Deliverable and Deadline
Deliverable: a term-paper of 7,000–10,000 words on a topic of your choice from among those in below. The paper must be submitted as a Microsoft Word or PDF file. The deadline for submission is the midnight of November 30, 2015 (IST).
Plagiarism
The term-paper must be your original work. Copying from other sources, or superficially rephrasing text or code from other sources, without mentioning the original source for each such use, is plagiarism. Any instance of plagiarism will lead to an “F” grade for this assignment.
You are encouraged to discuss with other students and with me or other faculty members. It is the final form of the ideas and writing that must be your own.
Instructions
Writing this term-paper will be your primary task in this course for the next two months. I have selected the topics accordingly. Choose a topic and start now, don’t put it off for the end.
You are not required to read the mentioned readings in their entirety. Try to construct a narrative of your own and use the materials as appropriate to support that narrative.
You can demonstrate your grasp of the topic in the following ways: filling in gaps in derivations or explanations in the reading, providing alternative intuition or examples, providing solutions to exercises, describing an application or further development of the topic based on additional reading.
You are encouraged to look beyond the recommended readings. Use Google Scholar to find material related to your topic. The additional sources that you use must come from a serious journal and must have been cited by other scholars (Google Scholar gives a citation count, papers with at least double-digit citation counts are what you should look for at this stage). I provide in the end a list of leading macroeconomics journals for your reference. If a paper you want to use is not from among these journals, you may want to consult me regarding its suitability. Book that you use must be published by reputed university presses. In short, just don’t use the first thing you find using Google. Check its credibility. Wikipedia is not a credible academic source.
Topics
Two readings referenced multiple times are:
Barro, R. J. and Sala-i-Martin, J. (2004), Economic Growth, 2nd ed., PHI.
Acemoglu, D. (2009), Introduction to Modern Economic Growth, MIT Press.
The list of topics follows.
Endogenous growth with expanding varieties
Models of endogenous growth seek to explain steady per-capita growth in output from within the model, instead of assuming an exogenous source of technical progress. In the models discussed in this topic, technological progress is seen to arise from an increase in the variety of goods available in the economy.
In the Solow and the Ramsey models without exogenous technological progress growth comes to an end ultimately because of diminishing returns. Any model of technological progress must explain why diminishing returns do not apply to the mechanism that generates technological progress in this model. What is the explanation in the case of models in this topic?
What policy implications follow from these models? What parameters should we change in what direction to increase growth? Why doesn’t everyone do this?
These models were first proposed a few decades ago. Have they been further developed in the intervening years? Have they fallen out of favour? Have they become special cases of newer models?
Readings
Barro and Sala-i-Martin, Chapter 6.
Acemoglu, Chapter 13.
Models of Schumpeterian growth
These are an alternative model of endogenous growth in which technological progress takes the form of quality improvements. The issues to explore are the same as in the pervious topic.
Readings
Barro and Sala-i-Martin, Chapter 7.
Acemoglu, Chapter 14.
Overlapping Generations models
In the Ramsey model, households are identical and have identical lifespans that equal the lifespan of the economy. The overlapping generations models present an alternative in which the economy still has an infinite horizon but the agents’ lifetimes do not match with the lifetime of the economy.
One of the surprising results of the overlapping generations model is that the First Fundamental Theorem of Welfare Economics may fail — there may be competitive equilibria which are not Pareto optimal. Explain intuitively how this can happen.
The overlapping generations model has been used to explore issues related to government debt, social security, money and asset price bubbles. Give a brief outline of one of these applications.
Readings
Farmer, R.E.A. (1999), Macroeconomics of Self-Fulfilling Prophecies, 2nd edition, MIT Press, Chapter 6.
de la Croix, D. and Michel, P. (2002), A Theory of Economic Growth, Cambridge University Press, Chapters 1, 3, 4.
Blanchard, O.J. and Fischer, S. (1989), Lectures on Macroeconomics, MIT Press, Chapters 3–5.
The Great Depression
The Great Depression is the key historical event that give macroeconomics its current shape. What really happened in the Great Depression? Give a chronology in terms of the behaviour of economic aggregates and economic policies in countries across the world. What are the major explanations of the causes of the Great Depression? Can it happen again?
Readings
Temin, P. (1991) Lessons from the Great Depression, MIT Press.
Friedman, M. and Schwartz, A.J. (1971) A Monetary History of the United States, 1867–1960, Princeton University Press, Chapter 7.
Bernanke, B. (2004) Essays on the Great Depression, Princeton University Press.
Empirical Evidence on Growth
What are the difficulties in measuring the variables needed to study economic growth? What are the main sources of data we have on economic growth? What are the broad cross-country trends in growth rates over the last century or more? Is there any tendency towards convergence in any sense? Do we have any evidence regarding the ultimate determinants of growth or the effects of different policies? What are “Kaldor’s stylized facts”? Are they true?
Bonus points for independent statistical work and visualization.
Readings
Acemoglu, Chapter 1.
Barro and Sala-i-Martin, Chapters 1, 12.
Computation
Describe the “value function iteration” and “policy function iteration” algorithms for numerically solving dynamic programming problems. Independently develop Python code to solve a RBC model with stochastic productivity and labor-leisure choice and to visualize the solution. Your submission must include the full source code with detailed comments on the algorithms and implementation.
Readings
Adda, J. and Cooper, R.W. (2003), Dynamic Economics, MIT Press, Chapters 2, 3, 5.
Sargent, T. J. and Stachurski, J. Quantitative Economics, http://quant-econ.net/
Leading journals: general and macro
American Economic Journal: Macroeconomics
American Economic Review
Econometrica
European Economic Review
International Economic Review
Journal of Economic Dynamics and Control
Journal of Economic Growth
Journal of Economic Theory
Journal of Monetary Economics
Journal of Money, Credit and Banking
Journal of Political Economy
Macroeconomic Dynamics
Quarterly Journal of Economics
Review of Economic Dynamics
Review of Economic Studies
Review of Economics and Statistics
Writing Advice
Writing well is a skill with very high payoff. I don’t claim to be an expert, but a few resources I have found useful are
McCloskey, “Economical Writing” http://www.ebfgroningen.nl/wp-content/uploads/2015/04/13.-How-to-write-an-economic-paper-mcklosky.pdf
Halmos, “How to Write Mathematics”, http://www.matem.unam.mx/ernesto/LIBROS/Halmos-How-To-Write%20Mathematics.pdf