Advanced Macroeconomics II. Real Business Cycle Models. Jordi Galí. Universitat Pompeu Fabra Spring 2018
|
|
- Buck Terry
- 5 years ago
- Views:
Transcription
1 Advanced Macroeconomics II Real Business Cycle Models Jordi Galí Universitat Pompeu Fabra Spring 2018
2 Assumptions Optimization by consumers and rms Perfect competition General equilibrium Absence of a monetary sector or nominal variables Outline: Basic RCB model without capital RBC model with capital accumulation Fiscal policy
3 Basic RBC Model without Capital Households Preferences E 0 1 X t=0 t U(C t ; N t ) where [0; 1]; U c > 0, U n < 0, U cc 0, and U nn 0 Budget constraint Optimality conditions - intratemporal - intertemporal C t + B t = W t N t + (1 + r t 1 )B t 1 + D t W t = U n;t U c;t MRS t U c;t = (1 + r t )E t fu c;t+1 g
4 Example: t 1 U(C t ; N t ) = C1 1 N 1+' t = log C t 1 + ' N 1+' t 1 + ' if 6= 1 if = 1 Optimality conditions: W t = Ct N ' t 1 = (1 + r t )E t (Ct+1 =C t ) Log-linear version: w t = c t + 'n t 1 c t = E t fc t+1 g (r t )
5 Labor Supply w σ c + φ n n
6 Labor Supply w σ c 1 + φ n σ c 0 + φ n n
7 Firms Technology Y t = A t F (N t ) (1) where F n > 0, F nn 0 and A t expfa t g is a technology parameter that evolves according to the AR(1) process: a t = a a t 1 + " a t where a 2 [0; 1), and f" a t g is white noise. Firm s problem max Y t W t N t subject to (1). Optimality condition W t = A t F n;t MP N t
8 Example Y t = A t N 1 t Optimality condition W t = (1 )A t Nt = (1 )(Y t =N t ) Log-linear version: w t = a t n t + log(1 )
9 Labor Demand w a α n + log(1-α) n
10 Labor Demand w a 1 α n + log(1-α) a 0 α n + log(1-α) n
11 Equilibrium Goods markets Labor market Asset market Y t = C t C t N ' t = W t = (1 )A t N t B t = 0 1 = (1 + r t )E t (Ct+1 =C t ) all for all t
12 Equilibrium values (in logs and ignoring constant terms): Predictions vs Evidence 1 n t = (1 ) + ' + a t 1 + ' y t = (1 ) + ' + a t + ' w t = (1 ) + ' + a t (1 + ')(1 r t = a ) (1 ) + ' + a t
13 Labor Market Equilibrium w σ c 0 + φ n w 0 a 0 α n + log(1-α) n 0 n
14 Effects of a Technology Shock (σ < 1) w σ c 1 + φ n σ c 0 + φ n w 1 w 0 a 1 α n + log(1-α) a 0 α n + log(1-α) n 0 n 1 n
15 Effects of a Technology Shock (σ > 1) w σ c 1 + φ n w 1 σ c 0 + φ n w 0 a 1 α n + log(1-α) a 0 α n + log(1-α) n 1 n 0 n
16 Effects of a Technology Shock (σ = 1) w σ c 1 + φ n w 1 σ c 0 + φ n w 0 a 1 α n + log(1-α) a 0 α n + log(1-α) n 0 =n 1 n
17 E cient Allocation: The Social Planner s Problem subject to max U(C t ; N t ) C t = A t F (N t ) Optimality condition: Example: U n;t U c;t = A t F n;t C t N ' t = (1 )A t N t =) Equivalence with competitive equilibrium allocation =) Any observed uctuations are optimal =) Stabilization policies are not justi ed
18 The Basic RBC Model with Capital Households Preferences E 0 1 X t=0 t U(C t ; N t ) where [0; 1]; U c > 0, U n < 0, U cc 0, and U nn 0 Budget constraint and capital accumulation equation C t + I t + B t = W t N t + R k t K t + (1 + r t 1 )B t 1 + D t K t+1 = (1 )K t + I t
19 Optimality conditions - intratemporal - intertemporal W t = U n;t U c;t MRS t U c;t = (1 + r t )E t fu c;t+1 g U c;t = E t fu c;t+1 (1 + R k t+1)g Example: t 1 U(C t ; N t ) = C1 1 Optimality conditions: N 1+' t 1 + ' W t = C t N ' t 1 = (1 + r t )E t (Ct+1 =C t ) 1 = E t (Ct+1 =C t ) (1 + R k t+1)
20 Firms Technology Y t = A t F (K t ; N t ) (2) where F k > 0, F n > 0, F kk 0, and F nn 0. De ning a t log A t, we assume a t = a a t 1 + " a t where a 2 [0; 1), and f" a t g is white noise. Firm s problem subject to (2). max Y t W t N t R k t K t Optimality conditions W t = A t F n (K t ; N t ) MP N t Rt k = A t F k (K t ; N t ) MP K t
21 Example (Cobb-Douglas) Y t = A t K t N 1 t Optimality conditions: Rt k = A t (K t =N t ) (1 ) W t = (1 )A t (K t =N t )
22 Equilibrium Goods market Labor market Y t = C t + I t (3) K t+1 = (1 )K t + A t Kt Nt 1 C t (4) C t N ' t = W t = (1 )A t (K t =N t ) (5) Asset market B t = 0 (6) o 1 = E t n(c t+1 =C t ) (1 + A t+1 (K t+1 =N t+1 ) (1 ) ) (7) 1 = (1 + r t )E t (Ct+1 =C t ) (8)
23 An Example with an Exact Solution Long and Plosser, JPE 1983 Complete depreciation ( = 1) + logarithmic utility ( = 1). Equilibrium conditions Conjecture: (1 )(Y t =N t ) = C t N ' t 1 = E t f(c t =C t+1 ) (Y t+1 =K t+1 )g K t+1 + C t = Y t Implications: K t+1 = Y t C t = (1 = )Y t N t = ((1 )(Y t =C t )) 1 1+' 1 = ' N
24 Equilibrium dynamics (in logs) y t = k t + a t + const: c t = y t + const: = k t + a t + const: k t+1 = y t + const: = k t + a t + const: Discussion: - dynamic e ects of a technology shock - "intrinsic" persistence - limitations: constant employment, uniform volatility,...
