Economics 661 Professor Carl Campbell

Macroeconomic Analysis I Zulauf 513

DuSable 274
Fall 2017

Syllabus

Overview
This three credit-hour course covers advanced macroeconomic theory and policy. The
topics include the classical model, consumption, investment, the Keynesian model, new
classical theory, real business cycle models, and new Keynesian economics. The learning
objectives of this course are that students will demonstrate the ability to use models of the
aggregate economy to make predictions about the effect of government policies and
external shocks on economic variables and will acquire sufficient knowledge of economic
modeling to conduct professional economic analysis.

Readings
The primary textbook for this course is Advanced Macroeconomics (4th edition) by David
Romer.

Office Hours and contacting me

My office hours are Mondays 2:00-3:00 and Wednesdays 2:00-3:00. If these times are not
convenient, you may schedule an appointment to meet. My phone number is 753-6974,
and my e-mail address is [email protected].

Grading
There will be several graded problem sets, a midterm, and a final exam. The problem sets
will count as 10% of the final grade, the midterm will count as 35%, and the final exam
will count as 55%. Using the above weights, an overall numerical score will be
computed, and letter grades for the course will be based on students overall numerical
score. Grades earned in this course will be in the range A, A-, B+, B, B-, C+, C, C-, D,
and F.

Academic Disabilities
Northern Illinois University is committed to providing an accessible educational
environment in collaboration with the Disability Resource Center (DRC). Any student
requiring an academic accommodation due to a disability should contact me as soon as
possible. In addition, students who need academic accommodations based on the impact
of a disability are encouraged to contact the DRC if they have not done so already.
The DRC is located on the 4th floor of the Health Services Building, and can be reached
at 815-753-1303 or [email protected].
Academic Integrity
Students may work together on the problem sets, but everyone must submit his or her
own work. Academic dishonesty on any of the problem sets will result in a grade of 0 on
the problem set component of the course. Academic dishonesty on the midterm or final
exam will result in a grade of 0 for the course.

Course T.A.
The T.A. for the course is Mohammad Alam. He will have office hours on Wednesdays
from 1:00-3:00 PM in DuSable 470. In addition, he is available by appointment. You can
contact him at [email protected] or at 815-517-6681.

Readings

I. The Classical Model

Sargent, Thomas, Macroeconomic Theory, Ch. I (except Sections 7-10)

II. Consumption

Romer, Ch. 8

Hall, Robert, Stochastic Implications of the Life Cycle-Permanent Income

Hypothesis, Journal of Political Economy, 86, December 1978, pp. 971-987.

Campbell, John, and N. Gregory Mankiw, Consumption, Income, and Interest

Rates: Reinterpreting the Time Series Evidence, NBER Macroeconomic
Annual, 1989.

Parker, Jonathan, Nicholas Souleles, David Johnson, and Robert McClelland,

Consumer Spending and the Economic Stimulus Payments of 2008,
American Economic Review, October 2013, pp. 2530-2553.

Zeldes, Stephen, Consumption and Liquidity Constraints: An Empirical

Investigation, Journal of Political Economy, April 1989, pp. 305-346.

Shea, John, Union Contracts and the Life-Cycle/Permanent-Income Hypothesis,

American Economic Review, March 1995, pp. 186-200.

Laibson, David, Golden Eggs and Hyperbolic Discounting, Quarterly Journal

of Economics, May 1997, pp. 443-477.
III. Investment

Romer, Ch. 9

Gertler, Mark, and Simon Gilchrist, Monetary Policy, Business Cycles, and the
Behavior of Small Manufacturing Firms, Quarterly Journal of Economics,
May 1994, pp. 309-340.

IV. The Keynesian Model

Romer, Ch. 6 (pp. 238-267)

V. New Classical Models

Romer, Ch. 6, Sections 6.9 and 6.10

Romer, Ch. 12, Sections 12.1-12.3

Lucas, Robert, Some International Evidence on Output-Inflation Tradeoffs,

American Economic Review, June 1973, pp. 326-334.

Lucas, Robert, Understanding Business Cycles, in Stabilization of the Domestic

and International Economy (Carnegie-Rochester Conference on Public Policy
5, 1977).

Sargent, Thomas, and Neil Wallace, Rational Expectations and the Theory of
Economic Policy, Journal of Monetary Economics, April 1976, pp. 169-184.

