UNIVERSITY OF CALIFORNIA                                                                          FALL 2014

Department of Economics                                                                             Economics 202A

                                                                                                               P. Gourinchas/D. Romer





Main Textbook: David Romer, Advanced Macroeconomics, Fourth Edition (New York: McGraw-Hill, 2012)


Part I: August 28 – October 14

GSI: Dominick Bartelme, office hours Th 2-3 P.M.

D. Romer office hours: W 1-3 P.M.




I.      Introduction: Current Crises in Macroeconomics


*David Romer, Advanced Macroeconomics, fourth edition (New York: McGraw-Hill, 2012), “Epilogue,” 644–648.


Carmen M. Reinhart and Kenneth S. Rogoff, This Time is Different, Chapter 14, “The Aftermath of Financial Crises” (Princeton: Princeton University Press, 2009), 223–239.


Ben S. Bernanke, “Japanese Monetary Policy: A Case of Self-Induced Paralysis?” in Ryoichi Mikitani and Adam S. Posen, eds., Japan’s Financial Crisis and Its Parallels to U.S. Experience (Washington, D.C.: Institute for International Economics, 2000), 149–166.


*Lee E. Ohanian, “The Economic Crisis from a Neoclassical Perspective,” Journal of Economic Perspectives 24 (Fall 2010), 45–66.


*Ricardo J. Caballero, “Macroeconomics after the Crisis: Time to Deal with the Pretense-of-Knowledge Syndrome,” Journal of Economic Perspectives 24 (Fall 2010), 85–102.


*David Romer, Advanced Macroeconomics, fourth edition, “Empirical Application: Is U.S. Fiscal Policy on a Sustainable Path?” 590–592.


*Alan J. Auerbach and William G. Gale, “Forgotten But Not Gone: The Long-Term Fiscal Imbalance,” unpublished paper, March 2014.




II.    The Solow Model


*David Romer, Advanced Macroeconomics, fourth edition, Chapter 1.


Robert M. Solow, “A Contribution to the Theory of Economic Growth.” Quarterly Journal of Economics 70 (February 1956), 65–94.


Robert E. Lucas, Jr., “Why Doesn’t Capital Flow from Rich to Poor Countries?” American Economic Review 80 (May 1990), 92–96.


J. Bradford DeLong, “Productivity Growth, Convergence, and Welfare: Comment,” American Economic Review 78 (December 1988): 1138–1154.


John Fernald and Brent Neiman, “Growth Accounting with Misallocation: Or, Doing Less with More in Singapore,” American Economic Journal: Macroeconomics 3 (April 2011): 29–74.


Thomas Piketty, Capital in the Twenty-First Century, translated by Arthur Goldhammer (Cambridge: Harvard University Press, 2014).


Thomas Piketty and Gabriel Zucman, “Capital Is Back: Wealth-Income Ratios in Rich Countries,” 1700–2010, unpublished paper (February 2014). Quarterly Journal of Economics, forthcoming.


*Matthew Rognlie, “A Note on Piketty and Diminishing Returns to Capital,” unpublished paper, M.I.T. (June 2014).  



III.  The Ramsey-Cass-Koopmans Model and Dynamic Optimization


*David Romer, Advanced Macroeconomics, fourth edition, Chapter 2, Part A.


 Robert J. Barro and Xavier Sala-i-Martin, Economic Growth, second edition (Cambridge: MIT Press, 2004), Chapter 2 and Appendix A.3 (at end of book).


Lars Ljungqvist and Thomas J. Sargent, Recursive Macroeconomic Theory, second edition (Cambridge: MIT Press, 2004), Chapter 3.


*Maurice Obstfeld, “Dynamic Optimization in Continuous-Time Economic Models (A Guide for the Perplexed),” unpublished paper, U.C. Berkeley, April 1992.


Martin Weitzman, Income, Wealth, and the Maximum Principle (Cambridge: Harvard University Press, 2003).

IV.   Overlapping Generations


*David Romer, Advanced Macroeconomics, fourth edition, Chapter 2, Part B.