25 General Case Step 1: determination of steady state Step 2: approximate equilibrium conditions around the steady state ("log-linearization") Step 3: calibration Step 4: simulation of calibrated model
26 Determination of Steady State Steady state: equilibrium A t = A, C t = C, K t = K, N t = N,... Evaluating (7) at the steady state: K=N = A (9) Evaluating (4) at the steady state (dividing by N), C=N = A A + Evaluating (5) at the steady state: N +' = (1 1 A )(C=N) A (K=N) Given N, use (9) and (10) to determine K and C, etc. Exercise: What determines long run labor productivity Y =N? (10)
27 Log-linearization of Equilibrium Conditions around Steady State Goods market b k t+1 = b k t +(1 (1 ))((1 ) bn t +a t ) (1 +(1 ))bc t Labor market bc t + ( + ')bn t = a t + b k t Capital rental market bc t = E t fbc t+1 g+(1 (1 )) (1 )( b k t+1 E t fbn t+1 g) a a t where bx t log(x t =X). More compactly: bc t E t fbc t+1 g 4bn t 5 = A e 4E t fbn t+1 g5 + B e a t b kt b kt+1
28 Technical Note on the Solution to Dynamical Systems Dynamical System y t = AE t fy t+1 g + Bz t z t = Rz t 1 + " t y t = [x 0 t; k 0 t] 0 : vector (n 1) of endogenous variables x t : vector (n x 1) of non-predetermined endogenous variables k t : vector (n k 1) of predetermined endogenous variables z t : vector (n z 1) of exogenous variables " t : vector (n z 1) following a white noise process Solution ("state-space representation"): s t = Cs t x t = Ms t 1 + D" t where s t = [k 0 t; z 0 t] 0 is the vector of state variables.
29 In our RBC example: b kt = kk b kt 1 + ka a t 1 a t = a a t 1 + " a t and for any other endogenous variable bx t : bx t = xk b kt + xa a t
30 Calibration [ ]: R = 1 average return S&P500 = 6:5% =) = (1 + (0:065=4)) 1 ' 0:985 [ ]: 0:10=4 = 0:025. [ ]: W = (1 )(Y=N) =) = 1 S n;t S n;t W tn t Y t ' 2=3 S n;t W tn t Y t ' 2=3 =) = 1=3 []: (1 ) Y t N t = C t N ' t... balanced growth requirement =) = 1 [' ]: w t = c t + 'n t...=)... n t = ' 1 w t ' 1 c t =) ' 1 : labor supply elasticity ' 4 (controversial) Aside: King-Rebelo speci cation: U(C; L) = C1 t L1 t 1 1 with restriction N t + L t = 1 L Implied labor supply elasticity: N = 0:8 (1)(0:2) = 4 [ a ; 2 a ]: a t = y t k t (1 )n t Estimated AR(1) process for fa t g: a = 0:979; 2 a = (0:007) 2
31 Predictions vs Empirical Evidence (KR, Tables 1 and 3) Volatility: - the model accounts for 70 percent of observed output volatility - can explain relative volatility of consumption and investment - consumption and hours too little volatile relative to output Persistence: - accounts for high positive autocorrelation Cyclical patterns - accounts for procyclicality of consumption, investment and hours. - main limitation: predicts too high procyclicality of interest rate and wages Simulations (KR Figure 7) - correlation simulated and actual output ' 0:8 - weaker comovement for labor market variables
32 Source: King and Rebelo (1999)
33 Source: King and Rebelo (1999)
34 Source: King and Rebelo (1999)
35
36 Signi cance of Findings Role of technology: end of growth vs uctuations dychotomy. Fluctuations are not necessarily ine cient, given optimality of equilibrium allocation ) stabilization policies may be counterproductive Exercise: Social planner s problem: max E 0 1 X t=0 t U(C t ; N t ) subject to K t+1 = (1 )K t + A t F (K t ; N t ) C t Derive optimality conditions and check equivalence with decentralized equilibrium
37 Criticisms No role for monetary policy No involuntary unemployment What is a negative technology shock? Shortcomings of Solow residual as a measure of technology Evidence on the e ects of technology shocks (Galí (AER, 1999), Basu et al. (AER, 2006))
