. Macroeconomic theory financial definition of macroeconomic. The theory did not attempt to answer the question how is equilibrium reached. Overlapping generations, cambridge university press, 2002. The dynamic macroeconomic effects of tax policy in an. A dynamic general equilibrium approach mike wickens university of york princeton university press exercises and solutions completed january 2010. Modern macroeconomic analysis is increasingly concerned with the construction, calibration andor estimation and simulation of dsge models. This book is a companion volume to dynamic macroeconomic theory by thomas j. First, to the extent that the deep parameters describing preferences and constraints are approximated reasonably well, the theory can provide reliable predictions. We have assumed that the economy discounts speriods ahead using the geometric or. The first part of the book describes dynamic programming, search theory, and real dynamic capital pricing models. Recursive macroeconomic theory second edition lars ljungqvist stockholm school of economics thomas j. Dynamic macroeconomics from a series of great teachers.
Show that, depending notably on the values of sand n, the modern sector may take over the whole economy, or in the contrary regress to zero. Growth with overlapping generations growth with overlapping generations growth with overlapping generations in many situations, the assumption of a representative household is. Each result is illustrated with analytical derivations, graphically, and by worked out examples. The main alternative is to use continuous time, which is often exactly analogous in terms of results. Humcap and uncer are the drafts of two additional chapters.
The rst sections focus on deterministic growth models and models of overlapping generations olg. Introduction to dynamic macroeconomic theory humcap. Overlapping generations approach, harvard university press. Macroeconomic theory hui he department of economics university of hawaii at manoa. Overlapping generations model og model with money figure 1. Growth with overlapping generations in many situations, the assumption of a representative household is not appropriate because 1 households do not have an innite planning horizon 2 new households arrive or are born over time. It is the perfect resource for students and researchers seeking coverage of the most current developments. A theory of economic growth dynamics and policy in overlapping generations. Exercises in dynamic macroeconomic theory in searchworks. An agent lives exactly for two periods youth and maturity, and has an o. This book truly offers something new by emphasizing the general equilibrium character of. To estimate this model, we introduce a unified state space modeling approach that lets us simultaneously fit the yield curve at each point in time and estimate the underlying dynamics of the factors. Demers, michael demers and sumru altug 3 taxes and welfare in a stochastically growing economy 155 stephen j. Recall that the ra model had a few special characteristics.
This book offers an introductory stepbystep course in dynamic stochastic general equilibrium dsge modelling. Among them, i would like to thank especially selo imrohoroglu, caroline betts, v. Dynamic macroeconomics will be of interest to economists interested in theoretical and applied macroeconomic issues. Introduction to dynamic macroeconomic general equilibrium models. This small concession to reality will have a big impact on implications.
Measuring macroeconomic activity 1930s 1950 phase ii. Humcap is a growth model with human capital with wealth and poverty traps, while uncer is a version of the model with uncertainty. Author links open overlay panel pere gomisporqueras. Chari, larry jones, ed prescott, narayana kocherlakota. Economics 7660 advanced macroeconomic theory ii lectures. A dynamic general equilibrium approach mike wickens university of york princeton university press exercises and solutions completed january 2010 0.
Dynamic macroeconomic analysis dynamic stochastic general equilibrium dsge models have begun to dominate the. The model developed here utilises the overlappinggenerations framework of. Find materials for this course in the pages linked along the left. For an overlappinggenerations model with 2period lifecycles for individuals and monopolistic competition in the goods markets, chang 1989 demonstrates that deflationary monetary policy supported by lumpsum taxation is able to implement a paretooptimal allocation as stationary perfectforesight equilibrium. Solutions to the problems in introduction to dynamic macroeconomic theory july 10, 2008 exercises 1. Jan 03, 2008 macroeconomic theory is the most up to date graduatelevel macroeconomics textbook available today. This is an excellent book which i am sure will become a wellthumbed friend on the. Thomas sargent, dynamic macroeconomic theory, cambridge, mass. This revised second edition emphasizes the general equilibrium character of macroeconomics to explain effects across the whole economy while taking into account recent research in the field. Introduction to dynamic macroeconomic theory george. Chapter1 simplerepresentativeagent models thischapterdealswiththemostsimplekindofmacroeconomicmodel, whichabstractsfromallissuesofheterogeneityanddistributionamong. Exercises in dynamic macroeconomic theory in searchworks catalog. The book is intended for graduate students as an introductory course to dsge modelling and for those economists who would. Econ 305 macroeconomic theory i george washington university.
