Main Information

“It doesn’t make any difference how beautiful your guess is, it doesn’t matter how smart you are, who made the guess, or what his name is… If it disagrees with experiment, it’s wrong.” (Richard Feynman, 1965 Nobel Prize in Physics)

Figure 0.1: Richard Feynman’s Cornell Lecture (1964)

Lectures. Tuesdays, 5:05-7:25pm. Bunche Hall 9383.

Course outline. This class will attempt to develop an evidence-based view of macroeconomics and finance, including both empirics and theory:

In terms of empirics, I will particularly emphasize identification strategies, both aggregate and cross-sectional approaches, reduced-form and structural methods. Substantively, I will try to summarize the literature on what we really “know” about the main “big” questions of macro-finance: consumption and saving, investment, the trade balance, asset pricing, monetary policy, multipliers, business cycles, financial crises.
In terms of theory, I will be concerned with developing theories which are in line with available empirical evidence. This will lead us to think again about investment, consumption, asset pricing, international macroeconomics and finance, where existing theories are often confronted with “puzzles”. This will lead me to go through more advanced topics, such as Keynesian economics without sticky prices (savings gluts and secular stagnation), housing and macroeconomics, asset pricing with heterogeneous beliefs, and financial frictions.

Office hours. Email me for an appointment.

Website. https://moodle2.sscnet.ucla.edu/course/view/18F-ECON221A-1.

Grading. First, I will ask you to replicate two empirical macro or/and finance papers, using publicly available data (e.g. national accounts, Compustat, CRSP, Nielsen Scanner data, other WRDS material, etc.), but for which the replication code was not made available online by the authors (or not fully). I shall give you a list of papers among which to choose. I believe that the best way to learn empirical methods in macroeconomics and finance is to “get your hands dirty”, and practice working with data. The first replication exercise will count towards 30% of your final grade, and the second will count towards 40%. Second, I will ask you to present a recent paper in empirical macroeconomics during the last two lectures. (30 minutes each) Again, I will give you a list from which to choose. This will count towards 30% of your final grade. Finally, attendance is mandatory for all lectures, and participation will count for 10% of your final grade.

Miscelleneous advice. Here I provide an introduction to R-statistics. Here I provide miscelleneous hopefully useful resources on researching, presenting, writing, coding, etc.

Textbooks. No macroeconomic textbook specifically focuses on evidence-based macroeconomics & finance, so we shall mostly be working from papers. I will also be writing my own notes as much as possible. Basic knowledge of 1st year macroeconomics and finance, which is not required to follow this class, can be found in the following very good entries. However, these textbooks are mostly about theory:

Romer, David. Advanced Macroeconomics. McGraw-Hill Education, 2011. [html]
Galí, Jordi. Monetary Policy, Inflation, and the Business Cycle: An Introduction to the New Keynesian Framework and Its Applications, Second Edition. Princeton University Press, 2015. [html]

Finance has a better textbook treatment. There exists two excellent textbooks offering complementary perspectives. John Cochrane’s textbook is structured around the stochastic discount factor view of finance; while John Campbell’s textbook is more agnostic.

Cochrane, John H. Asset Pricing (Revised Edition). Princeton University Press, 2009. [html🔒]
Campbell, John Y. Financial Decisions and Markets: A Course in Asset Pricing. Princeton University Press, 2017. [html🔒]

John Cochrane has a course on Asset Pricing on Youtube, which I very strongly recommend:

Cochrane, John H. Asset Pricing, Part 1. YouTube Online Courses. [html]
Cochrane, John H. Asset Pricing, Part 2. YouTube Online Courses. [html]

Summer Institute Econometric Lectures. I strongly recommend that you follow the NBER Summer Institute Econometric Lectures. Three of them are related to macroeconomics and finance:

Summer Institute Econometric Lecture, 2008, “What’s New in Econometrics: Time Series”, James H. Stock and Mark W. Watson. [html]
Summer Institute Econometric Lecture, 2010, “Financial Econometrics”, Sydney Ludvigson, Yacine Ait-Sahalia, Michael Brandt, & Andrew Lo. [html]
Summer Institute Econometric Lecture, 2011, “Computational Tools & Macroeconomic Applications”, Lawrence Christiano and Jesus Fernandez-Villaverde. [html]

Bibliography. The following contains a list of readings for each lecture. Those with a sign are papers which will be discussed during class. The first section has some background reading on methodology, empirical macroeconomics and the current state of macroeconomics. (spoiler: it is probably not that good)

1 Methodology and the state of macro

1.1 Main readings

Deaton, Angus. “On the usefulness of macroeconomic models.” Bank of England Panel of Academic Consultants. [pdf]

Summers, Lawrence H. “Some Skeptical Observations on Real Business Cycle Theory.” Minneapolis Quarterly Review, no. Fall (1986): 23–27. [pdf]

Summers, Lawrence H. “The Scientific Illusion in Empirical Macroeconomics.” The Scandinavian Journal of Economics 93, no. 2 (1991): 129–48. [pdf] [pdf🔒] [html🔒]

Summers, Lawrence H. “Should Keynesian Economics Dispense with the Phillips Curve?” In Issues in Contemporary Economics, 3–20. International Economic Association Series. Palgrave Macmillan, London, 1991. [pdf]

Pearce, Kerry A., and Kevin D. Hoover. “After the Revolution: Paul Samuelson and the Textbook Keynesian Model.” History of Political Economy 27, no. Supplement (December 1, 1995): 183–216. [pdf] [html]

Solow, Robert (2003). “Dumb and Dumber in Macroeconomics.” In Festschrift for Joe Stiglitz, pages 1–3. [pdf]

Solow, Robert. “The State of Macroeconomics.” The Journal of Economic Perspectives 22, no. 1 (2008): 243–46. [pdf] [html]

Blanchard, Olivier. “The State of Macro.” Annual Review of Economics 1, no. 1 (NBER August 2008, AR 2009): 209–28. [NBER WP] [pdf] [html]

Krugman, Paul. “How Did Economists Get It So Wrong?” The New York Times, September 2, 2009, sec. Magazine. [pdf] [html🔒]

Buchanan, Mark. “Just so” stories of modern economics. The Physics of Finance. Mar 5, 2014. [html]

Romer, P. M. (2015). Mathiness in the Theory of Economic Growth. American Economic Review, 105(5), 89‑93. [pdf] [html]

Romer, Paul M. “The Trouble With Macroeconomics,” 2016. [pdf]

Olivier Blanchard, 2016. “Do DSGE Models Have a Future?,” Policy Briefs PB16-11, Peterson Institute for International Economics. [pdf] [html]

Stiglitz, Joseph E. “Where Modern Macroeconomics Went Wrong.” Oxford Review of Economic Policy 34, no. 1–2 (January 5, 2018): 70–106. [pdf🔒] [html]

Krugman, Paul. “Good Enough for Government Work? Macroeconomics since the Crisis.” Oxford Review of Economic Policy 34, no. 1–2 (January 5, 2018): 156–68. [pdf🔒] [pdf] [html]

1.2 To go further

Hill, A. B. (1965). The Environment and Disease: Association or Causation? Proceedings of the Royal Society of Medicine, 58(5), 295‑300. [html]

McCloskey, Donald N. “The Rhetoric of Economics.” Journal of Economic Literature 21, no. 2 (1983): 481–517. pdf [html🔒] [pdf🔒]

Leamer, Edward E. “Let’s Take the Con Out of Econometrics.” The American Economic Review 73, no. 1 (1983): 31–43. [pdf] [html🔒] [pdf🔒]

Lars Peter Hansen and James J. Heckman, “The Empirical Foundations of Calibration,” Journal of Economic Perspectives 10, no. 1 (March 1996): 87–104. [pdf] [html]

