Department of Economics University of Minnesota
Phone-(612) 625-0941 4-101 Hanson Hall (off 4-179) Fed
Phone (612) 204-5528 1925 Fourth Street South Fax: (612)
624-0209 Minneapolis, MN 55455.
Homepage
http://www.econ.umn.edu/~vr0j/index.html
There will be sessions of this course
May 9 to May 20 and May 25 and 26. The classes will be 12:30
to 14:00 in 14.0.07.
Due to Jordi Gali's seminar, Thursday May 19th the class will
start at 11:30.
Other relevant links.
Here you may find an occasional
paper, homepage or subroutine of interest.
What are we doing?
A class by class ex-post diary, and list of
the next class.
Jan 26.
We talked about the course, and what it
is about. We went over all the details. We started with a
discussion of what is it that it means to do
Quantitative Macro, which is to answer quesstions with
the aid of a model that can be solved and mapped to the
data. I described the first homework which involves
computing the Solow residual, estimating a process to
represent it, posing it as a shock of a model that can
be thought of representing a modern economy (has leisure
and capital that depreciates it goes on forever), map
the model to data, solve the model, use it to generate
time series and compare the properties of those time
series with those of the U.S. economy. The simplest way
to do the homework is to use dynare. Some examples are
provided here
by J. Fernandez-Villaverde.
Jan 27
We went over the main tool of applied
macro, that of Recursive Competitive Equilibria. We look
at two specific models one with government policy,
including debt, and one with more than one agent
useful for example for international economics.
Jan 28
We looked at the other main class of
tools for modern macro, using measures to describe
economies. For this, we did some necessary math
(measure theory) and went over various versions of
Indusry equilibria as posed by Hopenhayn.
Monday May 9th. Restart and various items
We
talked about the objects of your interests
(entrepreneurship, new keynesian models of the labor
market, asset prices with rigidities in the labor
market). We also talked about the fundamental Real
business cycle and how it fails. We did some planning
for the next clasess.
Tuesday May 10th. Housing
We will again review
some of the topics of your interests. Robert will
explain us what is the role of heterogeneity in his
monetary project. I will talk about how to model
housing, and what is it from the point of view of macro.
Wednesday May 11th.
I presented a model of
human capital accumulation to address fundamental
differences in mortality across education groups.
Thursday May 12th.
I presented a model where
households changed their size over the business cycle.
Friday May 13th.
Omar and Giorgiy
presented. Thanks. Omar presented ... and Giorgiy
presented a model of household formation.
Monday May 16th.
Lian on occupational
choice and mobility with financial frictions in
developing countries. Roman on a dynamic model of
vertical integration. Thanks Lian and Roman.
Tuesday May 17th.
In the first part of the
class, I will give a discussion of productivity
shocks. Then I give the seminar which I cconsider an
integral part of the course.
Wednesday May 18th.
Luis talked about how to
think of an exogenous change of the interest rate as a
mechanism to change housing prices. I started a model
of household formation.
Thursday May 19th.
Cecilia talked about a
model of investment to attract scarce resources. It can
be applied to get spouses. I then discussed the problem
of transitions. We then went and learned from Jordi Gali.
Friday May 20th.
We spent some time
discussing Jordi's seminar. I talked about bankruptcies.
Wednesday May 25th.
Olga talked about how
to think of credibitlity of a Central Bank. Luis gave a
brief description of the logic of his project.
Thursday May 26th.
We discussed a bit of household
formation in preparation for J Knowles seminar and we
talked about the role of the course and of possible
continuations. We went and had a caĆ±a.
Homework
The homework consists essentially in replicating the
calculations done
in this
paper. So I want you to collect data, from the first
quarter of 1984 to the latest available, and do two things
with them. First, hp-filter the data and describe their
properties using the statistics of standard business cycle
analysis. Second, estimate a univariate process for the Solow
residual calculated as in the paper or as we talked in
class.
I also want you to pose a model. The baseline in this paper is
fine, any change will be very welcome. Once the model is
posed, you have write code to be able to solve it. Dynare is
the easiest form of doing so. Then calibrate the economy (you
have to write how, and why if different from that in the
paper). Then simulate the model using your estimates of the
Solow residual above and compare the statistics it generates
with those of the data.
I would be extremely happy if you were to do this with Spanish
data instead of U.S. data.
Email to me the results in pdf by May 5th.