38 Source: Galí (1999)
39 Source: Basu, Fernald and Kimball (2006)
Advanced Macroeconomics II The RBC model with Capital
Advanced Macroeconomics II The RBC model with Capital Lorenza Rossi (Spring 2014) University of Pavia Part of these slides are based on Jordi Galì slides for Macroeconomia Avanzada II. Outline Real business
More informationAdvanced Macroeconomics II. Monetary Models with Nominal Rigidities. Jordi Galí Universitat Pompeu Fabra April 2018
Advanced Macroeconomics II Monetary Models with Nominal Rigidities Jordi Galí Universitat Pompeu Fabra April 208 Motivation Empirical Evidence Macro evidence on the e ects of monetary policy shocks (i)
More information4- Current Method of Explaining Business Cycles: DSGE Models. Basic Economic Models
4- Current Method of Explaining Business Cycles: DSGE Models Basic Economic Models In Economics, we use theoretical models to explain the economic processes in the real world. These models de ne a relation
More informationNeoclassical Business Cycle Model
Neoclassical Business Cycle Model Prof. Eric Sims University of Notre Dame Fall 2015 1 / 36 Production Economy Last time: studied equilibrium in an endowment economy Now: study equilibrium in an economy
More informationThe Basic New Keynesian Model. Jordi Galí. November 2010
The Basic New Keynesian Model by Jordi Galí November 2 Motivation and Outline Evidence on Money, Output, and Prices: Short Run E ects of Monetary Policy Shocks (i) persistent e ects on real variables (ii)
More informationThe Basic New Keynesian Model. Jordi Galí. June 2008
The Basic New Keynesian Model by Jordi Galí June 28 Motivation and Outline Evidence on Money, Output, and Prices: Short Run E ects of Monetary Policy Shocks (i) persistent e ects on real variables (ii)
More informationFoundation of (virtually) all DSGE models (e.g., RBC model) is Solow growth model
THE BASELINE RBC MODEL: THEORY AND COMPUTATION FEBRUARY, 202 STYLIZED MACRO FACTS Foundation of (virtually all DSGE models (e.g., RBC model is Solow growth model So want/need/desire business-cycle models
More informationRBC Model with Indivisible Labor. Advanced Macroeconomic Theory
RBC Model with Indivisible Labor Advanced Macroeconomic Theory 1 Last Class What are business cycles? Using HP- lter to decompose data into trend and cyclical components Business cycle facts Standard RBC
More informationMacroeconomics Theory II
Macroeconomics Theory II Francesco Franco FEUNL February 2011 Francesco Franco Macroeconomics Theory II 1/34 The log-linear plain vanilla RBC and ν(σ n )= ĉ t = Y C ẑt +(1 α) Y C ˆn t + K βc ˆk t 1 + K
More information1 The social planner problem
The social planner problem max C t;k t+ U t = E t X t C t () that can be written as: s.t.: Y t = A t K t (2) Y t = C t + I t (3) I t = K t+ (4) A t = A A t (5) et t i:i:d: 0; 2 max C t;k t+ U t = E t "
More informationPublic Economics The Macroeconomic Perspective Chapter 2: The Ramsey Model. Burkhard Heer University of Augsburg, Germany
Public Economics The Macroeconomic Perspective Chapter 2: The Ramsey Model Burkhard Heer University of Augsburg, Germany October 3, 2018 Contents I 1 Central Planner 2 3 B. Heer c Public Economics: Chapter
More informationThe Ramsey Model. (Lecture Note, Advanced Macroeconomics, Thomas Steger, SS 2013)
The Ramsey Model (Lecture Note, Advanced Macroeconomics, Thomas Steger, SS 213) 1 Introduction The Ramsey model (or neoclassical growth model) is one of the prototype models in dynamic macroeconomics.