Angrist, Joshua D., and Jörn-Steffen Pischke. “The Credibility Revolution in Empirical Economics: How Better Research Design Is Taking the Con out of Econometrics.” Journal of Economic Perspectives 24, no. 2 (2010): 3–30. [pdf] [html]

Sims, Christopher A. “But Economics Is Not an Experimental Science.” Journal of Economic Perspectives 24, no. 2 (June 2010): 59–68. [pdf] [html]

Uhlig, Harald. “Economics and Reality.” Journal of Macroeconomics, Has macro progressed?, 34, no. 1 (March 1, 2012): 29–41. [pdf] [html]

Caballero, Ricardo J. “Macroeconomics after the Crisis: Time to Deal with the Pretense-of-Knowledge Syndrome.” The Journal of Economic Perspectives 24, no. 4 (2010): 85–102. [pdf] [html]

Akerlof, George A., and Pascal Michaillat. “Persistence of False Paradigms in Low-Power Sciences.” Proceedings of the National Academy of Sciences 115, no. 52 (December 26, 2018): 13228–33. [html]

1.3 Lighter readings

Axel Leijonhufvud, “Life Among the Econ,” Economic Inquiry 11, no. 3 (September 1, 1973): 327–37. [html]

Krugman, Paul. “There is something about macro.” [html]

Barro, Robert J. “New Classicals and Keynesians, or the Good Guys and the Bad Guys.” Swiss Journal of Economics and Statistics (SJES) 125, no. III (1989): 263–73. [pdf]

Romer, Paul M. “Mathiness in the Theory of Economic Growth.” American Economic Review 105, no. 5 (May 2015): 89–93. [pdf] [html]

Chetty, Raj. “Opinion | Yes, Economics Is a Science.” The New York Times, October 19, 2018, sec. Opinion. [html]

Appelbaum, Binyamin. “Blame Economists for the Mess We’re In.” The New York Times, August 24, 2019, sec. Opinion. [html]

2 Introduction; Some Macro Facts

2.1 Main Readings

Shapiro, Matthew D., and Mark W. Watson. “Sources of Business Cycle Fluctuations.” NBER Macroeconomics Annual 3 (1988): 111–48. [pdf] [html]

Blanchard, Olivier Jean, and Danny Quah. “The Dynamic Effects of Aggregate Demand and Supply Disturbances.” The American Economic Review 79, no. 4 (1989): 655–73. [pdf] [html]

Stock, James H., and Mark W. Watson. “Chapter 1 Business Cycle Fluctuations in Us Macroeconomic Time Series.” In Handbook of Macroeconomics, 1:3–64. Elsevier, 1999. [pdf] [html]

Stock, James H., Mark W. Watson, Alan S. Blinder, and Christopher A Sims. “Disentangling the Channels of the 2007–09 Recession.” Brookings Papers on Economic Activity, 2012, 81–156. [pdf] [html]

2.2 To go further

Shapiro, Matthew D., Robert J. Gordon, and Lawrence H. Summers. “Assessing the Federal Reserve’s Measures of Capacity and Utilization.” Brookings Papers on Economic Activity 1989, no. 1 (1989): 181–241. [pdf] [html]

Stock, James H., and Mark W. Watson. “Vector Autoregressions.” Journal of Economic Perspectives 15, no. 4 (December 2001): 101–15. [pdf] [html]

3 Identification

3.1 Main readings

Cochrane, John H. “Shocks.” Carnegie-Rochester Conference Series on Public Policy 41 (December 1994): 295–364. [pdf] [html🔒]

“Empirical Macroeconomics. Thomas J. Sargent and Christopher A. Sims” Scientific Background on the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2011. pdf

Raj Chetty et al., “Are Micro and Macro Labor Supply Elasticities Consistent? A Review of Evidence on the Intensive and Extensive Margins,” American Economic Review 101, no. 3 (May 2011): 471–75. pdf / html

Nakamura, Emi, and Jón Steinsson. “Identification in Macroeconomics.” Journal of Economic Perspectives 32, no. 3 (August 2018): 59–86. html / pdf

Ramey, V. A. “Chapter 2 - Macroeconomic Shocks and Their Propagation.” In Handbook of Macroeconomics, edited by John B. Taylor and Harald Uhlig, 2:71–162. Elsevier, 2016. html / pdf

3.2 To go further

Sims, Christopher A. “Macroeconomics and Reality.” Econometrica 48, no. 1 (1980): 1–48. pdf🔒 / html

4 Consumption and Saving

4.1 Main readings

O’Driscoll, Gerald P. “The Ricardian Nonequivalence Theorem.” Journal of Political Economy 85, no. 1 (February 1, 1977): 207–10. pdf 🔒 / pdf / html

Kotlikoff, Laurence J., and Lawrence H. Summers. “The Role of Intergenerational Transfers in Aggregate Capital Accumulation.” Journal of Political Economy 89, no. 4 (1981): 706–32. pdf / html

Poterba, James M., and Lawrence H. Summers. “Finite Lifetimes and the Effects of Budget Deficits on National Saving.” Journal of Monetary Economics 20, no. 2 (September 1, 1987): 369–91. pdf / html

Summers, Lawrence, Chris Carroll, and Alan S. Blinder. “Why Is U.S. National Saving so Low?” Brookings Papers on Economic Activity 1987, no. 2 (1987): 607–42. pdf / html

Barro, Robert J. “The Ricardian Approach to Budget Deficits.” Journal of Economic Perspectives 3, no. 2 (June 1989): 37–54. pdf / html

Johnson, David S., Jonathan A. Parker, and Nicholas S. Souleles. “Household Expenditure and the Income Tax Rebates of 2001.” American Economic Review 96, no. 5 (December 2006): 1589–1610. pdf / html

Carroll, Christopher D. “Why Do the Rich Save So Much?” In Does Atlas Shrug? The Economic Consequences of Taxing the Rich, edited by Joel B. Slemrod, Vol. D. Harvard Univ Pr, 2000. pdf

Parker, Jonathan A. “Spendthrift in America? On Two Decades of Decline in the U.S. Saving Rate.” NBER Macroeconomics Annual 1999, January 1, 2000, 317–87. pdf / html

Broda, Christian, and Jonathan A. Parker. “The Economic Stimulus Payments of 2008 and the Aggregate Demand for Consumption.” Journal of Monetary Economics, Supplement issue: October 19-20, 2012 Research Conference on “Financial Markets, Financial Policy, and Macroeconomic Activity” Sponsored by the Study Center Gerzensee and the Swiss National Bank, 68 (December 1, 2014): S20–36. pdf / html

Kaplan, Greg, Giovanni Violante, and Justin Weidner. “The Wealthy Hand-to-Mouth.” Brookings Papers on Economic Activity, 2014, 77–138. pdf / html

Parker, Jonathan A. “Why Don’t Households Smooth Consumption? Evidence from a $25 Million Experiment.” American Economic Journal: Macroeconomics 9, no. 4 (October 2017): 153–83. pdf / html

Baker, Scott R. “Debt and the Response to Household Income Shocks: Validation and Application of Linked Financial Account Data.” Journal of Political Economy 126, no. 4 (March 27, 2018): 1504–57. pdf / html

Kueng, Lorenz. “Excess Sensitivity of High-Income Consumers.” The Quarterly Journal of Economics 133, no. 4 (November 1, 2018): 1693–1751. pdf / html

Straub, Ludwig. “Consumption, Savings, and the Distribution of Permanent Income.” Working Paper, 2019. pdf

Ganong, Peter, and Pascal Noel. “Consumer Spending during Unemployment: Positive and Normative Implications.” American Economic Review 109, no. 7 (July 2019): 2383–2424. pdf / html

4.2 To go further

Keynes, John Maynard. The General Theory of Employment, Interest, and Money, 1936. pdf