Lucas, Robert, Econometric Policy Evaluation: A Critique, in The Phillips

Curve and Labor Markets, pp. 19-46.

Barro, Robert, Are Government Bonds Net Wealth, Journal of Political

Economy, November/December 1974, pp. 1095-1117.

VI. Real Business Cycle Models

Romer, Ch. 5

Plosser, Charles, Understanding Real Business Cycles, Journal of Economic

Perspectives, Summer 1989, pp. 51-77.

Mankiw, Gregory, Real Business Cycles: A New Keynesian Perspective,

Journal of Economic Perspectives, Summer 1989, pp. 79-90.
 Gal, Jordi, Technology, Employment, and the Business Cycle: Do Technology
Shocks Explain Aggregate Fluctuations? American Economic Review, March
1999, pp. 249-271.

Basu, Susanto, John G. Fernald, and Miles S. Kimball, Are Technology

Improvements Contractionary? American Economic Review, December
2006, pp. 1418-1448.

VII. New Keynesian Economics

Romer, Ch. 10 (except 10.6)

Romer, Ch. 6, pp. 267-274

Romer, Ch. 7.1-7.7

Yellen, Efficiency Wage Models of Unemployment, American Economic

Review, May 1984, pp. 200-205.

Campbell, Carl, and Kunal Kamlani, The Reasons for Wage Rigidity: Evidence
From a Survey of Firms, Quarterly Journal of Economics, August 1997, pp.
759-789.

Caplin, Andrew, and Daniel Spulber, Menu Costs and the Neutrality of Money,
Quarterly Journal of Economics, November 1987, pp. 703-725.

Golosov, Mikhail, and Robert E. Lucas, Menu Costs and Phillips Curves,
Journal of Political Economy, April 2007, pp. 171-199.

Klenow, Peter J., and Oleksiy Kryvtsov, State-Dependent or Price-Dependent

Pricing: Does It Matter for Recent U.S. Inflation? Quarterly Journal of
Economics, August 2008, pp. 863-904.

Nakamura, Emi, and Jn Steinsson, Five Facts About Prices: A Reevaluation of

Menu Cost Models, Quarterly Journal of Economics, November 2008, pp.
1415-1464.

VIII. Inflation, the Phillips Curve, and the Aggregate Supply Curve

Roberts, John, New Keynesian Economics and the Phillips Curve, Journal of
Money, Credit, and Banking, November 1995, pp. 975-984.

Mankiw, Gregory and Ricardo Reis, Sticky Information versus Sticky Prices: A
Proposal to Replace the New Keynesian Phillips Curve, Quarterly Journal of
Economics, November 2002, pp. 1295-1328.
 Campbell, Carl, Deriving the Wage-Wage and Price-Price Phillips Curves from a
Model with Efficiency Wages and Imperfect Information, Economics Letters,
May 2010, pp. 242-245.

Campbell, Carl, Efficiency Wage Setting, Labor Demand, and Phillips Curve
Microfoundations

IX. Search and Matching Models

Romer, Ch. 10.6

Diamond, Peter, Unemployment, Vacancies, and Wages, American Economic

Review, June 2011, pp. 1045-1072.

Mortensen, Dale, Markets with Search Friction and the DMP Model, American
Economic Review, June 2011, pp. 1073-1091.

Pissarides, Christopher, Equilibrium in the Labor Market with Search Frictions,

American Economic Review, June 2011, pp. 1092-1105.

Shimer, Robert, The Cyclical Behavior of Equilibrium Unemployment and

Vacancies, American Economic Review, March 2005, pp. 25-49.

X. Stabilization Policy

Romer, Ch. 11.1-11.6

XI. Dynamic Stochastic General Equilibrium Models

Romer, Ch. 7.8-7.9

Christiano, Lawrence; Martin Eichenbaum; and Charles Evans, Nominal

Rigidities and the Dynamic Effects of a Shock to Monetary Policy, Journal
of Political Economy, February 2005, pp. 1-45.

Smets, Frank and Raf Wouters, An Estimated Dynamic Stochastic General

Equilibrium Model of the Euro Area, Journal of the European Economic
Association, September 2003, pp. 1123-1175.

Additional topics may be assigned