More informationProblem 1 (30 points)
Problem (30 points) Prof. Robert King Consider an economy in which there is one period and there are many, identical households. Each household derives utility from consumption (c), leisure (l) and a public
More informationEquilibrium Conditions (symmetric across all differentiated goods)
MONOPOLISTIC COMPETITION IN A DSGE MODEL: PART II SEPTEMBER 30, 200 Canonical Dixit-Stiglitz Model MONOPOLISTICALLY-COMPETITIVE EQUILIBRIUM Equilibrium Conditions (symmetric across all differentiated goods)
More informationDSGE-Models. Calibration and Introduction to Dynare. Institute of Econometrics and Economic Statistics
DSGE-Models Calibration and Introduction to Dynare Dr. Andrea Beccarini Willi Mutschler, M.Sc. Institute of Econometrics and Economic Statistics willi.mutschler@uni-muenster.de Summer 2012 Willi Mutschler
More informationChapter 11 The Stochastic Growth Model and Aggregate Fluctuations
George Alogoskoufis, Dynamic Macroeconomics, 2016 Chapter 11 The Stochastic Growth Model and Aggregate Fluctuations In previous chapters we studied the long run evolution of output and consumption, real
More informationReal Business Cycle Model (RBC)
Real Business Cycle Model (RBC) Seyed Ali Madanizadeh November 2013 RBC Model Lucas 1980: One of the functions of theoretical economics is to provide fully articulated, artificial economic systems that
More information(a) Write down the Hamilton-Jacobi-Bellman (HJB) Equation in the dynamic programming
1. Government Purchases and Endogenous Growth Consider the following endogenous growth model with government purchases (G) in continuous time. Government purchases enhance production, and the production
More informationGraduate Macroeconomics - Econ 551
Graduate Macroeconomics - Econ 551 Tack Yun Indiana University Seoul National University Spring Semester January 2013 T. Yun (SNU) Macroeconomics 1/07/2013 1 / 32 Business Cycle Models for Emerging-Market
More informationLecture 6, January 7 and 15: Sticky Wages and Prices (Galí, Chapter 6)
MakØk3, Fall 2012/2013 (Blok 2) Business cycles and monetary stabilization policies Henrik Jensen Department of Economics University of Copenhagen Lecture 6, January 7 and 15: Sticky Wages and Prices (Galí,
More informationThe Real Business Cycle Model
The Real Business Cycle Model Macroeconomics II 2 The real business cycle model. Introduction This model explains the comovements in the fluctuations of aggregate economic variables around their trend.
More informationLecture 15 Real Business Cycle Model. Noah Williams
Lecture 15 Real Business Cycle Model Noah Williams University of Wisconsin - Madison Economics 702/312 Real Business Cycle Model We will have a shock: change in technology. Then we will have a propagation
More informationBusiness Failure and Labour Market Fluctuations
Business Failure and Labour Market Fluctuations Seong-Hoon Kim* Seongman Moon** *Centre for Dynamic Macroeconomic Analysis, St Andrews, UK **Korea Institute for International Economic Policy, Seoul, Korea
More informationECON 5118 Macroeconomic Theory
ECON 5118 Macroeconomic Theory Winter 013 Test 1 February 1, 013 Answer ALL Questions Time Allowed: 1 hour 0 min Attention: Please write your answers on the answer book provided Use the right-side pages
More informationproblem. max Both k (0) and h (0) are given at time 0. (a) Write down the Hamilton-Jacobi-Bellman (HJB) Equation in the dynamic programming
1. Endogenous Growth with Human Capital Consider the following endogenous growth model with both physical capital (k (t)) and human capital (h (t)) in continuous time. The representative household solves
More informationMonetary Policy and Unemployment: A New Keynesian Perspective
Monetary Policy and Unemployment: A New Keynesian Perspective Jordi Galí CREI, UPF and Barcelona GSE May 218 Jordi Galí (CREI, UPF and Barcelona GSE) Monetary Policy and Unemployment May 218 1 / 18 Introducing
More information1 The Basic RBC Model
IHS 2016, Macroeconomics III Michael Reiter Ch. 1: Notes on RBC Model 1 1 The Basic RBC Model 1.1 Description of Model Variables y z k L c I w r output level of technology (exogenous) capital at end of
More informationTopic 3. RBCs
14.452. Topic 3. RBCs Olivier Blanchard April 8, 2007 Nr. 1 1. Motivation, and organization Looked at Ramsey model, with productivity shocks. Replicated fairly well co-movements in output, consumption,
More informationWhat are we going to do?
RBC Model Analyzes to what extent growth and business cycles can be generated within the same framework Uses stochastic neoclassical growth model (Brock-Mirman model) as a workhorse, which is augmented
More informationSmall Open Economy RBC Model Uribe, Chapter 4
Small Open Economy RBC Model Uribe, Chapter 4 1 Basic Model 1.1 Uzawa Utility E 0 t=0 θ t U (c t, h t ) θ 0 = 1 θ t+1 = β (c t, h t ) θ t ; β c < 0; β h > 0. Time-varying discount factor With a constant
More informationToulouse School of Economics, M2 Macroeconomics 1 Professor Franck Portier. Exam Solution
Toulouse School of Economics, 2013-2014 M2 Macroeconomics 1 Professor Franck Portier Exam Solution This is a 3 hours exam. Class slides and any handwritten material are allowed. You must write legibly.