Friedman, Milton. Theory of the Consumption Function. Princeton University Press, 1957. pdf

Modigliani, Franco. “Life Cycle, Individual Thrift, and the Wealth of Nations.” The American Economic Review 76, no. 3 (1986): 297–313. html / pdf

Campbell, John Y., and N. Gregory Mankiw. “Consumption, Income and Interest Rates: Reinterpreting the Time Series Evidence.” NBER Macro Annual, January 1, 1989, 185–246. pdf / html

Campbell, John Y., and N. Gregory Mankiw. “The Response of Consumption to Income: A Cross-Country Investigation.” European Economic Review 35, no. 4 (May 1, 1991): 723–56. html / pdf

Cochrane, John H. “The Response of Consumption to Income: A Cross-Country Investigation: By J.Y. Campbell and N.G. Mankiw Why Test the Permanent Income Hypothesis?” European Economic Review 35, no. 4 (May 1, 1991): 757–64. html / pdf

Deaton, Angus. Understanding Consumption. Oxford University Press, 1992. pdf

Shapiro, Matthew D., and Joel Slemrod. “Consumer Response to the Timing of Income: Evidence from a Change in Tax Withholding.” The American Economic Review 85, no. 1 (1995): 274–83. pdf / html

Mankiw, N. Gregory. “The Savers-Spenders Theory of Fiscal Policy.” American Economic Review 90, no. 2 (May 2000): 120–25. html / pdf

Shapiro, Matthew D., and Joel Slemrod. “Consumer Response to Tax Rebates.” The American Economic Review 93, no. 1 (2003): 381–96. html / pdf

Camerer, C., Loewenstein, G., & Prelec, D. (2005). Neuroeconomics: How Neuroscience Can Inform Economics. Journal of Economic Literature, 43(1), 9‑64. html / pdf

Blundell, Richard, Luigi Pistaferri, and Ian Preston. “Consumption Inequality and Partial Insurance.” American Economic Review 98, no. 1998 (2008): 1887–1891. html / pdf

Baker, Scott R., and Constantine Yannelis. “Income Changes and Consumption: Evidence from the 2013 Federal Government Shutdown.” Review of Economic Dynamics 23 (January 1, 2017): 99–124. pdf / html

5 Investment

5.1 Main readings

Cobb, Charles W., and Paul H. Douglas. “A Theory of Production.” The American Economic Review 18, no. 1 (1928): 139–65. html / pdf

Solow, Robert M. “A Contribution to the Theory of Economic Growth.” The Quarterly Journal of Economics 70, no. 1 (1956): 65–94. html

Summers, Lawrence H., Barry P. Bosworth, James Tobin, and Philip M. White. “Taxation and Corporate Investment: A Q-Theory Approach.” Brookings Papers on Economic Activity 1981, no. 1 (1981): 67–140. html / pdf

Shapiro, Matthew D., Olivier J. Blanchard, and Michael C. Lovell. “Investment, Output, and the Cost of Capital.” Brookings Papers on Economic Activity 1986, no. 1 (1986): 111–64. html / pdf

Cummins, Jason G., Kevin A. Hassett, R. Glenn Hubbard, Robert E. Hall, and Ricardo J. Caballero. “A Reconsideration of Investment Behavior Using Tax Reforms as Natural Experiments.” Brookings Papers on Economic Activity 1994, no. 2 (1994): 1–74. html / pdf

Poterba, J. M., & Summers, L. H. (1995). A Ceo Survey of U.s. Companies’ Time Horizons and Hurdle Rates. Sloan Management Review, 37(1), 43–53. pdf / html

Oliner, Stephen, Glenn Rudebusch, and Daniel Sichel. “New and Old Models of Business Investment: A Comparison of Forecasting Performance.” Journal of Money, Credit and Banking 27, no. 3 (1995): 806–26. pdf / html

Caballero, Ricardo J. “Chapter 12 Aggregate Investment.” In Handbook of Macroeconomics, 1:813–62. Elsevier, 1999. html / pdf

Chirinko, Robert S., Steven M. Fazzari, and Andrew P. Meyer. “How Responsive Is Business Capital Formation to Its User Cost?: An Exploration with Micro Data.” Journal of Public Economics 74, no. 1 (October 1, 1999): 53–80. pdf / html

Desai, Mihir A., and Austan D. Goolsbee. “Investment, Overhang, and Tax Policy.” Brookings Papers on Economic Activity 2004, no. 2 (2004): 285–338. pdf / html

Chetty, Raj, and Emmanuel Saez. “Dividend Taxes and Corporate Behavior: Evidence from the 2003 Dividend Tax Cut.” The Quarterly Journal of Economics 120, no. 3 (August 1, 2005): 791–833. pdf / html

Chirinko, Robert S. “σ: The Long and Short of It.” Journal of Macroeconomics, The CES Production Function in the Theory and Empirics of Economic Growth, 30, no. 2 (June 1, 2008): 671–86. html

Piketty, Thomas, and Gabriel Zucman. “Capital Is Back: Wealth-Income Ratios in Rich Countries 1700–2010.” The Quarterly Journal of Economics 129, no. 3 (August 1, 2014): 1255–1310. pdf / html

Yagan, Danny. “Capital Tax Reform and the Real Economy: The Effects of the 2003 Dividend Tax Cut.” American Economic Review 105, no. 12 (December 2015): 3531–63. html / pdf

Saez, E., & Zucman, G. (2016). Wealth Inequality in the United States since 1913: Evidence from Capitalized Income Tax Data. The Quarterly Journal of Economics, 131(2), 519–578. html / pdf

Zwick, Eric, and James Mahon. “Tax Policy and Heterogeneous Investment Behavior.” American Economic Review 107, no. 1 (January 2017): 217–48. pdf / html

Sharpe, S. A., & Suarez, G. A. (2021). Why Isn’t Business Investment More Sensitive to Interest Rates? Evidence from Surveys. Management Science, 67(2), 720–741. pdf / html

5.2 To go further

Hayashi, Fumio. “Tobin’s Marginal Q and Average Q: A Neoclassical Interpretation.” Econometrica 50, no. 1 (1982): 213–24. html / pdf

Solow, Robert M. “Lecture to the memory of Alfred Nobel”, December 8, 1987. html

Ben Bernanke, Henning Bohn, and Peter C. Reiss, “Alternative Non-Nested Specification Tests of Time-Series Investment Models,” Journal of Econometrics 37, no. 3 (March 1, 1988): 293–326. html / pdf

Fazzari, Steven M., R. Glenn Hubbard, Bruce C. Petersen, Alan S. Blinder, and James M. Poterba. “Financing Constraints and Corporate Investment.” Brookings Papers on Economic Activity 1988, no. 1 (1988): 141–206. html / pdf

Steven N. Kaplan and Luigi Zingales, “Do Investment-Cash Flow Sensitivities Provide Useful Measures of Financing Constraints?,” The Quarterly Journal of Economics 112, no. 1 (February 1, 1997): 169–215. html / pdf

Janice Eberly, Sergio Rebelo, and Nicolas Vincent, “What Explains the Lagged-Investment Effect?,” Journal of Monetary Economics 59, no. 4 (May 1, 2012): 370–80. html / pdf

Lewis Alexander and Janice Eberly, “Investment Hollowing Out,” IMF Economic Review 66, no. 1 (March 1, 2018): 5–30. html

Boissel, Charles, and Adrien Matray. “Higher Dividend Taxes, No Problem! Evidence from Taxing Entrepreneurs in France.” SSRN Scholarly Paper. Rochester, NY: Social Science Research Network, July 10, 2019. html

6 The Trade Balance

6.1 Main Readings

Keynes, J. “The Balance of Trade and the Bank of England.” Essays in Persuasion. Springer, 1931. pdf