Paul A. Samuelson, “An Exact Consumption Loan Model of Interest with or without the Social Contrivance of Money,” Journal of Political Economy 66 (December 1958), 467–482.


Peter A. Diamond, “National Debt in a Neoclassical Growth Model,” American Economic Review 55 (December 1965), 1126–1150.


Olivier J. Blanchard and Charles M. Kahn, “The Solution of Linear Difference Models under Rational Expectations,” Econometrica 48 (September 1980), 1305–1311.


Andrew B. Abel, N, Gregory Mankiw, Lawrence H. Summers, and Richard J. Zeckhauser, “Assessing Dynamic Efficiency: Theory and Evidence,” Review of Economic Studies 56 (January 1989), 1–20.


Robert J. Barro, “Are Government Bonds Net Wealth?” Journal of Political Economy 82 (November/December 1974), 1095–1117.


Olivier J. Blanchard, “Debts, Deficits, and Finite Horizons,” Journal of Political Economy 93 (April 1985), 223–247.


Jean Tirole, “Asset Bubbles and Overlapping Generations,” Econometrica 53 (November 1985) 1499–1528.


Weil, Philippe. “Overlapping Generations: The First Jubilee.” Journal of Economic Perspectives 22 (Fall 2008), 115–134.


*Gauti B. Eggertsson and Neil R. Mehrotra, “A Model of Secular Stagnation,” unpublished paper, Brown University (July 2014).



V.     Endogenous Growth Theory


*David Romer, Advanced Macroeconomics, fourth edition, Chapter 3.


Paul M. Romer, “Endogenous Technical Change,” Journal of Political Economy 98 (October 1990, Part 2), S71–S102.


Robert E. Lucas, Jr., “On the Mechanics of Economic Development,” Journal of Monetary Economics 22 (July 1988) 3–42.

Charles I. Jones, “Growth and Ideas,” in Philippe Aghion and Steven Durlauf, eds., Handbook of Economic Growth, Volume 1B (Amsterdam: Elsevier, 2005), 1063–1111.


*Charles I. Jones, “Time-Series Tests of Endogenous Growth Models,” Quarterly Journal of Economics110 (May 1995), 495–525.


*Michael Kremer, “Population Growth and Technical Change: One Million B.C. to 1990,” Quarterly Journal of Economics 108 (August 1993), 681–716.


Oded Galor, Unified Growth Theory (Princeton: Princeton University Press, 2011).


Robert J. Gordon, “Is U.S. Economic Growth Over? Faltering Innovation Confronts the Six Headwinds,” NBER Working Paper No. 18315 (August 2012).



VI.   Cross-Country Income Differences


*David Romer, Advanced Macroeconomics, fourth edition, Chapter 4.


*Robert E. Hall, and Charles I. Jones, “Why Do Some Countries Produce So Much More Output per Worker than Others?” Quarterly Journal of Economics 114 (February 1999), 83–116.


Peter J. Klenow and Andrés Rodríguez-Clare, “The Neoclassical Revival in Growth Economics: Has It Gone Too Far?” NBER Macroeconomics Annual 12 (1997), 73–103.


Chang-Tai Hsieh and Peter J. Klenow, “Relative Prices and Relative Prosperity.” American Economic Review 97 (June 2007), 562–585.


Chang-Tai Hsieh and Peter J. Klenow, “Misallocation and Manufacturing TFP in China and India,” Quarterly Journal of Economics 124 (November 2009), 1403–1448.


Daron Acemoglu, “Why Not a Political Coase Theorem? Social Conflict, Commitment and Politics.” Journal of Comparative Economics 31 (December 2003), 620–652.






Part II: October 16 – December 09.

GSI and Office Hours:

GSI: Sergii Meleschchuk, office hours M,Tu 1-2P.M. 542 Evans

P. Gourinchas office hours: W 1-2P.M., 697D Evans





VII. Consumption


*David Romer, Advanced Macroeconomics, fourth edition, Chapter 8, “Consumption”


Milton Friedman, A Theory of the Consumption Function, Chapters 1-3, pp. 3-37.