More informationSolution for Problem Set 3
Solution for Problem Set 3 Q. Heterogeneous Expectations. Consider following dynamic IS-LM economy in Lecture Notes 8: IS curve: y t = ar t + u t (.) where y t is output, r t is the real interest rate,
More informationADVANCED MACROECONOMICS I
Name: Students ID: ADVANCED MACROECONOMICS I I. Short Questions (21/2 points each) Mark the following statements as True (T) or False (F) and give a brief explanation of your answer in each case. 1. 2.
More informationLecture 3, November 30: The Basic New Keynesian Model (Galí, Chapter 3)
MakØk3, Fall 2 (blok 2) Business cycles and monetary stabilization policies Henrik Jensen Department of Economics University of Copenhagen Lecture 3, November 3: The Basic New Keynesian Model (Galí, Chapter
More informationMacroeconomic Theory and Analysis V Suggested Solutions for the First Midterm. max
Macroeconomic Theory and Analysis V31.0013 Suggested Solutions for the First Midterm Question 1. Welfare Theorems (a) There are two households that maximize max i,g 1 + g 2 ) {c i,l i} (1) st : c i w(1
More informationMacroeconomics Theory II
Macroeconomics Theory II Francesco Franco FEUNL February 2016 Francesco Franco (FEUNL) Macroeconomics Theory II February 2016 1 / 18 Road Map Research question: we want to understand businesses cycles.
More informationMonetary Policy and Unemployment: A New Keynesian Perspective
Monetary Policy and Unemployment: A New Keynesian Perspective Jordi Galí CREI, UPF and Barcelona GSE April 215 Jordi Galí (CREI, UPF and Barcelona GSE) Monetary Policy and Unemployment April 215 1 / 16
More informationNew Notes on the Solow Growth Model
New Notes on the Solow Growth Model Roberto Chang September 2009 1 The Model The firstingredientofadynamicmodelisthedescriptionofthetimehorizon. In the original Solow model, time is continuous and the
More information1. Money in the utility function (start)
Monetary Economics: Macro Aspects, 1/3 2012 Henrik Jensen Department of Economics University of Copenhagen 1. Money in the utility function (start) a. The basic money-in-the-utility function model b. Optimal
More informationIntroduction to Real Business Cycles: The Solow Model and Dynamic Optimization
Introduction to Real Business Cycles: The Solow Model and Dynamic Optimization Vivaldo Mendes a ISCTE IUL Department of Economics 24 September 2017 (Vivaldo M. Mendes ) Macroeconomics (M8674) 24 September
More informationDynamic stochastic general equilibrium models. December 4, 2007
Dynamic stochastic general equilibrium models December 4, 2007 Dynamic stochastic general equilibrium models Random shocks to generate trajectories that look like the observed national accounts. Rational
More informationFluctuations. Shocks, Uncertainty, and the Consumption/Saving Choice
Fluctuations. Shocks, Uncertainty, and the Consumption/Saving Choice Olivier Blanchard April 2002 14.452. Spring 2002. Topic 2. 14.452. Spring, 2002 2 Want to start with a model with two ingredients: ²
More informationA simple macro dynamic model with endogenous saving rate: the representative agent model
A simple macro dynamic model with endogenous saving rate: the representative agent model Virginia Sánchez-Marcos Macroeconomics, MIE-UNICAN Macroeconomics (MIE-UNICAN) A simple macro dynamic model with
More informationFEDERAL RESERVE BANK of ATLANTA
FEDERAL RESERVE BANK of ATLANTA On the Solution of the Growth Model with Investment-Specific Technological Change Jesús Fernández-Villaverde and Juan Francisco Rubio-Ramírez Working Paper 2004-39 December
More informationA Modern Equilibrium Model. Jesús Fernández-Villaverde University of Pennsylvania
A Modern Equilibrium Model Jesús Fernández-Villaverde University of Pennsylvania 1 Household Problem Preferences: max E X β t t=0 c 1 σ t 1 σ ψ l1+γ t 1+γ Budget constraint: c t + k t+1 = w t l t + r t
More informationTOBB-ETU - Econ 532 Practice Problems II (Solutions)
TOBB-ETU - Econ 532 Practice Problems II (Solutions) Q: Ramsey Model: Exponential Utility Assume that in nite-horizon households maximize a utility function of the exponential form 1R max U = e (n )t (1=)e
More informationFiscal Multipliers in a Nonlinear World
Fiscal Multipliers in a Nonlinear World Jesper Lindé Sveriges Riksbank Mathias Trabandt Freie Universität Berlin November 28, 2016 Lindé and Trabandt Multipliers () in Nonlinear Models November 28, 2016
More informationEconomics Discussion Paper Series EDP Measuring monetary policy deviations from the Taylor rule
Economics Discussion Paper Series EDP-1803 Measuring monetary policy deviations from the Taylor rule João Madeira Nuno Palma February 2018 Economics School of Social Sciences The University of Manchester
More informationWith Realistic Parameters the Basic Real Business Cycle Model Acts Like the Solow Growth Model
Preliminary Draft With Realistic Parameters the Basic Real Business ycle Model Acts Like the Solow Growth Model Miles Kimball Shanthi P. Ramnath mkimball@umich.edu ramnath@umich.edu University of Michigan
More informationSimple New Keynesian Model without Capital
Simple New Keynesian Model without Capital Lawrence J. Christiano January 5, 2018 Objective Review the foundations of the basic New Keynesian model without capital. Clarify the role of money supply/demand.