Keynes, John Maynard. “Is there a Remedy?” Essays in Persuasion. Springer, 1931. pdf

Keynes, John Maynard. “Proposals for a Revenue Tariff (March 7, 1931).” Essays in Persuasion. Springer, 1931. pdf

Keynes, John Maynard. “Notes on Mercantilism, The Usury Laws, Stamped Money and Theories Of Under-Consumption.” The General Theory of Employment, Interest, and Money, 1936, Chapter 23. pdf

Jacobson, Louis S., Robert J. LaLonde, and Daniel G. Sullivan. “Earnings Losses of Displaced Workers.” The American Economic Review 83, no. 4 (1993): 685–709. pdf / html

Krugman, Paul. “Competitiveness: A Dangerous Obsession.” Foreign Affairs 73, no. 2 (1994): 28–44. pdf / html

Prestowitz, Clyde V. “Playing to Win.” Foreign Affairs 73, no. 4 (1994): 186–89. pdf / html

Thurow, Lester C. “Microchips, Not Potato Chips.” Foreign Affairs 73, no. 4 (1994): 189–92. pdf / html

Scharping, Rudolf. “Rule-Based Competition.” Foreign Affairs 73, no. 4 (1994): 192–94. pdf / html

Cohen, Stephen S. “Speaking Freely.” Foreign Affairs 73, no. 4 (1994): 194–97. pdf / html

Krugman, Paul. “Proving My Point.” Foreign Affairs 73, no. 4 (1994): 198–203. pdf / html

Rebelo, Sergio, and Carlos A. Vegh. “Real Effects of Exchange-Rate-Based Stabilization: An Analysis of Competing Theories.” NBER Macroeconomic Annual, January 1, 1995, 125–88.

Blanchard, Olivier, and Francesco Giavazzi. “Current Account Deficits in the Euro Area: The End of the Feldstein-Horioka Puzzle?” Brookings Papers on Economic Activity 2002, no. 2 (2002): 147–86. pdf / html

Rodrik, Dani. “The Real Exchange Rate and Economic Growth.” Brookings Papers on Economic Activity, no. 2 (2008): 365–412. pdf / html

Autor, David H., David Dorn, and Gordon H. Hanson. “The China Syndrome: Local Labor Market Effects of Import Competition in the United States.” American Economic Review 103, no. 6 (October 2013): 2121–68. pdf / html

Benigno, Gianluca, and Luca Fornaro. “The Financial Resource Curse.” The Scandinavian Journal of Economics 116, no. 1 (2014): 58–86. pdf / html

Autor, David H., David Dorn, and Gordon H. Hanson. “The China Shock: Learning from Labor-Market Adjustment to Large Changes in Trade.” Annual Review of Economics 8, no. 1 (2016): 205–40. pdf / html

Geerolf, François. “The Phillips Curve: a Relation between Real Exchange Rate Growth and Unemployment” Working Paper, 2019. pdf

6.2 To go further

Eichengreen, Barry. “Keynes and Protection.” The Journal of Economic History 44, no. 2 (1984): 363–73. pdf / html

Rodrik, Dani, and World Bank. “Goodbye Washington Consensus, Hello Washington Confusion? A Review of the World Bank’s ‘Economic Growth in the 1990s: Learning from a Decade of Reform.’” Journal of Economic Literature 44, no. 4 (2006): 973–87. pdf / html

Blecker, Robert A. “Davidson on Keynes: The Open Economy Dimension.” Journal of Post Keynesian Economics 32, no. 1 (2009): 19–41. html / pdf

Kalantzis, Yannick. “Financial Fragility in Small Open Economies: Firm Balance Sheets and the Sectoral Structure.” The Review of Economic Studies 82, no. 3 (July 1, 2015): 1194–1222. pdf / html

Benigno, Gianluca, Nathan Converse, and Luca Fornaro. “Large Capital Inflows, Sectoral Allocation, and Economic Performance.” Journal of International Money and Finance, Macroeconomic and financial challenges facing Latin America and the Caribbean after the crisis, 55 (July 1, 2015): 60–87. html

Vegh, Carlos A. Open Economy Macroeconomics in Developing Countries. MIT Press, 2013.

7 Multipliers

7.1 Main readings

Romer, Christina D., David H. Romer, Stephen M. Goldfeld, and Benjamin M. Friedman. “New Evidence on the Monetary Transmission Mechanism.” Brookings Papers on Economic Activity 1990, no. 1 (1990): 149–213. pdf / html

Giavazzi, Francesco, and Marco Pagano. “Can Severe Fiscal Contractions Be Expansionary? Tales of Two Small European Countries.” NBER Macroeconomics Annual 5 (January 1, 1990): 75–111. pdf / html

Romer, Christina D., and David H. Romer. “A New Measure of Monetary Shocks: Derivation and Implications.” American Economic Review 94, no. 4 (September 2004): 1055–84. [pdf] [pdf🔒] [html🔒]

Romer, Christina D., and David H. Romer. “The Macroeconomic Effects of Tax Changes: Estimates Based on a New Measure of Fiscal Shocks.” American Economic Review 100, no. 3 (June 2010): 763–801. [pdf] [pdf🔒] [html🔒]

Guajardo, Jaime, Daniel Leigh, and Andrea Pescatori. “Expansionary Austerity? International Evidence.” Journal of the European Economic Association 12, no. 4 (August 1, 2014): 949–68. pdf / html

Fatás, Antonio, and Lawrence H. Summers. “The Permanent Effects of Fiscal Consolidations.” Journal of International Economics 112 (May 1, 2018): 238–50. html / pdf

Chodorow-Reich, Gabriel. “Geographic Cross-Sectional Fiscal Spending Multipliers: What Have We Learned?” American Economic Journal: Economic Policy 11, no. 2 (May 2019): 1–34. pdf / html

Ramey, Valerie A. “Ten Years after the Financial Crisis: What Have We Learned from the Renaissance in Fiscal Research?” Journal of Economic Perspectives 33, no. 2 (May 2019): 89–114. pdf / html

Zidar, Owen. “Tax Cuts for Whom? Heterogeneous Effects of Income Tax Changes on Growth and Employment.” Journal of Political Economy 127, no. 3 (2019): 1437–72. pdf / html

House, Christopher L., Christian Proebsting, and Linda L. Tesar. “Austerity in the Aftermath of the Great Recession.” Journal of Monetary Economics, May 24, 2019. html

Geerolf, François, and Thomas Grjebine. “The Macroeconomic Effects of Lump-Sum Taxes.” Working Paper, 2019. pdf

7.2 To go further

Nelson, Charles R., and Charles R. Plosser. “Trends and Random Walks in Macroeconmic Time Series: Some Evidence and Implications.” Journal of Monetary Economics 10, no. 2 (January 1, 1982): 139–62. html

Campbell, John Y., and N. Gregory Mankiw. “International Evidence on the Persistence of Economic Fluctuations.” Journal of Monetary Economics 23, no. 2 (March 1, 1989): 319–33. html

Alesina, Alberto, and Silvia Ardagna. “Tales of Fiscal Adjustment.” Economic Policy 13, no. 27 (October 1, 1998): 488–545. pdf / html

Perotti, Roberto. “Fiscal Policy in Good Times and Bad.” The Quarterly Journal of Economics 114, no. 4 (November 1, 1999): 1399–1436. pdf / html

Blanchard, Olivier, and Roberto Perotti. “An Empirical Characterization of the Dynamic Effects of Changes in Government Spending and Taxes on Output.” The Quarterly Journal of Economics 117, no. 4 (2002): 1329–68. pdf / html

DeLong, J. Bradford, and Lawrence W. Summers. “Fiscal Policy in a Depressed Economy.” Brookings Papers on Economic Activity, 2012, 233–97. html

