Course Type | Course Code | No. Of Credits |
---|
Foundation Elective | SLS2EC106 | 4 |
Semester: II Semester
Course Coordinator and Team: Dr. Parag Waknis
Email of the Course Coordinator: parag[at]aud[dot]ac[dot]in
Pre-requisite: Macroeconomics I
Aim: Macroeconomics II continues from its sister course Macroeconomics I offered in the first semester of M.A.
Economics at AUD. After dealing with asset pricing, this course will introduce you to the departures from
standard frictionless Arrow-Debreu world. Topics covered will include self insurance, incomplete market
models, labor search models, Insurance and Incentives.
Course Outcomes
At the end of the course students should be able to:
- List the salient features of business cycles in the emerging markets and contrast them with those of developed countries.
- Describe the basic building blocks of a macroeconomic model in terms of agents, preferences, technology, and the underlying equilibrium concept.
- Derive the equilibrium properties of a standard Real Business Cycle (RBC) model.
- Evaluate the implications of different specifications for consumer preferences for the equilibrium prop- erties of the standard RBC model.
- Evaluate the implications of changes in preference specifications for asset pricing using the Lucas Asset Pricing model.
- Describe the implications of incomplete markets models like the Aiyagari model for the aggregate savings behavior and capital formation. 1
- Evaluate the usefulness of different macroeconomic models in understanding and explaining empirical regularities.
Topics:
- (a) Review of Chapter 8 and 12, LS2012. Some coverage of history of macroeconomic thought, current methodological debates and their relevance to the macroeconomic environments characterizing developing countries. (b) Review of Dynamic Programming: Chapter 4, McCandless.
- Asset Pricing, Chapter 13, LS2012.
- Self Insurance, Chapter 17, LS2012.
- Incomplete Market Models, Chapter 18, LS2012.
- Insurance and Incentives, Chapter 20, LS2012.
- Equilibrium Unemployment Models, Chapters 1-3 (DMP) & Chapter 28 (LS2012).
References
The following books will be used for the course:
- Ljungqvist Lars & Thomas Sargent (2012), Recursive Macroeconomic Theory, The MIT Press, Third Edition. (LS2012)
- McCandless George (2008), The ABCs of RBCs, Harvard University Press. (McCandless)
- Pissarides Chrsitopher A (2000), Equilibrium Unemployment Theory, Oxford University Press, Second Edition. (DMP)
The following articles will be used during the course:
- Mark Aguiar & Gita Gopinath, 2007. “Emerging Market Business Cycles: The Cycle Is the Trend," Journal of Political Economy, University of Chicago Press, vol. 115, pages 69-102.
- S. Rao Aiyagari, 1994. “Uninsured Idiosyncratic Risk and Aggregate Saving," The Quarterly Journal of Economics, Oxford University Press, vol. 109(3), pages 659-684.
- Robert J. Barro & Robert G. King, 1984. “Time-Separable Preferences and Intertemporal-Substitution
- Models of Business Cycles," The Quarterly Journal of Economics, Oxford University Press, vol. 99(4), pages 817-839.
- Greenwood, Jeremy Hercowitz, Zvi & Huffman, Gregory W, 1988. “Investment, Capacity Utilization, and the Real Business Cycle," American Economic Review, American Economic Association, vol. 78(3), pages 402-417, June.
Grading Scheme:
Your final grade will be determined as follows:
Component | Percentage Contribution |
Problem Sets (problems and questions based on research articles) | 30% |
Exams 1 (a class test based on material covered during first half of the semester.) | 35% |
Exams 2 (a class test based on material covered during first half of the semester.) | 35% |