ECON202B: BUSINESS CYCLES - SPRING 2011
LECTURE #5 - REAL BUSINESS CYCLE (IV)
YURIY GORODNICHENKO
1. Quantitative Validity of the Real Business Cycle Model
We are now ready to assess the empirical success of the theoretical model we developed so
far. We w
ECON202B: BUSINESS CYCLES - SPRING 2011
LECTURE #2 - REAL BUSINESS CYCLE (I)
YURIY GORODNICHENKO
We begin our analysis of business cycles by considering an elementary economy perturbed by
shocks to productivity. This elementary model, constructed in spiri
Prof. Chad Jones
Econ 202b
Spring 2007
Problem Set #5
Due Tuesday February 27, 2007
1. Intertemporal and Dynamic Budget Constraints. Consider the following intertemporal budget constraint:
Z
t
Cs ers (st) ds = Vt +
Z
t
(Ys Ts )ers (st) ds
where C is consu
UNIVERSITY OF CALIFORNIA
Department of Economics
SPRING 2007
Economics 202B
C. Jones/D. Romer
MACROECONOMICS
I. ECONOMIC GROWTH
A. The Solow Model
*Romer, David. 2006. Advanced Macroeconomics. Third edition. New York:
McGraw-Hill. Chapter 1.
Solow, Robert
Prof. Chad Jones
Econ 202b
Spring 2007
Problem Set #7
Due Tuesday, March 13, 2007
1. Problem 2.17 in Romers text.
2. Capital Externalities in a Neoclassical Growth Model (Frankel 1962
AER). Consider the usual Ramsey-Cass-Koopmans model as discussed
in cla
Prof. Chad Jones
Econ 202b
Spring 2007
Problem Set #8
Due Thursday, March 22, 2007
1. An AK Model with Physical and Human Capital. Consider the following
aggregate production function:
Yt = Kt (ht Lt )1
where ht Ht /Lt is human capital per person, Yt is o
Economics 202B Final Exam
Professors C. Jones and D. Romer
May 17, 2006
The final exam consists of two parts (Part I and Part II). Please
answer each part in a separate blue book. Be sure to indicate on the
outside of each book the Part to which it corres
Prof. Chad Jones
Econ 202b
Spring 2007
Problem Set #4
Due Thursday, February 15, 2007
1. The Optimal Allocation in a Neoclassical Growth Model. Consider the
following economic environment:
U0 =
Z
0
u(c)
u(ct )et dt,
c11/ 1
1 1/
Yt = Kt L1
,
t
K t = Yt Ct
UNIVERSITY OF CALIFORNIA
DEPARTMENT OF ECONOMICS
Economics 202B
Spring 2007
C. Jones/D. Romer
Problem Set 13
Due in lecture, Thursday, May 3
1. Romer, Problem 11.11.
2. Consider the Alesina-Drazen model as presented in the reading and in lecture. In that
UNIVERSITY OF CALIFORNIA
DEPARTMENT OF ECONOMICS
Economics 202B
Spring 2007
C. Jones/D. Romer
Problem Set 12
Due in lecture, Thursday, April 26
1. Consider the simplified version of Angeletos's model _presented in
_ lecture.
Suppose, however, that if ther
Prof. Chad Jones
Econ 202b
Spring 2007
Problem Set #10
Due Thursday, April 12, 2007
1. Deriving the Log-Linearized Capital Accumulation Equation. (Campbell, 1994).
Consider a simple version of the RBC model, where labor is exogenously fixed
(there is no l
UNIVERSITY OF CALIFORNIA
Department of Economics
SPRING 2006
C. Jones/D. Romer
ECONOMICS 202B
MIDTERM EXAMINATION
The exam consists of two parts. Do each part in a separate blue book.
Part I (Romer)
Section A. Multiple choice (16 points)
In your blue book
Agenda
How Exchange Rates are Determined (again)
Exchange Rates, Business Cycles, and Macroeconomic Policy in the Open Economy, Part 2
The IS-LM Model for an Open Economy Macroeconomic Policy in an Open Economy with Flexible Exchange Rates
20-1
20-2
How
Agenda
Fixed Exchange Rates
Exchange Rates, Business Cycles, and Macroeconomic Policy in the Open Economy, Part 3
Macroeconomic Policy in an Open Economy with Fixed Exchange Rates Fixed versus Flexible Exchange Rates
21-1
21-2
Fixed Exchange Rates
Fixe
Agenda
Principles of Money Supply Creation Monetary Policy and the Federal Reserve System, Part 1 The Federal Reserve System Monetary Policy Tools
22-1
22-2
Money Creation
Three groups affect the money supply:
The central bank conducts monetary policy.