Antonio Acconcia, Giancarlo Corsetti, and Saverio Simonelli, “Mafia and Public Spending: Evidence on the Fiscal Multiplier from a Quasi-Experiment,” American Economic Review 104, no. 7 (July 2014): 2185–2209. pdf / html

Alesina, Alberto, Carlo Favero, and Francesco Giavazzi. “The Output Effect of Fiscal Consolidation Plans.” Journal of International Economics, 37th Annual NBER International Seminar on Macroeconomics, 96 (July 1, 2015): S19–42. pdf / html

Alesina, Alberto, Omar Barbiero, Carlo Favero, Francesco Giavazzi, and Matteo Paradisi. “Austerity in 2009–13.” Economic Policy 30, no. 83 (July 1, 2015): 383–437. pdf / html

Riera-Crichton, Daniel, Carlos A. Vegh, and Guillermo Vuletin. “Tax Multipliers: Pitfalls in Measurement and Identification.” Journal of Monetary Economics 79 (2016): 30–48. pdf / html

Ramey, Valerie A., and Sarah Zubairy. “Government Spending Multipliers in Good Times and in Bad: Evidence from US Historical Data.” Journal of Political Economy 126, no. 2 (December 5, 2017): 850–901. html / pdf

Alesina, Alberto, Carlo Favero, and Francesco Giavazzi. Austerity: When It Works and When It Doesn’t. Princeton University Press, 2019. html

8 Housing and Macro

8.1 Main readings

Mian, Atif, and Amir Sufi. “The Consequences of Mortgage Credit Expansion: Evidence from the U.S. Mortgage Default Crisis.” The Quarterly Journal of Economics 124, no. 4 (November 1, 2009): 1449–96. pdf / html

Mian, Atif, Kamalesh Rao, and Amir Sufi. “Household Balance Sheets, Consumption, and the Economic Slump.” The Quarterly Journal of Economics 128, no. 4 (November 1, 2013): 1687–1726. pdf / html

Mian, Atif, and Amir Sufi. “What Explains the 2007–2009 Drop in Employment?” Econometrica 82, no. 6 (November 1, 2014): 2197–2223. pdf / html

Wong, Arlene. “Refinancing and the Transmission of Monetary Policy to Consumption.” 2016 Meeting Paper. Society for Economic Dynamics, 2016. pdf

8.2 To go further

Saiz, Albert. “The Geographic Determinants of Housing Supply.” The Quarterly Journal of Economics 125, no. 3 (August 1, 2010): 1253–96. pdf / html

Mian, Atif, and Amir Sufi. “The Great Recession: Lessons from Microeconomic Data.” American Economic Review 100, no. 2 (May 2010): 51–56. pdf / html

Mian, Atif, and Amir Sufi. “The Effects of Fiscal Stimulus: Evidence from the 2009 Cash for Clunkers Program.” The Quarterly Journal of Economics 127, no. 3 (August 1, 2012): 1107–42. pdf / html

Leamer, Edward E. “Housing Really Is the Business Cycle: What Survives the Lessons of 2008–09?” Journal of Money, Credit and Banking 47, no. S1 (2015): 43–50. pdf / html

Mian, A., and A. Sufi. “Chapter 5 - Who Bears the Cost of Recessions? The Role of House Prices and Household Debt.” In Handbook of Macroeconomics, edited by John B. Taylor and Harald Uhlig, 2:255–96. Elsevier, 2016. pdf / html

Guren, Adam M, Alisdair McKay, Emi Nakamura, and Jón Steinsson. “Housing Wealth Effects: The Long View.” Working Paper. National Bureau of Economic Research, June 2018. pdf

9 Monetary Policy

9.1 Main Readings

Romer, Christina D., and David H. Romer. “Does Monetary Policy Matter? A New Test in the Spirit of Friedman and Schwartz.” NBER Macroeconomics Annual 1989, Volume 4, January 1, 1989, 121–84. [pdf]

Maggio, Marco Di, Christopher Palmer, Deborah Lucas, Philipp Schnabl, Felipe Severino, Adam Ashcraft, Charles Calomiris, et al. “How Quantitative Easing Works: Evidence on the Refinancing Channel,” no. September (2016).

Nakamura, Emi, Jón Steinsson, Patrick Sun, and Daniel Villar. “The Elusive Costs of Inflation: Price Dispersion during the U.S. Great Inflation.” The Quarterly Journal of Economics 133, no. 4 (November 1, 2018): 1933–80. [pdf] [pdf🔒] [html🔒]

Beraja, Martin, Andreas Fuster, Erik Hurst, and Joseph Vavra. “Regional Heterogeneity and the Refinancing Channel of Monetary Policy.” The Quarterly Journal of Economics 134, no. 1 (February 1, 2019): 109–83. [pdf] [pdf🔒] [html🔒]

Hausman, Joshua K., Paul W. Rhode, and Johannes F. Wieland. “Recovery from the Great Depression: The Farm Channel in Spring 1933.” American Economic Review 109, no. 2 (February 2019): 427–72. [pdf] [html]

Cloyne, James, Clodomiro Ferreira, and Paolo Surico. “Monetary Policy When Households Have Debt: New Evidence on the Transmission Mechanism.” The Review of Economic Studies. Accessed June 8, 2019. [html]

Romer, Christina D., David H. Romer. “The Effects of Monetary Changes: The Monetary Transmission Mechanism.” Economics 210c/236a, 2018 Lecture Notes. [pdf]

9.2 To go further

Christiano, Lawrence J., Martin Eichenbaum, and Charles L. Evans. “Chapter 2 Monetary Policy Shocks: What Have We Learned and to What End?” In Handbook of Macroeconomics, 1:65–148. Elsevier, 1999. [pdf] [html]

Kaplan, Greg, Benjamin Moll, and Giovanni L. Violante. “Monetary Policy According to HANK.” American Economic Review 108, no. 3 (March 2018): 697–743. [pdf] [html]

Auclert, Adrien. “Monetary Policy and the Redistribution Channel.” American Economic Review 109, no. 6 (June 2019): 2333–67. [pdf] [html]

10 Phillips Curve, Neoclassical Synthesis

10.1 Main Readings

Fisher, Irving. “A Statistical Relation between Unemployment and Price Changes.” International Labour Review 13 (1926): 785. html / pdf

Phillips, A. W. “The Relation Between Unemployment and the Rate of Change of Money Wage Rates in the United Kingdom, 1861-1957.” Economica 25, no. 100 (November 1, 1958): 283–99. pdf / html

Samuelson, Paul A., and Robert M. Solow. “Analytical Aspects of Anti-Inflation Policy.” The American Economic Review 50, no. 2 (1960): 177–94. [pdf] [html🔒] [pdf🔒]

Phelps, Edmund S. “Phillips Curves, Expectations of Inflation and Optimal Unemployment over Time.” Economica 34, no. 135 (1967): 254–81. pdf / html

Leijonhufvud, Axel. “Keynes and the Keynesians: A Suggested Interpretation.” The American Economic Review 57, no. 2 (1967): 401–10. html / pdf

Lucas, R. E. (1976). Econometric policy evaluation: A critique. Carnegie-Rochester Conference Series on Public Policy, 1(Supplement C), 19‑46. pdf / html

Lucas, Robert E., and Thomas J. Sargent. “After Keynesian Macroeconomics.” Federal Reserve Bank Minneapolis Quarterly Review, no. Spr (1979). [pdf] [html]

Sargent, T. J. (1982). The Ends of Four Big Inflations. In Inflation : Causes and Effects (p. 41‑98). University of Chicago Press. [html] [pdf]

Atkeson, Andy and Lee E. Ohanian, “Are Phillips Curves Useful for Forecasting Inflation ?,” Federal Reserve Bank Minneapolis Quarterly Review, 2001, 25 (1), 2–11. [pdf]