Macroeconomic theory dirk krueger1 department of economics university of pennsylvania january 26, 2012 1i am grateful to my teachers in minnesota, v. An overlapping generations model of growth and the. Download introduction to dynamic macroeconomic theory. An overlapping generations approach, by george mccandless and neil wallace article in the journal of economic education 241. Introduction to dynamic macroeconomic theory will become a classic of economic exposition and a standard teaching and reference tool for intertemporal macroeconomics and the overlapping generations model. Macroeconomic theory hui he department of economics shanghai university of finance and economics. Lecture 8, overlapping generations daron acemoglu mit november 22, 2011. Munich personal repec archive macroeconomic theory and policy 2nd edition andolfatto, david simon fraser university 1 january 2008 online at. It provides scrimmages in dynamic macroeconomic theoryprecisely the kind of drills that people will need in order to learn the techniques of dynamic programming and its applications to economics. A read is counted each time someone views a publication summary such as the title, abstract, and list of authors, clicks on a figure, or views or downloads the fulltext. Daron acemoglu mit economic growth lecture 8 november 22, 2011.
The exercises file contains the answers to the exercises in the book. In particular, those seeking anintegrated, consistent approach to the keynesian nonmarket clearing disequilibrium approach to macroeconomic dynamics and its relationship to the currently dominant equilibrium paradigm. Solutions to the problems in introduction to dynamic. George mccandless with neil wallace, introduction to dynamic macroeconomic theory.
Expansionary versus contractionary government spending the third thing to note from figure 2 is that the positive monetary policy shock to the monetary base also creates responses in the other variables that are consistent with standard macroeconomic theory. Introduction to dynamic macroeconomic theory ucema. Uncertainty in dynamic models seems likely to be very important in the future. The dynamic macroeconomic effects of tax policy in. Amazonintroduction to dynamic macroeconomic theory. Macroeconomic theory a dynamic general equilibrium approach michael wickens princeton university press. The model developed here utilises the overlapping generations framework of. Macroeconomic theory is the most uptodate graduatelevel macroeconomics textbook available today. This new growth theory relies on positive externalities to generate growth, but does not consider how negative externalities from growth might in turn affect the growth process.
An overlapping generations approach, by george mccandless and neil wallace. V chari, timothy kehoe and ed ward prescott, my excolleagues at stanford, robert hall, beatrix paal and tom. Fiscal and monetary policies in overlapping generations. Three seminal phases of the history of macroeconomic thought practice. A twoperiod overlapping generations economy with constant population. Lucas, recursive methods in economic dynamics, cambridge. These models describe the evolution of macroeconomic activity as arecursive sequence of outcomes based upon the optimal decision rules of rational households. Macroeconomic variables can then be computed by summing up the actions of all individuals. A relevant question is whether if we remove that assumption so that generations overlapped, and consequently had to trade with one another, and if. Macroeconomic theory a dynamic general equilibrium approach. Turnovsky 4 recent developments in the macroeconomic. First, the material would present the modern theory of economic dynamics in a rigorous way. Later sections are dedicated to stochastic models, including neoclassical growth and real business cycles models.
Introduction to dynamic macroeconomic general equilibrium. Macroeconomic theory is the most up to date graduatelevel macroeconomics textbook available today. The approach to macroeconomics taken by sargent in this book is relatively new, and most of the fundamental. Macroeconomic models c mathematical tools we are going to use exactly the same set of tools throughout the. Exercises in recursive macroeconomic theory preliminary and incomplete stijn van nieuwerburgh pierreolivier weill lars ljungqvist thomas j.
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