Lecture Notes in Macroeconomics R20070826D

Lecture Notes in Macroeconomics R20070826D - Lecture Notes...

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Unformatted text preview: Lecture Notes in Macroeconomics John C. Driscoll Brown University and NBER 1 December 3, 2001 1 Department of Economics, Brown University, Box B, Providence RI 02912. Phone (401) 863-1584, Fax (401) 863-1970, email:John Driscoll@brown.edu, web:http: \\ econ.pstc.brown.edu \ jd. c Copyright John C. Driscoll, 1999, 2000, 2001. All rights reserved. Do not reproduce without permission. Comments welcome. I especially thank David Weil, on whose notes substantial parts of the chapters on Money and Prices and Investment are based. Kyung Mook Lim and Wataru Miyanaga provided detailed corrections to typographical errors. Several classes of Brown students have provided suggestions and corrections. All remaining errors are mine. ii Contents 1 Money and Prices 1 1.1 De f nitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.1.1 Prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.1.2 Money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.2 The History of Money . . . . . . . . . . . . . . . . . . . . . . . . 3 1.3 The Demand for Money . . . . . . . . . . . . . . . . . . . . . . . 4 1.3.1 The Baumol-Tobin Model of Money Demand . . . . . . . 4 1.4 Money in Dynamic General Equilibrium . . . . . . . . . . . . . . 6 1.4.1 Discrete Time . . . . . . . . . . . . . . . . . . . . . . . . . 7 1.4.2 Continuous Time . . . . . . . . . . . . . . . . . . . . . . . 10 1.4.3 Solving the Model . . . . . . . . . . . . . . . . . . . . . . 13 1.5 The optimum quantity of money . . . . . . . . . . . . . . . . . . 14 1.5.1 The Quantity Theory of Money . . . . . . . . . . . . . . . 14 1.6 Seigniorage, Hyperin F ation and the Cost of In F ation . . . . . . . 16 1.7 Problems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 2 Nominal Rigidities and Economic Fluctuations 27 2.1 Old Keynesian Economics: The Neoclassical Synthesis . . . . . . 28 2.1.1 Open Economy . . . . . . . . . . . . . . . . . . . . . . . . 31 2.1.2 Aggregate Supply . . . . . . . . . . . . . . . . . . . . . . 33 2.2 Disequilibrium Economics . . . . . . . . . . . . . . . . . . . . . . 36 2.2.1 Setup . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 2.2.2 The Walrasian Benchmark Case . . . . . . . . . . . . . . 37 2.2.3 Exogenously Fixed Price . . . . . . . . . . . . . . . . . . . 38 2.2.4 Exogenously Fixed Nominal Wage . . . . . . . . . . . . . 39 2.2.5 Both prices and wages in F exible . . . . . . . . . . . . . . 39 2.2.6 Analysis of this model . . . . . . . . . . . . . . . . . . . . 40 2.3 Imperfect Information Models . . . . . . . . . . . . . . . . . . . . 41 2.4 New Keynesian Models . . . . . . . . . . . . . . . . . . . . . . . . 43 2.4.1 Contracting Models . . . . . . . . . . . . . . . . . . . . . 43 2.4.2 Predetermined Wages . . . . . . . . . . . . . . . . . . . . 44 2.4.3 Fixed Wages . . . . . . . . . . . . . . . . . . . . . . . . . 47 2.5 Imperfect Competition and New Keynesian Economics . . . . . . 50 2.5.1 Macroeconomic E f ects of Imperfect Competition . . . . . 50 iii iv...
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This essay was uploaded on 04/20/2008 for the course ECON 800 taught by Professor Krueger during the Spring '02 term at Stanford.

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Lecture Notes in Macroeconomics R20070826D - Lecture Notes...

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