Nakamura, Emi, and Jón Steinsson. “Five Facts about Prices: A Reevaluation of Menu Cost Models.” The Quarterly Journal of Economics 123, no. 4 (November 1, 2008): 1415–64. pdf / html

Blanchard, Olivier. “Should We Reject the Natural Rate Hypothesis?” Journal of Economic Perspectives 32, no. 1 (February 2018): 97–120. pdf / html

Geerolf, François. “The Phillips Curve: a Relation between Real Exchange Rate Growth and Unemployment” Working Paper, 2019. pdf

10.2 To go further

Joan Robinson, “What Has Become of the Keynesian Revolution?,” Challenge 16, no. 6 (January 1, 1974): 6–11. pdf

Sleeman, A. G. “Retrospectives: The Phillips Curve: A Rushed Job?” Journal of Economic Perspectives 25, no. 1 (March 2011): 223–38. pdf / html

Forder, James. Macroeconomics and the Phillips Curve Myth. Oxford University Press, 2014. html / pdf

11 Exchange Rate Regimes

11.1 Main readings

Mundell, Robert A. “A Theory of Optimum Currency Areas.” The American Economic Review 51, no. 4 (1961): 657–65. html / pdf

Mundell, Robert. “Flexible Exchange Rates and Employment Policy.” The Canadian Journal of Economics and Political Science / Revue Canadienne d’Economique et de Science Politique 27, no. 4 (1961): 509–17. html / pdf

Fleming, J. Marcus. “Domestic Financial Policies under Fixed and under Floating Exchange Rates.” Staff Papers (International Monetary Fund) 9, no. 3 (1962): 369–80. html / pdf

Johnson, Harry G. “The Case for Flexible Exchange Rates, 1969.” Federal Reserve Bank of St. Louis Review, no. June 1969 (1969).

Mussa, Michael. “Nominal Exchange Rate Regimes and the Behavior of Real Exchange Rates: Evidence and Implications.” Carnegie-Rochester Conference Series on Public Policy 25 (September 1986): 117–214. html

Eichengreen, Barry, Charles Wyplosz, William H. Branson, and Rudiger Dornbusch. “The Unstable EMS.” Brookings Papers on Economic Activity 1993, no. 1 (1993): 51–143. html / pdf

Krugman, Paul. “Lessons of Massachusetts for EMU.” In Adjustment and Growth in the European Monetary Union, edited by Francesco Giavazzi and Francisco Torres, 241–66. Cambridge: Cambridge University Press, 1993. pdf / html

11.2 To go further

Grauwe, Paul de. “The Cost of Disinflation and the European Monetary System.” Open Economies Review 1, no. 2 (June 1, 1990): 147–73. html / pdf

Flood, Robert P., and Andrew K. Rose. “Fixing Exchange Rates A Virtual Quest for Fundamentals.” Journal of Monetary Economics 36, no. 1 (August 1, 1995): 3–37. html

Feldstein, Martin. “The Political Economy of the European Economic and Monetary Union: Political Sources of an Economic Liability.” Journal of Economic Perspectives 11, no. 4 (December 1997): 23–42. pdf / html

Schmitt-Grohé, Stephanie, and Martín Uribe. “Downward Nominal Wage Rigidity, Currency Pegs, and Involuntary Unemployment.” Journal of Political Economy 124, no. 5 (August 30, 2016): 1466–1514. html

Stiglitz, Joseph. The Euro: And Its Threat to the Future of Europe. Penguin UK, 2016. html

Mody, Ashoka. Eurotragedy: A Drama in Nine Acts. Oxford University Press, 2018. html

Grauwe, Paul De. Economics of the Monetary Union. Oxford University Press, 2020. html

12 Dynamic Inefficiency, Secular Stagnation, r-g

12.1 Main readings

Harrod, R. F. “An Essay in Dynamic Theory.” The Economic Journal 49, no. 193 (1939): 14–33. html / pdf

Klein, Lawrence Robert. “The Keynesian Revolution.” Thesis, Massachusetts Institute of Technology, 1944. html / pdf

Hansen, Alvin H. “Economic Progress and Declining Population Growth.” The American Economic Review 29, no. 1 (1939): 1–15. html / pdf

Domar, Evsey D. “Capital Expansion, Rate of Growth, and Employment.” Econometrica 14, no. 2 (1946): 137–47. html / pdf

Allais, Maurice. “Economie et Intérêt.” Imprimerie Nationale, 1947.

Malinvaud, Edmond. “Capital Accumulation and Efficient Allocation of Resources.” Econometrica 21, no. 2 (1953): 233–68. html / pdf

Samuelson, Paul A. “An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money.” Journal of Political Economy 66, no. 6 (1958): 467–82. html

Gleason, Alan H. “Foster and Catchings: A Reappraisal.” Journal of Political Economy 67, no. 2 (1959): 156–72. html / pdf

Diamond, Peter A. “National Debt in a Neoclassical Growth Model.” The American Economic Review 55, no. 5 (1965): 1126–50. html / pdf

Abel, Andrew B., N. Gregory Mankiw, Lawrence H. Summers, and Richard J. Zeckhauser. “Assessing Dynamic Efficiency: Theory and Evidence.” The Review of Economic Studies 56, no. 1 (January 1, 1989): 1–19. html

Rhee, Changyong. “Dynamic Inefficiency in an Economy with Land.” The Review of Economic Studies 58, no. 4 (1991): 791–97. html / pdf

Kim, Kyung-Soo, and Jaewoo Lee. “Reexamination of Dynamic Efficiency with Taxation on Land.” Economics Letters 57, no. 2 (December 5, 1997): 169–75. html / pdf

Caselli, Francesco, and James Feyrer. “The Marginal Product of Capital.” The Quarterly Journal of Economics 122, no. 2 (May 1, 2007): 535–68. html / pdf

Dimson, Elroy, Paul Marsh, and Mike Staunton. Triumph of the Optimists: 101 Years of Global Investment Returns. Princeton University Press, 2009.

Dimson, Elroy, Paul Marsh, and Mike Staunton. “CHAPTER 11 - The Worldwide Equity Premium: A Smaller Puzzle.” In Handbook of the Equity Risk Premium, edited by Rajnish Mehra, 467–514. Handbooks in Finance. San Diego: Elsevier, 2008. html

Geerolf, François. “Reassessing Dynamic Efficiency.” Working Paper, 2013. pdf

Geerolf, François. “Dynamic Inefficiency and Capital Taxation.” Working Paper, 2013. pdf

Summers, Lawrence H. “Conference Address.” IMF Fourtheenth Annual Research Conference in Honor of Stanley Fischer, 2013. html / Video

Summers, Lawrence H. “Why Stagnation Might Prove to Be the New Normal.” Financial Times 15 (2013): 12. html

Blume, Lawrence E., and Thomas J. Sargent. “Harrod 1939.” The Economic Journal 125, no. 583 (March 1, 2015): 350–77. html / pdf

Summers, Lawrence H. “Demand Side Secular Stagnation.” American Economic Review 105, no. 5 (May 2015): 60–65. html / pdf

Summers, Lawrence H. “Crises in Economic Thought, Secular Stagnation, and Future Economic Research.” NBER Macroeconomics Annual 31, no. 1 (January 1, 2017): 557–77. pdf / html

Blanchard, Olivier, and Lawrence H. Summers. “Rethinking Stabilization Policy: Evolution or Revolution?” Working Paper. National Bureau of Economic Research, December 2017. pdf

Geerolf, François. “A Theory of Demand Side Secular Stagnation.” UCLA Working Paper, 2019, 1–60. pdf

Sharpe, S. A., & Suarez, G. A. (2021). Why Isn’t Business Investment More Sensitive to Interest Rates? Evidence from Surveys. Management Science, 67(2), 720–741. html / pdf / old pdf

