Solutions to PS6
Econ 202A - Second Half
Fall 2011
Prof. David Romer
1
GSI: Victoria Vanasco
Romer 8.13. Habit formation and serial correlation in consumption growth
Utility of the representative consumer is given by:
T
1
1+
U=
t=1
1.1
t
1
1
cit
zit
1
Ex
UNIVERSITY OF CALIFORNIA
DEPARTMENT OF ECONOMICS
Economics 202A
Fall 2012
M. Obstfeld/D. Romer
Lecture Outline, 10/16 & 10/18
MACROECONOMIC CRISES
I. THE MACROECONOMIC AND FINANCIAL CRISIS OF 2007 AND BEYOND
A. Background: The Great Moderation
1. Macroeco
Economics 202A, Problem Set 1
Maurice Obstfeld
1. Hicks Meets Solow. Consider the Solow model, but now with the assumption that
Y = AF (K; L);
where
_
A
= g:
A
(a) Show what happens if we try to derive a balanced growth path like
the one derived in class.
Economics 202A, Problem Set 3
Maurice Obstfeld
1. OG Model for the Open Economy. Consider the overlapping generations model with the following twists: population is constant, the path
y
o
o
0, the country may borrow
of output fyt ; yt gis exogenous with y
Economics 202A
Problem Set #4
1. An endogenous growth model based on human capital. Consider an economy
with a xed labor force. Output per worker is given by
y = Ak (uh)1
where k is physical capital (per worker), h is human capital (per worker), and
u 2 [
UNIVERSITY OF CALIFORNIA
DEPARTMENT OF ECONOMICS
Economics 202A
Fall 2012
M. Obstfeld/D. Romer
Problem Set 5
Due in lecture Tuesday, November 6
1. According to the permanent-income hypothesis, if a consumer learns in period t that his or her income
will b
UNIVERSITY OF CALIFORNIA
DEPARTMENT OF ECONOMICS
Economics 202A
Fall 2012
M. Obstfeld/D. Romer
Problem Set 6
Due in lecture Tuesday, November 13
1. Consider the continuous-time consumption problem discussed in lecture: an individual lives
from 0 to T; has
UNIVERSITY OF CALIFORNIA
DEPARTMENT OF ECONOMICS
Economics 202A
Fall 2012
M. Obstfeld/D. Romer
Problem Set 7
Due in lecture, Tuesday, November 20
1. The saddle-path of the q-theory model. (Special ground rules for this problem: (1) You must try it first
u
UNIVERSITY OF CALIFORNIA
DEPARTMENT OF ECONOMICS
Economics 202A
Fall 2012
M. Obstfeld/D. Romer
Problem Set 8
Due in lecture, Thursday, November 29
1. (The investment problem of a monopolist.) Consider the q-theory model. Suppose, however,
that the industr
UNIVERSITY OF CALIFORNIA
DEPARTMENT OF ECONOMICS
Economics 202A
Fall 2012
D. Romer
OPTIMAL PORTFOLIOS AND THE MUTUAL FUND SEPARATION THEOREM
Set-up
An agent has wealth W. Theres a riskless asset, which pays a return of zero for sure, and N risky
assets. A
Economics 202A
Lecture #1 Outline (version 2.0)
Maurice Obstfeld
About This Course
The rst part of this course will focus on long-run macro questions, with
much of the discussion of short-term
uctuations and the business cycle held
o until Economics 202B
Solutions to PS7
Econ 202A - Second Half
Fall 2011
Prof. David Romer
1
GSI: Victoria Vanasco
Saddle-Path of the q-Theory Model.