Robert Hall, “: Theory and Evidence,” Journal of Political Economy, December 1978, pp. 971-987.


John Campbell and N. Gregory Mankiw, “Consumption, Income and Interest Rates: Reinterpreting the Time-Series Evidence,” NBER Macroeconomics Annual: 1989. Blanchard, O. and S. Fischer eds. MIT Press.


*Chang-Tai Hsieh, “Do Consumers React to Anticipated Income Changes? Evidence from the Alaska Permanent Fund,” American Economic Review, March 2003, pp. 397-405.


Jonathan A. Parker, Nicholas S. Souleles, David S. Johnson, Robert McClelland, “Consumer Spending and the Economic Stimulus Payments of 2008,” American Economic Review, October 2013, vol. 103(6), pp2530-53.


*Angus Deaton, “Saving and Liquidity Constraints,” Econometrica, September 1991, vol. 59(5), pp1221-48


Angus Deaton, Understanding Consumption, Clarendon Lectures in Economics, Oxford University Press, 1992


Christopher Carroll, “A Theory of the Consumption Function, with and without Liquidity Constraints”, Journal of Economic Perspectives, Summer 2001, vol. 15(3), pp23-45


*Pierre-Olivier Gourinchas and Jonathan Parker, “Consumption over the Lifecycle,” Econometrica, January 2002, vol. 70(1), pp47-91


Mark Aguiar and Erik Hurst, “Consumption vs. Expenditure,” Journal of Political Economy, October 2005, vol. 113(5), pp919-948


John Karl Scholz, Ananth Sheshadri and Surachai Khitatrakun, “Are Americans Saving `Optimally’ for Retirement,” Journal of Political Economy, August 2006, vol. 114(4), pp607-643


Marios Angeletos, David Laibson, Andrea Repetto, Jeremy Tobacman and Stephen Weinberg, “The Hyperbolic Buffer Stock Model: Calibration, Simulation and Empirical Validation,” Journal of Economic Perspectives, Summer 2001, vol. 15(3), pp47-68


Atif Mian, Kamalesh Rao and Amir Sufi, “Household Balance Sheets, Consumption and the Economic Slump,” Quarterly Journal of Economics, vol. 128(4), pp1687-1726



VIII. Investment


*David Romer, Advanced Macroeconomics, fourth edition, Chapter 9, “Investment,” Sections 9.1-9.8, pp. 405-436.


Maurice Obstfeld and Kenneth Rogoff, Foundations of International Macroeconomics (Cambridge: MIT Press, 1996), pp. 105-113.


Robert Hall and Dale Jorgenson, “Tax Policy and Investment Behavior,” American Economic Review, June 1967, vol. 57(3), pp391-414


*Fumio Hayashi, “Tobin’s Marginal q and Average A: A Neoclassical Interpretation,” Econometrica, January 1982, vol. 50(1), pp213-224


Lawrence Summers, “Taxation and Corporate Investment: A q-Theory Approach,” Brookings Papers on Economic Activity, 1981:1, pp. 67-127.


*Austan Goolsbee, “Investment Tax Incentives, Prices, and the Supply of Capital Goods,” Quarterly Journal of Economics, February 1998, pp. 121-148.


Dixit and Pindyck, Investment under Uncertainty, chapters 1-5


*Ricardo Caballero, “Aggregate Investment,” Handbook of Macroeconomics, vol. 1B, 1999, John B. Taylor and Michael Woodford, Eds, Elsevier, pp813-862


Ricardo Caballero and Eduardo Engel, “Explaining Investment Dynamics in U.S. Manufacturing: A Generalized (S,s) Approach,” Econometrica, July 1999, vol. 67(4), pp783-826.