12.2 To go further

Sargent, Thomas J., and Neil Wallace. “Some Unpleasant Monetarist Arithmetic.” In Monetarism in the United Kingdom, 15–41. Palgrave Macmillan, London, 1984. html

Malinvaud, Edmond. “The Overlapping Generations Model in 1947.” Journal of Economic Literature 25, no. 1 (1987): 103–5. html / pdf

Diba, Behzad T., and Herschel I. Grossman. “On the Inception of Rational Bubbles.” The Quarterly Journal of Economics 102, no. 3 (1987): 697–700. html

Abel, Andrew. “Can the Government Roll over Its Debt Forever?” Business Review, no. Nov (1992): 3–18. pdf

Geanakoplos, John. “Overlapping Generations Models of General Equilibrium.” In The New Palgrave Dictionary of Economics Second Edition, edited by Lawrence E. Durlauf, Steven N. and Blume. Palgrave Macmillan, 2008. html / pdf

Eggertsson, Gauti B., Neil R. Mehrotra, and Jacob A. Robbins. “A Model of Secular Stagnation: Theory and Quantitative Evaluation.” American Economic Journal: Macroeconomics 11, no. 1 (January 2019): 1–48. pdf / html

Weizsäcker, C. C. von, & Krämer, H. (2021). Saving and Investment in the Twenty-First Century: The Great Divergence. Springer International Publishing. pdf / html

13 Rational Bubbles

13.1 Main Readings

Tirole, Jean. “Asset Bubbles and Overlapping Generations.” Econometrica 53, no. 5 (1985): 1071–1100. html / pdf

Geanakoplos, John, Michael Magill, and Martine Quinzii. “Demography and the Long-Run Predictability of the Stock Market.” Brookings Papers on Economic Activity 2004, no. 1 (2004): 241–307. html

Kraay, Aart, and Jaume Ventura. “The Dot-Com Bubble, the Bush Deficits, and the U.S. Current Account.” In G7 Current Account Imbalances: Sustainability and Adjustment, 457–96. University of Chicago Press, 2007. pdf / html

Martin, Alberto, and Jaume Ventura. “Theoretical Notes on Bubbles and the Current Crisis.” IMF Economic Review 59, no. 1 (February 2011): 6–40. html

Martin, Alberto, and Jaume Ventura. “Economic Growth with Bubbles.” American Economic Review 102, no. 6 (May 2012): 3033–58. pdf / html

Martin, Alberto, and Jaume Ventura. “The Macroeconomics of Rational Bubbles: A User’s Guide.” Annual Review of Economics 10, no. 1 (2018): 505–39. pdf / html

13.2 To go further

Diba, Behzad T., and Herschel I. Grossman. “On the Inception of Rational Bubbles.” The Quarterly Journal of Economics 102, no. 3 (1987): 697–700. html

Saint-Paul, Gilles. “Fiscal Policy in an Endogenous Growth Model.” The Quarterly Journal of Economics 107, no. 4 (1992): 1243–59. html

Caballero, Ricardo J., Emmanuel Farhi, and Pierre-Olivier Gourinchas. “Financial Crash, Commodity Prices, and Global Imbalances.” Brookings Papers on Economic Activity 2008 (2008): 1–55. html

Ventura, Jaume. “Bubbles and Capital Flows.” Journal of Economic Theory, Issue in honor of David Cass, 147, no. 2 (March 1, 2012): 738–58. html

Farhi, Emmanuel, and Jean Tirole. “Bubbly Liquidity.” The Review of Economic Studies 79, no. 2 (April 1, 2012): 678–706. html / pdf

14 Asset Pricing

14.1 Main readings

Shiller, Robert J. “Do Stock Prices Move Too Much to Be Justified by Subsequent Changes in Dividends?” The American Economic Review 71, no. 3 (1981): 421–36. pdf / html

Summers, Lawrence H. “On Economics and Finance.” The Journal of Finance 40, no. 3 (1985): 633–35. pdf / html

Welch, Ivo. “Views of Financial Economists on the Equity Premium and on Professional Controversies.” The Journal of Business 73, no. 4 (2000): 501–37. pdf / html

Cochrane, John H. “Presidential Address: Discount Rates.” The Journal of Finance 66, no. 4 (August 1, 2011): 1047–1108. pdf / html

Adrian, Tobias, Erkko Etula, and Tyler Muir. “Financial Intermediaries and the Cross-Section of Asset Returns.” The Journal of Finance 69, no. 6 (2014): 2557–2596. html / pdf

Muir, Tyler. “Financial Crises and Risk Premia.” The Quarterly Journal of Economics 132, no. 2 (May 1, 2017): 765–809. html / pdf

Geerolf, François. “Asset Pricing with Heterogeneous Investors” Working Paper, 2017, 1–59. pdf

14.2 To go further

Shleifer, Andrei, and Robert W. Vishny. “Liquidation Values and Debt Capacity: A Market Equilibrium Approach.” The Journal of Finance 47, no. 4 (September 1, 1992): 1343–66. html / pdf

Holmström, Bengt, and Jean Tirole. “Financial Intermediation, Loanable Funds, and The Real Sector.” The Quarterly Journal of Economics 112, no. 3 (August 1, 1997): 663–91. html / pdf

Holmström, Bengt, and Jean Tirole. “Private and Public Supply of Liquidity.” Journal of Political Economy 106, no. 1 (February 1, 1998): 1–40. html / pdf

Tirole, Jean. The Theory of Corporate Finance. Princeton University Press, 2006. html

Chari, V. V., Patrick J. Kehoe, and Ellen R. McGrattan. “Business Cycle Accounting.” Econometrica 75, no. 3 (May 1, 2007): 781–836. html / pdf

Welch, Ivo, and Amit Goyal. “A Comprehensive Look at The Empirical Performance of Equity Premium Prediction.” The Review of Financial Studies 21, no. 4 (July 1, 2008): 1455–1508. html

Brunnermeier, Markus K., and Lasse Heje Pedersen. “Market Liquidity and Funding Liquidity.” The Review of Financial Studies 22, no. 6 (2009): 2201–38. html / pdf

Hall, Robert E. “The High Sensitivity of Economic Activity to Financial Frictions.” The Economic Journal 121, no. 552 (May 1, 2011): 351–78. html / pdf

Gertler, Mark, and Nobuhiro Kiyotaki. “Financial Intermediation and Credit Policy in Business Cycle Analysis.” In Handbook of Monetary Economics - Volume 3A, 3:547–599. 11. Elsevier Ltd, 2011. html / pdf

Holmström, Bengt, and Jean Tirole. Inside and Outside Liquidity. Cambridge, MA: MIT Press, 2011. html

Modigliani, Franco, and Merton H. Miller. “The Cost of Capital, Corporation Finance and the Theory of Investment.” The American Economic Review 48, no. 3 (1958): 261–97. html / pdf

Bernanke, Ben S. “Nonmonetary Effects of the Financial Crisis in the Propagation of the Great Depression.” The American Economic Review 73, no. 3 (1983): 257–76. html / pdf

He, Zhiguo, and Arvind Krishnamurthy. “Intermediary Asset Pricing.” American Economic Review 103, no. 2 (April 2013): 732–70. html / pdf

He, Zhiguo, Bryan Kelly, and Asaf Manela. “Intermediary Asset Pricing: New Evidence from Many Asset Classes.” Journal of Financial Economics 126, no. 1 (October 1, 2017): 1–35. html / pdf

15 Heterogeneous Beliefs

15.1 Main readings

De Long, J. Bradford, Andrei Shleifer, Lawrence H. Summers, and Robert J. Waldmann. “Noise Trader Risk in Financial Markets.” Journal of Political Economy 98, no. 4 (1990): 703–38. html

Cutler, David M., James M. Poterba, and Lawrence H. Summers. “Speculative Dynamics.” The Review of Economic Studies 58, no. 3 (1991): 529–46. html

Geanakoplos, John. “The Leverage Cycle.” NBER Macroeconomics Annual 2009 Volume 24 (April 23, 2010): 1–65.

