# Syllabus Econ 704, Spring 2022 2nd Session

José Víctor Ríos Rull

## Course Description.

This course complements the rest of 702-704. In my view, the ultimate
goal of this course is to learn to use a variety of models that can be
used to give *quantitative* answers to economic questions. The models
can generate artificial data of both allocations and prices that can
be meaningfully related to actual data. In this course, most, if not
all, of the material will be studied from the strict point of view of
the theory, so we will not look at data in any serious manner nor at
solving the models with the computer. The emphasis is on *economic
rigor*, i.e. the target is to learn tools that will be useful
later. The course, then, is not a survey of topics in
macroeconomics. When some specific topic is addressed, the objective is
not to give a review of known results, but rather to give an example of
how an issue is addressed and of how tools are used.

Starting in the second week there will be recitations once a week. These will be used either to introduce some mathematical apparatus that we need, to solve homeworks, or to explore issues related to those presented in class. The material covered in recitations constitutes part of the required curriculum.

## Homeworks and Grades

In the context of the course, I will assign some homeworks: usually I will ask you to prove something during a lecture, sometimes they will be posted in the homepage. These problems are not required but will give you an idea of what is expected for the exams, and especially for the prelim. The grades will be based 33% on some form of midterm, date and format to be determined, and 67% on a final date and format to be determined. Luigi will give you feedback regarding the homeworks. He may post them on the web as well as post answers to it at a later day. Or he may not. We will see about it.

## Textbooks and papers

No special textbooks. There are notes from previous years and Luigi will post class notes of this year's class. The notes are the evolution of class notes by many students over the years, both from Penn and Minnesota including Makoto Nakajima (2002), Vivian Zhanwei Yue (2002-3), Ahu Gemici (2003-4), Kagan (Omer Parmaksiz) (2004-5), Thanasis Geromichalos (2005-6), Se Kyu Choi (2006-7), Serdar Ozkan (2007), Ali Shourideh (2008), Manuel Macera (2009), Tayyar Buyukbasaran (2010), Bernabe Lopez-Martin (2011), Rishabh Kirpalani (2012), Zhifeng Cai (2013), Alexandra (Sasha) Solovyeva (2014), Keyvan Eslami (2015), Sumedh Ambokar (2016), Omer Faruk Koru (2017), Jinfeng Luo (2018), Ricardo Marto (2019,2020) and Jonathan Arnold (2021).

It never hurts to have the usual suspects, but I do not dwell on them. Besides those used and recommended by my colleagues, there is a good little book (out of print actually) that is useful, Harris-87. The papers that I cite (in a very incomplete form below) are not to be read in general, although some students may find them useful. We will occasionally use bits of it. First year is to learn tools, not to read papers.

## Preliminary List of Material to Cover

This list is of material that I want to go over. The first few items you have seen in a very similar way, so I will go very fast over it, but I find it very useful to go over them again. There are always minor adjustments along the way.

- Introduction: Why the Growth Model
- Recursive Competitive Equilibrium
- Asset Pricing: Lucas Tree Model
- Endogenous Productivity in a Product Search Model (Competitive Search)
- Measure Theory
- Industry Equilibrium
- Incomplete Market Models
- Extreme Value Shocks and the elimination of decision rules as functions
- Monopolistic Competition
- New Keynesian Models.
- Endogenous Growth and R&D
- Time Consistency Problems
- Wage Distribution

## References

COOLEY, T. F., AND E. C. PRESCOTT (1995): "Economic Growth and Business
Cycles," in *Frontiers of Business Cycle Research*, ed. by T. F. Cooley,
chap. 1. Princeton University Press, Princeton.

HARRIS, M. (1987): *Dynamic Economic Analysis*. Oxford University Press.

LUCAS, R. E. (1988): "On the Mechanics of Economic Development," 22, 3-42.

ROGERSON, R., R. SHIMER, AND R. WRIGHT (2005): "Search-Theoretic Models
of the Labor Market: A Survey," *Journal of Economic Literature*, 43,
959-988.

ROMER, P. M. (1986): "Increasing Return and Long-run Growth," 94, 1002-36.

ROMER, P. M. (1990): "Endogenous Technological Change," 98, S71-S102.

STOKEY, N. L., AND E. C. LUCAS, R. E. WITH PRESCOTT (1989): *Recursive
Methods in Economic Dynamics*. Harvard University Press.

JUNGQVIST, L. AND SARGENT T. J. (2018) "Recursive Macroeconomic Theory", fourth edition, The MIT Press.