Topics in Macroeconomics

Semester: III Semester

Course Coordinator and Team: Dr. Parag Waknis
Email of the Course Coordinator: parag@aud.ac.in
Pre-requisite: Macroeconomics I
Aim: This course aims to further familiarise students with methods and results of contemporary
Macroeconomics. For the current semester, focus will be on Growth Theory with the objec-
tive of introducing three (broadly classified) departures from the neo-classical growth model
(already covered in Macroeconomics I).
Learning Outcomes:
At the end of the course students should be able to:

1. Describe the departures from the standard growth models handled in course.
2. Describe the basic setup of an Overlapping Generations (OLG) Model.
3. Derive the equilibrium properties and welfare implications of the Diamond OLG model.
4. Analyse the pros and cons of different social security systems using the OLG model.
5. Describe a standard endogenous growth model setup and its equilibrium and welfare properties.
6. Evaluate the role of productive government spending using a OLG model of endogenous growth.
7. Evaluate the implications of public vs. private spending on education for resulting
8. income distribution using a OLG model of endogenous growth.

Topics Covered & Readings:
Readings with will be covered in full. Readings with no indicators may be used in part or
are provided as classic references for that section.
1. Review of Optimal Growth Model, Optimization techniques including Dynamic Pro-
gramming (2 weeks)
(a) Chapters 3 and 4, McCandless George T. 2008, The ABCs of RBCs: An Intro-
duction to Dynamic Macroeconomic Models, Harvard University Press.
2. Growth with Overlapping Generations (4 weeks)

1. Chapter 9, Acemoglu Daron. 2009. Introduction to Modern Economic Growth, Princeton University Press.
2. Williamson S, “Lecture notes on Advanced Macroeconomics”, mimeo.
3. Samuelson Paul A, 1958. “An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, Univer- sity of Chicago Press, vol. 66, pages 467-467.
4. Diamond, Peter A. 1965 “National Debt in a Neoclassical Growth Model." The
5. American Economic Review 55, no. 5 : 1126-150.
6. Weil, Philippe. 2008. "Overlapping Generations: The First Jubilee." Journal of
7. Economic Perspectives, 22(4): 115-34.

3. Endogenous Growth Models (7 Weeks)

1. Chapter 15, Ljunqvist and Sargent, 2012. Recursive Macroeconomic Theory, 3rd edition, MIT Press. (or Chapter 14, 2nd edition).
2. Lucas Robert Jr. 1988. “On the mechanics of economic development, Journal of Monetary Economics, Volume 22, Issue 1, , Pages 3-42.”
3. Romer, Paul M. 1994. “The Origins of Endogenous Growth.”The Journal of Eco- nomic Perspectives, vol. 8, no. 1, pp. 3-22. 2
4. Romer, Paul M, 1986. “Increasing Returns and Long-run Growth," Journal of Political Economy, vol. 94(5), pages 1002-1037, October.
5. Rebelo, Sergio. 1991. “Long-Run Policy Analysis and Long-Run Growth”, Journal of Political Economy, Vol 99, pages 500-521.
6. Glomm, Gerhard & Ravikumar, B, 1992. “Public versus Private Investment in Human Capital, Endogenous Growth and Income Inequality,” Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 818-834, August.
7. Glomm, Gerhard & Ravikumar, B., 1997. “Productive government expenditures and long-run growth,” Journal of Economic Dynamics and Control, Elsevier, vol. 21(1), pages 183-204, January.

4. Income Distribution and Economic Growth (3 Weeks):

1. Galor, Oded, 2012. "Inequality, Human Capital Formation and the Process of Development," IZA Discussion Papers 6328, Institute for the Study of Labor (IZA).
2. Galor, Oded and J Zierra, 1993. "Income Distribution and Macroeconomics," Review of Economic Studies, 60: 35-52.
3. Glomm, Gerhard & Ravikumar, B, 2003. “Public Education and Income Inequal- ity”, European Journal of Political Economy Vol. 19, 289-300.
4. Krishna Dutt, A. (2016), “Growth and Distribution in Heterodox Models with Managers and Financiers”. Metroeconomica, 67: 364-396.
5. Rajan R, 2009. “Rent Preservation and Persistence of Underdevelopment”, Amer- ican Economic Journal: Macroeconomics, 1.1, 178-218.

Grading Scheme:

Your final grade will be determined as follows: