An initial listing of the material that I will cover
follows. Things might (and will) be added and deleted, partly
reflecting the audience.
Introduction. What is a Model?
A measurement tool. How big is bla bla ?
A device to assess the implications of changes. What
happens if bla bla bla?
First Question. How big is the contribution of
productivity shocks to aggregate fluctuations: the most basic
structure.
Review of the theory. The optimal growth model. Using
dynamic programming to solve for the optimal allocation.
The second welfare theorem. A Recursive version of the
second welfare theorem.
Computation of the model. This will involve the
review of more than one method. And some homeworks. I
will put now the list of things about solving an optimal
decision model through computers that we may see in the
whole course. We will not see all this time though.
Calibration of the model. This is the most important part of
the chapter. So far calibration has been a tainted word with too
many meanings. We will introduce a very disciplined approach to
restrict the model quantitatively. Cooley and Prescott, [1995].
How to measure wage dispersion? Temporary versus
permanent changes.
Transition, deterministic evolution over time. Convergence to
a new steady state.
Extensions to the basic question. Does feature bla bla matter?
We will review a few of them to learn about other classes of
economies, which means both a new set of calibration and
computational issues.
Economies with measures of
things, countries, people, firms, that have idiosyncratic
shocks. Most of this chapter follows the first half of
Ríos-Rull, [1998].
Theory. A steady state.
Theory. A recursive equilibria.
Computational. The household problem.
Computational. The stationary distribution of
households.
Computational. The measure as a state variable.
Now we can use these models to talk about a variety of
issues.
Aiyagari, S. R. (1995).
Optimal capital income taxation with incomplete markets, borrowing
constraints, and constant discounting.
Journal of Political Economy 103 (6), 1158-1175.
Altig, D. and C. T. Carlstrom (1991, August).
Inflation, personal taxes, and real output: A dynamic analysis.
Journal of Money, Credit, and Banking 23 (3), 547-71.
Castañeda, A., J. Díaz-Giménez, and J. V. Ríos-Rull
(1998).
A general equilibrium analysis of progressive income taxation:
Quantifying the trade-offs.
Mimeo, University of Pennsylvania.
Ceria, S. and J. V. Ríos-Rull (1992).
On the existence uniqueness and computability of non-optimal
recursive equilibria in linear quadratic economies.
Unpublished Manuscript, Carnegie Mellon University.
Chang, R. (1995).
Report on political party negotiations, income distribution and
endogenous growth.
Unpublished manuscript, Federal Reserve Bank of Atlanta.
Chari, V. V. and P. J. Kehoe (1999).
Optimal fiscal and monetary policy.
In J. B. Taylor and M. Woodford (Eds.), Handbook of
Macroeconomics, Vol III, Chapter 26. Amsterdam: North Holland.
Chatterjee, S., D. Corbae, M. Nakajima, and J.-V. Ríos-Rull (2004).
A quantitative theory of unsecured consumer credit with risk of
default.
Unpublished Manuscript, CAERP.
Christiano, L. J. and J. D. Fisher (1994).
Algorithms for solving dynamic models with occasionally binding
constraints.
Federal Reserve Bank of Minneapolis Staff Report 171.
Cooley, T. F. and E. C. Prescott (1995).
Economic growth and business cycles.
In T. F. Cooley (Ed.), Frontiers of Business Cycle Research,
Chapter 1. Princeton: Princeton University Press.
Cubeddu, L. M. and J.-V. Ríos-Rull (2003).
Families as shocks.
Journal of the European Economic Association 1 (2-3),
671-682.
(Papers and Proceedings of the Seventeenth Annual Congress of the
European Economic Association, Venice, 21-24 August 2002).
Diaz, A. and M.-J. Luengo-Prado (2004).
Precautionary savings and wealth distribution with durable goods.
http://www.eco.uc3m.es/ andiaz/pdfs/research/durables.pdf.
Díaz-Gimenez, J., V. Quadrini, and J.-V. Ríos-Rull (1997,
Spring).
Dimensions of inequality: Facts on the U.S. distributions of
earnings, income, and wealth.
Federal Reserve Bank of Minneapolis Quarterly Review
21 (2), 3-21.
Fernández-Villaverde, J. and D. Krueger (2003).
Consumption over the life cycle: Some facts from consumer expenditure
survey data.
CAERP Working Paper No. 2003-07.
Fernandez-Villaverde, J. and A. Tsyvinski (2003).
Optimal fiscal policy in a business cycle model without commitment.
Mimeo, University of Pennsylvania.
Hansen, G. D. and E. C. Prescott (1995).
Recursive methods for computing equilibria of business cycle models.
In T. F. Cooley (Ed.), Frontiers of Business Cycle Research,
Chapter 2. Princeton: Princeton University Press.
Heathcote, J., K. Storesletten, and G. Violante (2004).
The cross-sectional implications of rising wage inequality in the
united states.
CEPR Discussion Paper No. 4296.
Khan, A. and J. Thomas (2003).
Inventories and the business cycle: An equilibrium analysis of (s,s)
policies.
FRB Minneapolis, Staff Report Number 329.
Krusell, P., V. Quadrini, and J.-V. Ríos-Rull (1996).
Are consumption taxes really better than income taxes?
Journal of Monetary Economics 37 (3), 475-504.
Krusell, P. and A. Smith (1997).
Income and wealth heterogeneity, portfolio choice, and equilibrium
asset returns.
Macroeconomic Dynamics 1 (2), 387-422.
Ortalo-Magne, F. and S. Rady (2003).
Housing market dynamics: On the contribution of income shocks and
credit constraints.
http://research.bus.wisc.edu/fom/documents/hm-latest.pdf.
Osuna, V. and J.-V. Ríos-Rull (2003, January).
Implementing the 35 hour workweek by means of overtime taxation.
Review of Economic Dynamics 6 (1), 179-206.
Press, W. H., S. A. Teukolski, W. T. Vetterling, and B. P. . Flannery (1992).
Numerical Recipes in Fortran 77 The Art of Scientific
Computing.
Cambridge University Press.
Quadrini, V. and J.-V. Ríos-Rull (1997, Spring).
Understanding the U.S. distribution of wealth.
Federal Reserve Bank of Minneapolis Quarterly Review
21, 22-36.
Regalia, F. and J.-V. Ríos-Rull (1998).
What accounts for the increase in single households and for the
properties of fertility?
Mimeo, University of Pennsylvania.
Ríos-Rull, J.-V. (1998).
Computing equilibria in models with heterogenous agents.
In R. Marimon and A. Scott (Eds.), Computational Methods for the
Study of Dynamic Economics, Chapter 9. Oxford University Press.
Trick, M. A. and S. E. Zin (1993).
A linear programming aprroach to solving stochastic dynamic programs.
Unpublished Manuscript, Carnegie Mellon University.
Trick, M. A. and S. E. Zin (1997).
Spline approximations to value functions: A linear programming
aprroach.
Unpublished manuscript, Carnegie Mellon University.
Uhlig, H. (1995).
A toolkit for analyzing nonlinear dynamic stochastic models easily.
Institute for Empirical Macroeconomics DP 101 (There might be a more
recent version in his homepage).