Course Description
The target of this course is to aid you to transform a
question into a strategy to write a paper. The first few
classes are pure investment in tools (this includes the
homework) that I think are necessary. After that, I want to
discuss and shape questions into modeling strategies. These
need identification (how can the data talk to us) and what are
the ingredients of a model to be able to answer the
question.
This course can be thought of as an addendum to the other
courses that you take that give specific tools or issues, but
are less concerned about the linking of models and data and
the writing of your papers.
This requires your very active participation. So please think
of a question (some of you have already talked to me and are
reading papers to present) and/or a specific paper or papers
that you may want to extend. Then you should volunteer to
present it. This requieres that you digest the paper well and
write slides (no more than 8). One with the question. Four or
five with the main ingredients of the model. Another with its
strategy to learn from the data, and the final one with its
findings.
This is a Ph.D. course not a Masters course. As such students
are not expected to learn what other people have discovered, but
the tools that are needed in order to discover things by
themselves. Because of this reason the active work of the
students is crucial to achieve the objective of mastering the
tools that are described above. This is a course to learn to do
things, and, therefore, it requires to do some things.
Every class except the first one we will devote the first
twenty minutes or so to students presentations of
homeworks. I expect professional competence in this regard.
What about knowledge of Computers?
This is not a course in computer languages so students are
responsible to learn to write computer programs. Students are
also responsible for learning their way around McNeil
computational facilities. I do not expect anybody to have a
computer at home or anything like that. It is better to work
in McNeill's computer room because you can talk to each other.
There are various general classes of computer languages.
Fortran 90. This is the best and more powerfull computer
language. Among economists very few prefer C. It is a little
bit hard at the beginning (you have to declare variables and
the like) but students have told me it is well worth to learn
as soon as possible. A very good introduction to fortran can
be
found
here.
MPI and open MP. This is the mother of all serious
calculations. It is a form of using f90 to parallelize code
and take advantage of various hardwares.
Matlab, Gauss, Scilab, Octave and R. These are very
popular packages in economics. They are relatively easy to
learn and code writing is easy. They generate a lot slower
code than F90 (about 100 times) but they are probably a good
choice to solve some problems. They may have an interface
with f90 but I have never seen it working. Matlab is by now
used in 90% of the cases. R and Octave are free. Dynare works
with Matlab and Octave and it is dumb simple.
Stata, Eviews, R, Gretl, and Maple, SAS. These are
packages best suited for reading data. State is the most
popular and expensive. (I have used fortran for this which is
insane, others have used Gauss). Still it is worth to learn
stata.
Mathematica and Maple. These are packages capable of
doing symbolic manipulation of equations. Occasionally they
can also be used to do numeric calculations. It does not hurt
to know them. They may work together with matlab and sciword.
Excel, open office Calc. A dirty thing to do fast data
manipulation. Perfect for grades. And to get output of
models. Calc is free and slow.
A program to write plots. Sciword does it as matlab and
excel and gauss. Some dinosaurs like me use gnuplot.
Students should be able to write code in F90 in addition to matlab
or gauss and to stata. Most students tell me in later years that I
should have enforced harder the learning of F90, but I am willing
to consider exceptions. If somebody has a serious reason not to
use F90, please come and talk to me. At least one homework should
be answered in f90.
Cooley and Prescott,
[1995]. It is now dated but it contains some important
lines of attack on business cycles. The computational
techniques are a little bit obsolete, but the questions less
so.
Judd, [1998].
is a general computational textbook with special attention
to economists. While it is short on some details that we
care about (complicated equilibrium considerations,
multidimensional value functions, multidimensional
interpolation) it is a very useful book for many topics.
Marimon and Scott,
[1998]. It has a bunch of chapters that deal with
specific problems. I find the continuous time chapter nice
as well as some scattered other chapters.
Miranda and Fackler,
[2002]. It is quite a nice book. Like others it is too
irrelevant in some places and too easy in others. It is
designed for matlab which is a pity, but it has a nice
implementation (via a <a
href="http://www4.ncsu.edu/unity/users/p/pfackler/www/compecon/toolbox.html"
> downloadable toolbox</a>) of function global
approximations.
Heer and Maussner,
[2004].
This is a nice book with a lot more economics than the others. Its
consideration of the theory is closest to what we do. It has also many
examples. The codes can be found
here.