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Created 8/24/1998
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ECONOMICS 202B

TTh 12:30-2:00 Evans 60
(Sections W 10-12 Evans 6, W 12-2 Evans 2)

Maurice Obstfeld (
obstfeld@econ.berkeley.edu); Brad DeLong (delong@econ.berkeley.edu); Petra Geraats (geraats@econ.berkeley.edu); Galina Borissova (galina@econ.berkeley.edu)



I. Unemployment

August 25 (D): Efficiency Wage Models of Unemployment (Handout 1)

David Romer (1996), Advanced Macroeconomics (New York: McGraw-Hill), sections 10.1, 10.2, 10.3
George Akerlof and Larry Katz (1989), "
Workers' Trust Funds and the Logic of Wage Profiles," Quarterly Journal of Economics 104 (August), pp. 525-36.

August 27 (D): Implicit Contract Models of Unemployment (Problem Set 1 out; Answers)

Romer, sections 10.4, 10.5
Carl Shapiro and Joseph Stiglitz (1984), "
Equilibrium Unemployment as a Worker Discipline Device," American Economic Review 74 (June), pp. 433-44.
Costas Azariadis (1975), "
Implicit Contracts and Underemployment Equilibria," Journal of Political Economy 83:6 (December), pp. 1183-1202.

September 1 (D): Insider/Outsider Models of Unemployment

Romer 10.6, 10.7
Nils Gottfries (1992), "I
nsiders, Outsiders, and Nominal Wage Contracts," Journal of Political Economy 100 (April), pp. 252-70.

September 3 (D): Search and Matching Models of Unemployment (Problem Set 1 due)

Romer 10.8, 10.9
Peter Diamond (1982), "
Aggregate Demand Management in Search Equilibrium," Journal of Political Economy 90 (October), pp. 881-894.


II. Consumption in More Detail

September 8 (D): The Permanent-Income Hypothesis (Problem Set 2 out; Answers)

Romer, 7.1

September 10 (D): Random Walk-Consumption

Romer 7.2, 7.3
Robert Hall (1978), "
Stochastic Implications of the Life Cycle-Permanent Income Hypothesis," Journal of Political Economy 86 (December), pp. 971-87.

September 15 (D): Savings and the Interest Rate

Romer 7.4
Lawrence Summers (1981), "
Capital Taxation and Accumulation in a Life Cycle Growth Model," American Economic Review 71 (September), pp. 533-44.

September 17 (D): Alternative Views of Consumption (Problem Set 2 due)

Romer 7.6
Christopher Carroll (1997), "
Buffer-Stock Saving and the Life Cycle/Permanent Income Hypothesis,"Quarterly Journal of Economics 112 (February).
Larry Epstein and Stanley Zin (1991), "
Substitution, Risk Aversion, and the Temporal Behavior of Consumption and Asset Returns: An Empirical Analysis," Journal of Political Economy 99 (April), pp. 263-86.


III. Investment and the Capital Stock

September 22 (D): Investment: the Cost of Capital (Problem Set 3 out; Answers)

Romer 8.1
Robert Hall and Dale Jorgenson (1967), "
Tax Policy and Investment Behavior," American Economic Review 57 (June), pp. 391-414.

September 24 (D): Adjustment Costs and Tobin's q

Romer 8.2, 8.3
Fumio Hayashi (1982), "
Tobin's Marginal q and Average q," Econometrica 50 (January), pp. 213-224.

September 29 (D): Tobin's q II (Mock Exam Out)

Romer 8.4, 8.5

October 1 (D): Irreversibility and Uncertainty (Problem Set 3 due)

Romer 8.6, 8.7, 8.8
Ben Bernanke (1983), "
Irreversibility, Uncertainty, and Cyclical Investment," Quarterly Journal of Economics 98 (February), pp. 85-106.
Avinash Dixit (1989), "
Entry and Exit Decisions of a Firm Under Fluctuating Exchange Rates," Journal of Political Economy 97:3 (June), pp. 620-638.
Irreversibility Handout

October 6 (O): Financial Fragility

Ben Bernanke and Mark Gertler (1990), "Financial Fragility and Economic Performance," Quarterly Journal of Economics 105 (February), pp. 87-114.