Consider the equations
q (t) = rq (t) (K (t)
K (t) = f (q (t)
(a) Dene the steady state of the model, q , K . Show that the mod
Solutions to Problem Set 8
Econ 202A - 2nd Half - Fall 2011
Prof. David Romer, GSI: Victoria Vanasco
1 Consumption and Risky Assets
Consumer's lifetime utility:
U = u (c1 ) + E [u (c2 )]
2
Income: Y1 = Y certain and Y2 F Y , y is random variable. Initial
D. Romer
11/27/12
Forces limiting the extent to which sophisticated investors are willing to make trades that
move asset prices back toward fundamentals
As described in lecture last week, researchers have identified 3 factors that limit the extent to
whic
Economics 202A
Lecture #2 Outline (version 1.4)
Maurice Obstfeld
I have commented on the ad hoc nature of the saving behavior postulated
by Solow. The next model assumes instead that people plan ahead in making
saving decisions. One advantage of this assu
Economics 202A
Lecture Outline #3 (version 1.0)
Maurice Obstfeld
Steady State of the Ramsey-Cass-Koopmans Model
In the last few lectures we have seen how to set up the Ramsey-CassKoopmans Model in discrete time, and with an innite horizon. We have
reviewe
Economics 202A
Lecture Outline #4 (version 1.3)
Maurice Obstfeld
Government Debt and Taxes
As a result of the events of September 2008, government actions to underwrite the U.S. nancial system, coupled with a massive recession and a
huge scal stimulus pla
Economics 202A
Lecture Outline #5 (version 1.3)
Maurice Obstfeld
Endogenous Growth
We have already seen one crude endogenous growth model, the so-called
AK model. It is crude because it does not give a realistic account of the
channels through which produ
Economics 202A
Lecture Outline #6 (version 1.1)
Maurice Obstfeld
The Open Economy and the Current Account
Let dene (all in real terms)
s
Y
C
I
G
NX
F
=
=
=
=
GDP
consumption
investment
government purchases
X M = net exports
= net foreign income earnings (
Econ 202A, 10/30/2012 Guest Lecture
Professor Romer covered already consumption theory under these assumptions:
certainty, constant r
uncertainty about labor income, constant r
Today we do a third case: certainty and variable r.
Adding uncertainty takes u
UNIVERSITY OF CALIFORNIA
DEPARTMENT OF ECONOMICS
Economics 202A
Fall 2012
M. Obstfeld/D. Romer
Problem Set 9
NOT TO BE HANDED IN/ONLY SKETCHES OF ANSWERS WILL BE PROVIDED
1. (This follows Jacklin, 1987.) Consider the Diamond-Dybvig model as presented in l
UNIVERSITY O F CALIFORNIA, BERKELEY, DEPARTMENT O F ECONOMICS
ECONOMICS 202A READING LIST
Professors Maurice Obstfeld and David Romer
Fall Semester 2012
Main Textbook: David Romer, Advanced Macroeconomics, Fourth Edition (New York: McGrawHill, 2012).
Part
Notes on Seigniorage and Budget Constraints
Maurice Obstfeld
Economics 202A, Fall 2012
These notes show how to integrate money creation by the central government into national budgetary accounts. They relate the discussion to the
notion of the revenue-max
Econ 202A, Macroeconomic Theory
Section 8. Review Session
GSI: Dominick Bartelme
October 18, 2012
Please ask questions as we go along.
1.
Solow Model
Things to know: key equations, key assumptions, nd a balanced growth path, work with normalized equation
Econ 202A, Macroeconomic Theory
Section 1. Aggregate Production Functions
GSI: Dominick Bartelme
August 27 & 29, 2012
Outline
The Aggregate Production Function
Neoclassical production functions
Intensive form
Elasticity of Substitution
Isoelastic pr
Econ 202A, Macroeconomic Theory
Section 1. Production Function
GSI: Slavik Sheremirov
August 29 & 31, 2011
Outline
neoclassical assumptions on production function
isoelastic production function
Cobb-Douglas, Leontie, and perfectly substitutable factors
Econ 202A, Macroeconomic Theory
Section 2. The Solow Model
GSI: Dominick Bartelme
September 9 & 11, 2013
1.
Overview
Today well discuss how to solve the Solow model and look at some special cases and extensions.
The Solow Model is a simple yet powerful f
Econ 202A, Macroeconomic Theory
Solutions to Exercise 5 in Section Notes 4
GSI: Dominick Bartelme
September 21, 2012
Solution 1 These are verbal descriptions that are best accompanied by going along in the phase
diagram.
1. k falls from the steady state v
Econ 202A, Macroeconomic Theory
Section 4. Analyzing Differential Equations and the Ramsey
Model
GSI: Dominick Bartelme
September 23 & 25, 2012
Last time we showed how to derive the necessary conditions for an optimum for discrete and
continuous time opt