INTRODUCTION TO MACROECONOMIC DYNAMICS
CEU, Economics Department




Lecturer: Prof. Stephen J. Turnovsky
Course: 1 credit

Reading List

This course provides an introduction to modern intertemporal macroeconomics.  We will introduce
two topics:  (i) the representative agent model and (ii) an introduction to growth theory.  The course
will be drawn from Parts III and IV of

 S.J. Turnovsky, Methods of Macroeconomic Dynamics MIT Press, 2nd Ed, 2000.

Other books that include the material that we will be discussing include:

 O.J. Blanchard and S. Fischer, Lectures on Macroeconomics MIT Press, 1989.
 D. Romer, Advanced Macroeconomics McGraw-Hill, 2nd Ed. 2000.

Comprehensive treatments of growth theory are available in:

R. Barro and X. Sala-i-Martin, Economic Growth, MIT Press, 2nd ed. 2003,
P. Aghion and P. Howitt, Endogenous Growth Theory, MIT Press, 1998.

Course Outline:

I.  Review of Saddlepoint Methods
    Turnovsky, Chapter 7

II. Representative Agent Model

   1.  Basic Infinite Horizon Model
        Blanchard and Fischer, Chapter 2.
        Turnovsky, Chapter 8.
        Romer, Chapter 2, pp 47-74.
        Ramsey, F.P., "A Mathematical Theory of Saving," Economic Journal, 38, 1928.
        Reprinted in Stiglitz and Uzawa (eds.)  Readings in the Modern Theory of Economic Growth,
        MIT Press, 1966.
        Abel, A. and O. Blanchard, "An Intertemporal Equilibrium Model of Saving and Investment,"
        Econometrica, 51, 1983.
        Hayashi, F., "Tobin's Marginal and Average q:  A Neoclassical Interpretation," Econometrica, 50, 1982.

   2.  Fiscal and Monetary Policy in Basic Intertemporal Model
        Turnovsky, Chapters 9 and 10.
         Barro, R.J., "The Neoclassical Approach to Fiscal Policy," in R.J. Barro (ed.) Modern Business
         Cycle Theory, Harvard University Press, 1989.
         Aschauer, D.A., "The Equilibrium Approach to Fiscal Policy," Journal of Money, Credit, and
         Banking, 20, 1988.

   3.  Optimal Policy in Basic Intertemporal Model
        Turnovsky, Chapter 11.
        Lucas, R.E. and N.L. Stokey, "Optimal Fiscal and Monetary Policy in an Economy without Capital,"
        Journal of Monetary Economics, 1983.
        Chari, V.V., L.J. Christiano, and P.J. Kehoe, "Optimal Fiscal and Monetary Policy:  Some Recent
        Results," Journal of Money, Credit, and Banking, 23, 1991.
        Chamley, C. "Optimal Taxation of Capital Income in General Equilibrium with Infinite Lives,"
        Econometrica, 54, 1986.
        Lucas, R.E., "Supply-Side Economics: An Analytical Review, Oxford Economic Papers, 1990.
        Chari, V.V. and P.J. Kehoe, “Optimal Fiscal and Monetary Policy” in Handbook of Macroeconomics
 

III. Growth Theory

    1. Introduction to Neoclassical Growth Model
        Romer, Chapter 1.
        Solow, R.M., "A Contribution to the Theory of Economic Growth, Quarterly Journal of
        Economics, 1956.  Reprinted in Stiglitz and Uzawa (eds.)  Readings in the Modern Theory of
        Economic Growth, MIT Press, 1966.
        Swan, T.W., "Economic Growth and Capital Accumulation," Economic Record, 1956.
        Ramsey, F.P., "A Mathematical Theory of Saving," Economic Journal, 38, 1928.  Reprinted in
        Stiglitz and Uzawa (eds.)  Readings in the Modern Theory of Economic Growth, MIT Press, 1966.
        Cass, D., "Optimum Growth in an Aggregative Model of Capital Accumulation," Review of
        Economic Studies, 1965.
        Diamond, P.A., "National Debt in a Neoclassical Growth Model," American Economic Review, 55, 1965.

   2.  Endogenous Growth Models: Models of Balanced Growth
        Turnovsky, Chapter 13.
        Turnovsky, 2003.“Old and New Growth Theories: A Unifying Structure,” in N. Salvadori (ed.)
        Old and New Growth Theories: An Assessment, Edward Elgar, pp. 10-29.
        Romer, P.M. 1986. "Increasing Returns and Long-Run Growth." Journal of Political Economy 94:
        1002-1037.
        Romer, P.M., 1989. "Capital Accumulation in the Theory of Long-run Growth," in R.J. Barro (ed.)
        Modern Business Cycle Theory.
        Rebelo, S. 1991. "Long-run Policy Analysis and Long-run Growth." Journal of Political Economy, 99:
        500-521.
        Barro, R.J. 1990. "Government Spending in a Simple Model of Endogenous Growth."
       Journal of Political Economy 98: S103-S125.
        Ireland, P. 1994. "Supply-Side Economics and Endogenous Growth." Journal of Monetary
        Economics 33: 559-571.
        Turnovsky, S.J. 2000. “Fiscal Policy, Elastic Labor Supply, and Endogenous Growth,” Journal of
        Monetary Economics 45: 185-210.
        Barro, R.J. and X. Sala-i-Martin, Economic Growth, Chapter 4.

   3.  Transitional Dynamics and Endogenous Growth
        Turnovsky, Chapter 14, pp. 487-516.
        Turnovsky, “Old and New Growth Theories,” pp. 29-41.
        Romer, Chapter 3, 98-138.
        Futagami, K., Y. Morita, and A. Shibata. 1993. "Dynamic Analysis of an Endogenous Growth
        Model with Public Capital." Scandinavian Journal of Economics 95: 607-625.
        Turnovsky, S.J. 1997. "Public and Private Capital in an Endogenously Growing Economy."
        Macroeconomic Dynamics 1: 615-639.
        Lucas, R.E. 1988. "On the Mechanics of Economic Development." Journal of Monetary
        Economics 22: 3-42.
        Romer, P.M. 1990. "Endogenous Technological Change." Journal of Political Economy 98:
        S71-S103.
        Bond, E., W., P. Wang, and C. K. Yip. 1996. "A General Two-Sector Model of Endogenous
        Growth with Human and Physical Capital." Journal of Economic Theory 68: 149-173.
        Ortigueira, S. and M.S. Santos. 1997. "On the Convergence of Endogenous Growth Models."
        American Economic Review 87: 383-399.

    4. Non-scale Growth
        Jones, C.I., "R&D Based Models of Economic Growth," Journal of Political Economy, 103, 1995.
        Jones, C. 1995. "R&D Based Models of Economic Growth." Journal of Political Economy 103:
        759-784.
        Turnovsky, Chapter 14, pp 516-534.
        Turnovsky, “Old and New Growth Theories,” pp. 41-46.
        Segerstrom, P. 1998. "Endogenous Growth without Scale Effects." American Economic
        Review 88: 1290-1310.
        Young, A. 1998. "Growth without Scale Effects." Journal of Political Economy 106: 41-63.
        Eicher, T. and S. J. Turnovsky. 1999. "Non-Scale Models of Economic Growth." Economic
       Journal 109: 394-415.
        Eicher, T. and S.J. Turnovsky. 1999. "Convergence in a Two-Sector Non-Scale Growth Model,"
        Journal of Economic Growth 4: 413-428,
        Jones, C.I., 1999. “Growth: With or Without Scale Effects,” American Economic Review, Papers
        and Proceedings, 89, 139-144.
        Turnovsky, S.J., “The Transitional Dynamics of Fiscal Policy: Long-run Capital Accumulation and
        Growth,” Journal of Money, Credit, and Banking, 2004.