October 8: MIDTERM (midterm answers)


(The after-the-midterm schedule is still tentative, and may change)

IV. Risk and Asset Markets

October 13 (O): Uncertainty and Markets for Risk (Problem Set 4 out)

Maurice Obstfeld and Kenneth Rogoff (1996), Foundations of International Macroeconomics (Cambridge: MIT Press), 5.1

October 15 (O): The Capital Asset Pricing Model and the Stock Market

John Lintner (1965), "The Valuation of Risky Assets," Review of Economics and Statistics 47 (February).
Obstfeld and Rogoff, 5.4.
Sanford Grossman and Robert Shiller (1981), "The Determinants of the Variability of Stock Market Prices," American Economic Review (May).

October 20 (D): Asset Market Pathologies: Bubbles and Noise (Bubbles Handout)

Maurice Obstfeld and Kenneth Froot (1991), "Intrinsic Bubbles: The Case of Stock Prices," American Economic Review (December).
J. Bradford DeLong et al. (1990), "Noise Trader Risk in Financial Markets," Journal of Political Economy (August).

October 22 (D): Asset Market Pathologies: Equity Premia (Problem Set 4 due; Equity Premium Handout)

Rajneesh Mehra and Edward Prescott (1985), "The Equity Premium: A Puzzle," Journal of Monetary Economics (March).


V. International Capital Mobility

October 27 (O): The Open Economy and the Current Account (Problem Set 5 out)

Obstfeld and Rogoff, 1.1, 1.2, 2.1, 2.2

October 29 (O): Saving and the Intertemporal Terms of Trade

Obstfeld and Rogoff, 1.3

November 3 (D): Evidence on International Capital Mobility (International Capital Mobility Handout)

Martin Feldstein and Charles Horioka (1980), "Domestic Saving and International Capital Flows," Economic Journal (June).
Maurice Obstfeld (1995), "International Capital Mobility in the 1990s," in Peter Kenen, ed., Understanding Interdependence (Princeton: Princeton University Press).


VI. Seignorage and High Inflation

November 5 (O): Models of Money and Perfect Foresight (Problem Set 5 due)

Maurice Obstfeld and Kenneth Rogoff (1983), "Speculative Hyperinflations in Maximizing Models: Can We Rule Them Out?" Journal of Political Economy (August).

November 10 (O): Money, Seigniorage, and Government Budget I (Problem Set 6 out)

Thomas Sargent and Neil Wallace (1981), "Some Unpleasant Monetarist Arithmetic," Federal Reserve Bank of Minneapolis Quarterly Review.

November 12 (O): Money, Seigniorage, and Government Budget II

Michael Woodford (1995), "Price-Level Determinacy without Control of a Monetary Aggregate," Carnegie-Rochester Series 43 (December).

November 17 (O): Optimal Seigniorage

I. Correia and P. Teles (1997), "The Optimal Inflation Tax" (Federal Reserve Bank of Minneapolis, August).


VII. Exchange Rates and Currency Crises

November 19 (O): Liquidity and Bank Runs (Problem Set 6 due)

D. Diamond and P. Dybvig (1983), "Bank Runs, Deposit Insurance, and Liquidity," Journal of Political Economy (June).

November 24 (O): Models of Speculative Currency Crises I

Obstfeld and Rogoff, 8.4

November 26 THANKSGIVING HOLIDAY

December 1 (O): Models of Speculative Currency Crises II

Maurice Obstfeld (1994), "The Logic of Currency Crises," Cahiers Economiques et Monetaires, 43.


December 3 (O & D): Review and Overflow

December 15: 12:30-3:30 PM: FINAL EXAMINATION


Office hours:

Brad DeLong, 601 Evans, 3-4027, T 2:30-4:00 (August 26); T 2:30-4:00 (Thereafter)
Maurice Obstfeld, 3-9646, W 1-3
Petra Geraats, 608-8 Evans, 3-5391, W 2-4 (till November) or by appointment
Galina Borissova, 608-4 Evans, 2-7210, W 2-4 (from November) or by appointment


Professor of Economics J. Bradford DeLong, 601 Evans
University of California at Berkeley; Berkeley, CA 94720-3880
(510) 643-4027 phone (510) 642-6615 fax
delong@econ.berkeley.edu
http://www.j-bradford-delong.net/

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