Agenda
Monetary Policy Control Monetary Policy and the Federal Reserve System, Part 2
Intermediate targets Making monetary policy in practice
Rules versus Discretion
22-1
22-2
Monetary Policy Control
Intermediate targets:
The Fed uses intermediate targ
UNIVERSITY OF CALIFORNIA
DEPARTMENT OF ECONOMICS
Economics 202B
Spring 2007
C. Jones/D. Romer
Problem Set 11
Due in lecture, Thursday, April 19
1. Romer, Problem 11.1.
2. Consider the Barro tax-smoothing model. Suppose that output and the real interest
ra
UNIVERSITY OF CALIFORNIA
DEPARTMENT OF ECONOMICS
Economics 202B
Spring 2007
C. Jones/D. Romer
Problem Set 2
Due in lecture Thursday, February 1
1. In the usual Solow model, people consume a constant fraction of their income: C(t) =
(1-s)Y(t). Suppose inst
ECON202B: BUSINESS CYCLES - SPRING 2011
LECTURE #3 - REAL BUSINESS CYCLE (II)
YURIY GORODNICHENKO
1. Steady State
Recall the system of equations dening the steady state of the basic RBC model:
(1)
C L1/ = (1 )Y /L
(2)
1 = (Y /K + (1 )
(3)
Y = Z K L1
(4)
ECON202B: BUSINESS CYCLES - SPRING 2011
LECTURE #4 - PHASE DIAGRAMS WITH CAPITAL STOCK AND
FLEXIBLE LABOR SUPPLY
YURIY GORODNICHENKO
1. Comparative Statics of Equilibrium in RBC
In previous classes, we specied, calibrated, log-linearized, and solved the b
ECON202B: BUSINESS CYCLES - SPRING 2011
LECTURE #6 - REAL BUSINESS CYCLE (V)
YURIY GORODNICHENKO
In the previous lecture, we investigated the properties of the baseline real business cycle
(RBC) model. Overall, the conclusion was that to a rst-order appro
ECON202B: BUSINESS CYCLES - SPRING 2011
LECTURE #7 - IMPERFECT COMPETITION AND VARIABLE
MARKUPS
YURIY GORODNICHENKO
1. Introduction
In our analysis of the basic RBC model, we found that the basic RBC model lacks strong
internal amplication and propagation
ECON202B: BUSINESS CYCLES - SPRING 2011
LECTURE #8 - PRICE RIGIDITY
YURIY GORODNICHENKO
1. Stylized Facts about Pricing
As we discussed in the previous lecture, inexible prices can lead to ex-post counter-cyclical
markups and thus can serve as a useful pr
ECON202B: BUSINESS CYCLES - SPRING 2011
LECTURE #9 - MODELS WITH STICKY PRICES (I)
YURIY GORODNICHENKO
In the previous lecture, we considered why rms may nd it optimal to keep their prices
xed in response to shocks. Our analysis was static in nature while
ECON202B: BUSINESS CYCLES - SPRING 2011
LECTURE #10 - MODELS WITH STICKY PRICES (II)
YURIY GORODNICHENKO
1. Interpretation and solution
In the previous lecture we derived the three equation system of equations which constitute the
simplest New Keynesian m
ECON202B: BUSINESS CYCLES - SPRING 2011
LECTURE #11 - MONETARY POLICY
YURIY GORODNICHENKO
In this lecture, we will briey look into design of optimal monetary policy when prices are
sticky. We will use the basic Calvo pricing model in our analysis. Althoug
ECON202B: BUSINESS CYCLES - SPRING 2011
LECTURE #12 - FINANCIAL FRICTIONS
YURIY GORODNICHENKO
The baseline New Keynesian and RBC models do not have nancial markets. This omission
could be motivated by several reasons:
(1) In a normally functioning economy
ECON202B: BUSINESS CYCLES - SPRING 2011
LECTURE #13 - EMPIRICS, OVERVIEW AND OPEN QUESTIONS OF
RESEARCH IN BUSINESS CYCLES
YURIY GORODNICHENKO
In previous lectures we documented a few stylized facts about business cycles and developed
a series of models t