ECON 8050 – Macroeconomics II (Spring 2024)
Prof. Svetlana Pashchenko is the intructor, and I am the TA for this semester. I host weekly office hours to go over in-progress assignments, solutions to graded assignments, and answer questions about lecture material or the coding exercises. I will post any handouts to eLC and this webpage as the semester progresses.
Instructor: svetlana@uga.edu
TA: michael.kotrous@uga.edu
Office Hours
Instructor: Thursday, 11:30 a.m. – 1:00 p.m., Amos B455
TA: Tuesday, 11:00 a.m. – 12:30 p.m., Correll 133 (any deviations will be announced on eLC)
Important Dates
Midterm Exam, Wednesday, March 13, 12:45 p.m. – 2:00 p.m.
Final Exam, Monday, May 6, 12:00 p.m. – 3:00 p.m.
Course Outline
Theory of Consumption and Savings
This section introduces partial equilibrium models of consumption and savings by rational agents that take income and factor prices as given. The Permanent Income Hypothesis and certainty equivalence are discussed. Students will become familiar with using backward induction to solve finite-horizon, life-cycle models of consumption and savings. Students will learn about different motives for asset accumulation and borrowing constraints.
References:
- Orazio Attanasio, “Consumption,” Chapter 11 in Handbook of Macroeconomics (Elsevier)
- Milton Friedman, A Theory of the Consumption Function (Princeton University Press)
- Jerome Adda and Russell W. Cooper, Dynamic Economics: Quantitative Methods and Applications, Chapter 6 (MIT Press)
Dynamic Programming
This section of the course teaches the practice of writing models as dynamic programming problems and using Matlab to solve them. Students will become familiar with value function iteration and backward induction to solve infinite-horizon and finite-horizon models, respectively. Students will also learn to write and solve models with stochastic processes (e.g., income process, health shock).
References:
- Prof. Roozbeh Hosseini’s ECON 8040 lecture notes
- Value Function Iteration in Matlab (slides; Code (.zip))
- Jerome Adda and Russell W. Cooper, Dynamic Economics: Quantitative Methods and Applications, Chapters 2 and 3 (MIT Press)
Overlapping Generations: Pension Systems & Government Debt
This section uses the Overlapping Generations (OG) model to introduce the concept of dynamic inefficiency. Students will learn how public pension systems or government debt can restore the first-best.
References:
- Steve Williamson, Notes on Macroeconomic Theory, Chapter 2 (PDF)
General Equilibrium Models of Consumption and Savings
Consumption and savings models presented at the beginning of the course did not specify how household labor and savings decisions affect aggregate allocations and, accordingly, factor prices. Students will be introduced to the literature of Standard Incomplete Markets (SIM) models with idiosyncratic risks and aggregate uncertainty and learn how to solve such models using Matlab.
References: