CEU, Economics Department

Lecturers: Prof. Julius Horvath and Andri Chassamboulli

Course: 4 credits

Prof. Andri Chassamboulli
Office Hours: by appointment
The lectures will cover the topics listed below. You are assumed to come to class prepared to discuss the day's topic
and encouraged to participate in class discussions. Besides regular class attendance, you are expected to carry out
a fair amount of work on your own, including completing all core readings and homework assignments. Homework solutions
will be discussed in seminars, and then graded by the Teaching Assistant.
The final grade is determined by performance on the final exam (85%), homework assignments (15%).

The main textbook for the course is Advanced Macroeconomics by David Romer, second edition, 2001. Core readings
are the textbook chapters and some additional articles from the list below, which will be specified in class. The extra
readings on the syllabus, not indicated as required readings, include more advanced background material. If you have
strong interest in a particular topic, you are encouraged to get acquainted with these readings as well. Most articles can
be easily downloaded from If you are having difficulty downloading an article let me know.

Note: The syllabus may change throughout the course. I will notify you in class if there are changes. So make sure you
attend the lectures and check for updates.

I. Consumption and Savings:
LC/PIH with Certainty, with uncertainty, Empirical Applications, Interest Rate and Savings,
Asset Pricing, Precautionary Savings, Liquidity Constraints.

Romer (2001): Advanced Macroeconomics, Ch 7
Blanchard and Fischer (1994): Lectures on Macroeconomics, Ch 6.3

Browning and Crossley (2001): The Life Cycle Model of Consumption and Saving, JEP
Laibson (1998): Life-Cycle Consumption and Hyperbolic Discount Functions, EER

Barsky, Mankiw and Zeldes (1986): Ricardian Consumers with Keynesian Propensities, AER

Carroll (1997): Buffer-Stock Saving and the Life-Cycle/Permanent Income Hypothesis, QJE

Carroll (2001): A Theory of the Consumption Function, with and without Liquidity Constraints, JEP

Carroll (2001): Requiem for the Representative Consumer, AER

Deaton (1992): Understanding Consumption, Oxford UP

Deaton (1991): Savings and Liquidity Constraints, Econometrica

Gourinchas and Parker (2001): The Empirical Importance of Precautionary Saving, AER

Hall (1978): Stochastic Implications of the Life Cycle, Permanent Income Hypothesis, JPE

Hall (1988):Intertemporal Substitution in Consumption, JPE

Meghir (2004): A Retrospective on Friedmanís Theory of Permanent Income, EJ

Zeldes(1989):Consumption and Liquidity Constraints: An Empirical Investigation, JPE

Zeldes(1989):Optimal Consumption with Stochastic Income: Deviation from Certainty Equivalence, QJE

II. Investment in Physical Capital and Inventories:
Cost of Capital, Investment Tax Credit, Q Theory,
Irreversible Investment, Lumpiness and Uncertainty, Financial Imperfections, Inventory Accumulation


Romer (2001): Advanced Macroeconomics, Ch 8

Blanchard and Fischer (1994): Lectures on Macroeconomics, Ch 6.4


Chirinko (1996): Finance Constraints, Liquidity, and Investment Spending: Theoretical Restrictions and
International Evidence, working paper

Hubbard (1994): Investment under Uncertainty: Keeping Oneís Option Open, Sections 1-3, JEL

Chirinko (1993): Business Fixed Investment Spending: Modeling Strategies, Empirical Results, and
Policy Implications, JEL

Dixit and Pindyck (1994): Investment under Uncertainty, Princeton UP

Hall (2000): The Stock Market and Capital Accumulation, AER