More informationLecture 2 The Centralized Economy
Lecture 2 The Centralized Economy Economics 5118 Macroeconomic Theory Kam Yu Winter 2013 Outline 1 Introduction 2 The Basic DGE Closed Economy 3 Golden Rule Solution 4 Optimal Solution The Euler Equation
More informationHousing and the Business Cycle
Housing and the Business Cycle Morris Davis and Jonathan Heathcote Winter 2009 Huw Lloyd-Ellis () ECON917 Winter 2009 1 / 21 Motivation Need to distinguish between housing and non housing investment,!
More informationLecture 15. Dynamic Stochastic General Equilibrium Model. Randall Romero Aguilar, PhD I Semestre 2017 Last updated: July 3, 2017
Lecture 15 Dynamic Stochastic General Equilibrium Model Randall Romero Aguilar, PhD I Semestre 2017 Last updated: July 3, 2017 Universidad de Costa Rica EC3201 - Teoría Macroeconómica 2 Table of contents
More informationRamsey Cass Koopmans Model (1): Setup of the Model and Competitive Equilibrium Path
Ramsey Cass Koopmans Model (1): Setup of the Model and Competitive Equilibrium Path Ryoji Ohdoi Dept. of Industrial Engineering and Economics, Tokyo Tech This lecture note is mainly based on Ch. 8 of Acemoglu
More informationResearch Division Federal Reserve Bank of St. Louis Working Paper Series
Research Division Federal Reserve Bank of St. Louis Working Paper Series Imperfect Competition and Sunspots Pengfei Wang and Yi Wen Working Paper 2006-05A http://research.stlouisfed.org/wp/2006/2006-05.pdf
More informationVolume 29, Issue 4. Stability under learning: the neo-classical growth problem
Volume 29, Issue 4 Stability under learning: the neo-classical growth problem Orlando Gomes ISCAL - IPL; Economics Research Center [UNIDE/ISCTE - ERC] Abstract A local stability condition for the standard
More informationMA Advanced Macroeconomics: 7. The Real Business Cycle Model
MA Advanced Macroeconomics: 7. The Real Business Cycle Model Karl Whelan School of Economics, UCD Spring 2016 Karl Whelan (UCD) Real Business Cycles Spring 2016 1 / 38 Working Through A DSGE Model We have
More information"0". Doing the stuff on SVARs from the February 28 slides
Monetary Policy, 7/3 2018 Henrik Jensen Department of Economics University of Copenhagen "0". Doing the stuff on SVARs from the February 28 slides 1. Money in the utility function (start) a. The basic
More informationIndeterminacy with No-Income-Effect Preferences and Sector-Specific Externalities
Indeterminacy with No-Income-Effect Preferences and Sector-Specific Externalities Jang-Ting Guo University of California, Riverside Sharon G. Harrison Barnard College, Columbia University July 9, 2008
More informationEcon 5110 Solutions to the Practice Questions for the Midterm Exam
Econ 50 Solutions to the Practice Questions for the Midterm Exam Spring 202 Real Business Cycle Theory. Consider a simple neoclassical growth model (notation similar to class) where all agents are identical
More informationAdvanced Macroeconomics
Advanced Macroeconomics The Ramsey Model Marcin Kolasa Warsaw School of Economics Marcin Kolasa (WSE) Ad. Macro - Ramsey model 1 / 30 Introduction Authors: Frank Ramsey (1928), David Cass (1965) and Tjalling
More informationSolow Growth Model. Michael Bar. February 28, Introduction Some facts about modern growth Questions... 4
Solow Growth Model Michael Bar February 28, 208 Contents Introduction 2. Some facts about modern growth........................ 3.2 Questions..................................... 4 2 The Solow Model 5
More informationCan News be a Major Source of Aggregate Fluctuations?
Can News be a Major Source of Aggregate Fluctuations? A Bayesian DSGE Approach Ippei Fujiwara 1 Yasuo Hirose 1 Mototsugu 2 1 Bank of Japan 2 Vanderbilt University August 4, 2009 Contributions of this paper
More informationMacroeconomics - Data & Theory
Macroeconomics - Data & Theory Wouter J. Den Haan University of Amsterdam October 24, 2009 How to isolate the business cycle component? Easy way is to use the Hodrick-Prescott (HP) lter min fx τ,t g T
More informationProcyclical Debt as Automatic Stabilizer
Procyclical Debt as Automatic Stabilizer Dennis Wesselbaum University of Hamburg German Physical Society Euro Area Business Cycle Network 4th SEEK Conference Mannheim May 16, 2014 Dennis Wesselbaum (UHH,
More informationMonetary Economics Notes
Monetary Economics Notes Nicola Viegi 2 University of Pretoria - School of Economics Contents New Keynesian Models. Readings...............................2 Basic New Keynesian Model...................