Robert Merton, “Lifetime Portfolio Selection under Uncertainty: The Continuous-Time Case,” Review of Economics and Statistics, August 1969, vol. 51(3), pp247-257



IX. International Economics


*Maurice Obstfeld and Kenneth Rogoff, Foundations of International Macroeconomics (Cambridge: MIT Press, 1996), chapters 2 and 3.


*Pierre-Olivier Gourinchas and Olivier Jeanne, “Capital Flows to Developing Countries: The Allocation Puzzle,” Review of Economic Studies, October 2013, vol. 80(4), pp1484-1515


*Ben Bernanke, “Remarks by Governor Ben S. Bernanke: The Global Saving Glut and the U.S. Current Account Deficit,” March 10, 2005.


Ricardo Caballero, Emmanuel Farhi and Pierre-Olivier Gourinchas, “An Equilibrium Model of `Global Imbalances’ and Low Interest Rates,” American Economic Review, March 2008, vol. 98(1), pp358-393


*Maurice Obstfeld, “Does the Current Account Still Matter?” American Economic Review (May 2012), pp. 1-23


Jeffrey Frankel, “Measuring International Capital Mobility: A Review,” American Economic Review, May 1992, vol. 82(2), pp197-202


*Rudiger Dornbusch, "Expectations and Exchange Rate Dynamics," Journal of Political Economy, December 1976, vol. 84(6), pp. 1161-1176.



Francesco Giavazzi and Luigi Spaventa, “Why the Current Account May Matter in a Monetary Union: Lessons from the Financial Crisis in the Euro Area,” Discussion Paper 8008, Centre for Economic Policy Research (London), September 2010.


Jay Shambaugh, “The Euro’s Three Crises,” Brookings Papers on Economic Activity, Spring 2012, pp157-211



X. Financial Markets and Financial Crises


*David Romer, Advanced Macroeconomics, fourth edition, Sections 9.9 and 9.10, pp. 436-451.


*Robert E. Lucas, Jr., “Asset Prices in an Exchange Economy,” Econometrica, December 1978, pp. 1429-1445.


Rajnish Mehra and Edward C. Prescott, “The Equity Premium: A Puzzle,” Journal of Monetary Economics, March 1985, vol. 15(2), pp. 145-161.


*J. Bradford DeLong, Andrei Shleifer, Lawrence H. Summers, and Robert J. Waldmann, “Noise Trader Risk in Financial Markets,” Journal of Political Economy, August 1990, pp. 703-738.


Andrei Shleifer and Robert Vishny, “The Limits of Arbitrage,” Journal of Finance, March 1997, pp. 35-55.


Michael C. Jensen and William H. Meckling, “Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure,” Journal of Financial Economics, October 1976, pp. 305-360.


Ben S. Bernanke, Mark Gertler, and Simon Gilchrist, “The Financial Accelerator and the Flight to Quality,” Review of Economics and Statistics, February 1996, pp. 1-15.


*Ben Bernanke and Mark Gertler, “Financial Fragility and Economic Performance,” Quarterly Journal of Economics, February 1990, pp. 87-114.


*Douglas Diamond and Philip Dybvig, “Bank Runs, Deposit Insurance, and Liquidity,” Journal of Political Economy, June 1983, vol. 91(3), pp. 401-419.


*Victoria Ivashina and David S. Scharfstein, “Bank Lending During the Financial Crisis of 2008,” Journal of Financial Economics, September 2010. pp. 319-338.


Gary Gorton and Andrew Metrick, “Securitized Banking and the Run on Repo,” Journal of Financial Economics, June 2012, pp. 425-451.


Markus K. Brunnermeier, “Deciphering the Liquidity and Credit Crunch 2007-2008,” Journal of Economic Perspectives, Winter 2009, pp. 77-100.


*Atif Mian and Amir Sufi, “What Explains the 2007-2009 Drop in Employment,” February 2014, Chicago Booth Working Research Paper 13-43


Gabriel Chodorow-Reich, “The Employment Effects of Credit Market Disruptions: Firm-Level Evidence From the 2008-9 Financial Crisis,” Quarterly Journal of Economics, February 2014, vol. 129(1), pp1-59