More informationMSC Macroeconomics G022, 2009
MSC Macroeconomics G022, 2009 Lecture 4: The Decentralized Economy Morten O. Ravn University College London October 2009 M.O. Ravn (UCL) Lecture 4 October 2009 1 / 68 In this lecture Consumption theory
More informationMonetary Policy and Exchange Rate Volatility in a Small Open Economy. Jordi Galí and Tommaso Monacelli. March 2005
Monetary Policy and Exchange Rate Volatility in a Small Open Economy by Jordi Galí and Tommaso Monacelli March 2005 Motivation The new Keynesian model for the closed economy - equilibrium dynamics: simple
More informationThe full RBC model. Empirical evaluation
The full RBC model. Empirical evaluation Lecture 13 (updated version), ECON 4310 Tord Krogh October 24, 2012 Tord Krogh () ECON 4310 October 24, 2012 1 / 49 Today s lecture Add labor to the stochastic
More informationSuggested Solutions to Homework #6 Econ 511b (Part I), Spring 2004
Suggested Solutions to Homework #6 Econ 511b (Part I), Spring 2004 1. (a) Find the planner s optimal decision rule in the stochastic one-sector growth model without valued leisure by linearizing the Euler
More informationMacroeconomics Theory II
Macroeconomics Theory II Francesco Franco Novasbe February 2016 Francesco Franco (Novasbe) Macroeconomics Theory II February 2016 1 / 8 The Social Planner Solution Notice no intertemporal issues (Y t =
More informationLecture notes on modern growth theory
Lecture notes on modern growth theory Part 2 Mario Tirelli Very preliminary material Not to be circulated without the permission of the author October 25, 2017 Contents 1. Introduction 1 2. Optimal economic
More informationCompetitive Equilibrium and the Welfare Theorems
Competitive Equilibrium and the Welfare Theorems Craig Burnside Duke University September 2010 Craig Burnside (Duke University) Competitive Equilibrium September 2010 1 / 32 Competitive Equilibrium and
More informationGovernment The government faces an exogenous sequence {g t } t=0
Part 6 1. Borrowing Constraints II 1.1. Borrowing Constraints and the Ricardian Equivalence Equivalence between current taxes and current deficits? Basic paper on the Ricardian Equivalence: Barro, JPE,
More informationHomework 3 - Partial Answers
Homework 3 - Partial Answers Jonathan Heathcote Due in Class on Tuesday February 28th In class we outlined two versions of the stochastic growth model: a planner s problem, and an Arrow-Debreu competitive
More informationThe economy is populated by a unit mass of infinitely lived households with preferences given by. β t u(c Mt, c Ht ) t=0
Review Questions: Two Sector Models Econ720. Fall 207. Prof. Lutz Hendricks A Planning Problem The economy is populated by a unit mass of infinitely lived households with preferences given by β t uc Mt,
More informationECON607 Fall 2010 University of Hawaii Professor Hui He TA: Xiaodong Sun Assignment 2
ECON607 Fall 200 University of Hawaii Professor Hui He TA: Xiaodong Sun Assignment 2 The due date for this assignment is Tuesday, October 2. ( Total points = 50). (Two-sector growth model) Consider the
More informationLoglinear approximate solutions to RBC models: An illustration and some observations
Loglinear approximate solutions to RBC models: An illustration and some observations Sau-Him Paul Lau and Philip Hoi-Tak Ng University of Hong Kong January 2004 Abstract Following the analytical approach
More informationThe Basic New Keynesian Model, the Labor Market and Sticky Wages
The Basic New Keynesian Model, the Labor Market and Sticky Wages Lawrence J. Christiano August 25, 203 Baseline NK model with no capital and with a competitive labor market. private sector equilibrium
More informationThe Ramsey Model. Alessandra Pelloni. October TEI Lecture. Alessandra Pelloni (TEI Lecture) Economic Growth October / 61
The Ramsey Model Alessandra Pelloni TEI Lecture October 2015 Alessandra Pelloni (TEI Lecture) Economic Growth October 2015 1 / 61 Introduction Introduction Introduction Ramsey-Cass-Koopmans model: di ers
More informationNews Driven Business Cycles in Heterogenous Agents Economies
News Driven Business Cycles in Heterogenous Agents Economies Paul Beaudry and Franck Portier DRAFT February 9 Abstract We present a new propagation mechanism for news shocks in dynamic general equilibrium
More informationMacroeconomics Qualifying Examination
Macroeconomics Qualifying Examination August 2016 Department of Economics UNC Chapel Hill Instructions: This examination consists of 4 questions. Answer all questions. If you believe a question is ambiguously
More informationGranger Causality and Equilibrium Business Cycle Theory
Granger Causality and Equilibrium Business Cycle Theory Yi Wen Department of Economics Cornell University Abstract Post war US data show that consumption growth causes output and investment growth. This
More informationThe Return of the Wage Phillips Curve
The Return of the Wage Phillips Curve Jordi Galí CREI, UPF and Barcelona GSE March 2010 Jordi Galí (CREI, UPF and Barcelona GSE) The Return of the Wage Phillips Curve March 2010 1 / 15 Introduction Two
More informationMacroeconomics IV Problem Set I
14.454 - Macroeconomics IV Problem Set I 04/02/2011 Due: Monday 4/11/2011 1 Question 1 - Kocherlakota (2000) Take an economy with a representative, in nitely-lived consumer. The consumer owns a technology
More informationGraduate Macro Theory II: Business Cycle Accounting and Wedges
Graduate Macro Theory II: Business Cycle Accounting and Wedges Eric Sims University of Notre Dame Spring 2017 1 Introduction Most modern dynamic macro models have at their core a prototypical real business
More informationMarkov Perfect Equilibria in the Ramsey Model
Markov Perfect Equilibria in the Ramsey Model Paul Pichler and Gerhard Sorger This Version: February 2006 Abstract We study the Ramsey (1928) model under the assumption that households act strategically.
More informationCapital-Labor Substitution, Equilibrium Indeterminacy, and the Cyclical Behavior of Labor Income
Capital-Labor Substitution, Equilibrium Indeterminacy, and the Cyclical Behavior of Labor Income Jang-Ting Guo University of California, Riverside y Kevin J. Lansing Federal Reserve Bank of San Francisco
More informationSession 4: Money. Jean Imbs. November 2010
Session 4: Jean November 2010 I So far, focused on real economy. Real quantities consumed, produced, invested. No money, no nominal in uences. I Now, introduce nominal dimension in the economy. First and
More informationPseudo-Wealth and Consumption Fluctuations
Pseudo-Wealth and Consumption Fluctuations Banque de France Martin Guzman (Columbia-UBA) Joseph Stiglitz (Columbia) April 4, 2017 Motivation 1 Analytical puzzle from the perspective of DSGE models: Physical
More informationPermanent Income Hypothesis Intro to the Ramsey Model
Consumption and Savings Permanent Income Hypothesis Intro to the Ramsey Model Lecture 10 Topics in Macroeconomics November 6, 2007 Lecture 10 1/18 Topics in Macroeconomics Consumption and Savings Outline
More informationTopic 2. Consumption/Saving and Productivity shocks
14.452. Topic 2. Consumption/Saving and Productivity shocks Olivier Blanchard April 2006 Nr. 1 1. What starting point? Want to start with a model with at least two ingredients: Shocks, so uncertainty.
More informationMonetary Policy and Equilibrium Indeterminacy in a Cash in Advance Economy with Investment. Abstract
Monetary Policy and Equilibrium Indeterminacy in a Cash in Advance Economy with Investment Chong Kee Yip Department of Economics, The Chinese University of Hong Kong Ka Fai Li Department of Economics,
More informationThe Small-Open-Economy Real Business Cycle Model
The Small-Open-Economy Real Business Cycle Model Comments Some Empirical Regularities Variable Canadian Data σ xt ρ xt,x t ρ xt,gdp t y 2.8.6 c 2.5.7.59 i 9.8.3.64 h 2.54.8 tb y.9.66 -.3 Source: Mendoza
More informationResolving the Missing Deflation Puzzle. June 7, 2018
Resolving the Missing Deflation Puzzle Jesper Lindé Sveriges Riksbank Mathias Trabandt Freie Universität Berlin June 7, 218 Motivation Key observations during the Great Recession: Extraordinary contraction
More informationMonetary Economics: Solutions Problem Set 1
Monetary Economics: Solutions Problem Set 1 December 14, 2006 Exercise 1 A Households Households maximise their intertemporal utility function by optimally choosing consumption, savings, and the mix of
More informationThe New Keynesian Model: Introduction
The New Keynesian Model: Introduction Vivaldo M. Mendes ISCTE Lisbon University Institute 13 November 2017 (Vivaldo M. Mendes) The New Keynesian Model: Introduction 13 November 2013 1 / 39 Summary 1 What
More informationMonetary Economics. Lecture 15: unemployment in the new Keynesian model, part one. Chris Edmond. 2nd Semester 2014
Monetary Economics Lecture 15: unemployment in the new Keynesian model, part one Chris Edmond 2nd Semester 214 1 This class Unemployment fluctuations in the new Keynesian model, part one Main reading:
More informationFoundations of Modern Macroeconomics Second Edition
Foundations of Modern Macroeconomics Second Edition Chapter 4: Anticipation effects and economic policy BJ Heijdra Department of Economics, Econometrics & Finance University of Groningen 1 September 2009
More informationEmployment, Wage, and Output Dynamics under External Habit Formation and E ciency Wages
Employment, Wage, and Output Dynamics under External Habit Formation and E ciency Wages Matthew L. Booth Middle Tennessee State University Murfreesboro TN 37132 mbooth@mtsu.edu February 9, 2018 Abstract
More information