Schularick, Moritz, and Alan M. Taylor. “Credit Booms Gone Bust: Monetary Policy, Leverage Cycles, and Financial Crises, 1870-2008.” American Economic Review 102, no. 2 (April 2012): 1029–61. pdf / html

Simsek, Alp. “Belief Disagreements and Collateral Constraints.” Econometrica 81, no. 1 (January 1, 2013): 1–53. html

Geerolf, François. “Leverage and Disagreement” Working Paper, 2015, 1–61. pdf

15.2 To go further

Harrison, J. Michael, and David M. Kreps. “Speculative Investor Behavior in a Stock Market with Heterogeneous Expectations.” The Quarterly Journal of Economics 92, no. 2 (May 1, 1978): 323–36. html

Shleifer, Andrei, and Lawrence H. Summers. “The Noise Trader Approach to Finance.” Journal of Economic Perspectives 4, no. 2 (June 1990): 19–33. html

Jones, Charles M, and Owen A Lamont. “Short-Sale Constraints and Stock Returns.” Journal of Financial Economics, Limits on Arbitrage, 66, no. 2 (November 1, 2002): 207–39. html

Hong, Harrison, José Scheinkman, and Wei Xiong. “Asset Float and Speculative Bubbles.” The Journal of Finance 61, no. 3 (2006): 1073–1117.

Blume, Lawrence, and David Easley. “If You’re so Smart, Why Aren’t You Rich? Belief Selection in Complete and Incomplete Markets.” Econometrica 74, no. 4 (July 1, 2006): 929–66. html

Hong, Harrison, and Jeremy C. Stein. “Disagreement and the Stock Market.” Journal of Economic Perspectives 21, no. 2 (June 2007): 109–28. html

Gorton, Gary B. “The Panic of 2007.” Working Paper. National Bureau of Economic Research, September 2008. pdf / html

Shiller, Robert J. Irrational Exuberance: Revised and Expanded Third Edition. Princeton University Press, 2015.

Gorton, Gary, and Andrew Metrick. “Securitized Banking and the Run on Repo.” Journal of Financial Economics, Market Institutions, Financial Market Risks and Financial Crisis, 104, no. 3 (June 1, 2012): 425–51. pdf / html

Brunnermeier, Markus K., Alp Simsek, and Wei Xiong. “A Welfare Criterion For Models With Distorted Beliefs.” Quarterly Journal of Economics 129, no. 2012 (2014): 1753–1797. html

16 Financial Frictions

16.1 Main readings

Bernanke, Ben S., and Alan S. Blinder. “The Federal Funds Rate and the Channels of Monetary Transmission.” The American Economic Review 82, no. 4 (1992): 901–21. html / pdf

Kashyap, Anil K., Jeremy C. Stein, and David W. Wilcox. “Monetary Policy and Credit Conditions: Evidence from the Composition of External Finance.” The American Economic Review 83, no. 1 (1993): 78–98. html / pdf

Kashyap, Anil K., and Jeremy C. Stein. “Monetary Policy and Bank Lending.” In Monetary Policy, edited by N. Gregory Mankiw, 221–261. January. University of Chicago Press, 1994. html / pdf

Holmström, Bengt, and Jean Tirole. “Private and Public Supply of Liquidity.” Journal of Political Economy 106, no. 1 (February 1, 1998): 1–40. html / pdf

Kashyap, Anil K, and Jeremy C. Stein. “What Do a Million Observations on Banks Say about the Transmission of Monetary Policy?” The American Economic Review 90, no. 3 (2000): 407–28. html / pdf

Mitchell, Mark, Lasse Heje Pedersen, and Todd Pulvino. “Slow Moving Capital.” American Economic Review 97, no. 2 (May 2007): 215–20. html / pdf

Krishnamurthy, Arvind, and Annette Vissing-Jorgensen. “The Effects of Quantitative Easing on Interest Rates: Channels and Implications for Policy.” Brookings Papers on Economic Activity, 2011, 215–87. html / pdf

Gilchrist, Simon, and Egon Zakrajšek. “Credit Spreads and Business Cycle Fluctuations.” American Economic Review 102, no. 4 (June 2012): 1692–1720. html / pdf

Jiménez, Gabriel, Steven Ongena, José-Luis Peydró, and Jesús Saurina. “Hazardous Times for Monetary Policy: What Do Twenty-Three Million Bank Loans Say About the Effects of Monetary Policy on Credit Risk-Taking?” Econometrica 82, no. 2 (March 1, 2014): 463–505. html / pdf

Chodorow-Reich, Gabriel. “The Employment Effects of Credit Market Disruptions: Firm-Level Evidence from the 2008–9 Financial Crisis.” The Quarterly Journal of Economics 129, no. 1 (February 1, 2014): 1–59. html / pdf

Gertler, Mark, and Peter Karadi. “Monetary Policy Surprises, Credit Costs, and Economic Activity.” American Economic Journal: Macroeconomics 7, no. 1 (January 2015): 44–76. html / pdf

Brunnermeier, Markus K., and Yuliy Sannikov. “A Macroeconomic Model with a Financial Sector.” American Economic Review 104, no. 2 (February 2014): 379–421. html / pdf

Giroud, Xavier, and Holger M. Mueller. “Firm Leverage, Consumer Demand, and Employment Losses During the Great Recession.” The Quarterly Journal of Economics 132, no. 1 (February 1, 2017): 271–316. html / pdf

16.2 To go further

Townsend, Robert M. “Optimal Contracts and Competitive Markets with Costly State Verification.” Journal of Economic Theory 21, no. 2 (October 1, 1979): 265–93. html / pdf

Bernanke, Ben, and Mark Gertler. “Agency Costs, Net Worth, and Business Fluctuations.” The American Economic Review 79, no. 1 (1989): 14–31. html / pdf

Shleifer, Andrei, and Robert W. Vishny. “The Limits of Arbitrage.” The Journal of Finance 52, no. 1 (March 1, 1997): 35–55. html / pdf

Kiyotaki, Nobuhiro, and John Moore. “Credit Cycles.” Journal of Political Economy 105, no. 2 (April 1, 1997): 211–48. html / pdf

Bernanke, Ben S., Mark Gertler, and Simon Gilchrist. “Chapter 21 The Financial Accelerator in a Quantitative Business Cycle Framework.” In Handbook of Macroeconomics, 1:1341–93. Elsevier, 1999. html / pdf

Krishnamurthy, Arvind. “Collateral Constraints and the Amplification Mechanism.” Journal of Economic Theory 111, no. 2 (August 2003): 277–92. html / pdf

Campello, Murillo, John R. Graham, and Campbell R. Harvey. “The Real Effects of Financial Constraints: Evidence from a Financial Crisis.” Journal of Financial Economics, The 2007-8 financial crisis: Lessons from corporate finance, 97, no. 3 (September 1, 2010): 470–87. html / pdf

17 Pareto Distributions

17.1 Main readings

Feenberg, Daniel R., and James M. Poterba. “Income Inequality and the Incomes of Very High-Income Taxpayers: Evidence from Tax Returns.” Tax Policy and the Economy, Volume 7 7, no. January (1993): 145–177.

Lucas, Robert E. “On the Size Distribution of Business Firms.” The Bell Journal of Economics 9, no. 2 (1978): 508–23. html /pdf

Rosen, Sherwin. “The Economics of Superstars.” The American Economic Review 71, no. 5 (1981): 845–58. html / pdf

Gabaix, Xavier. “Zipf’s Law for Cities: An Explanation.” The Quarterly Journal of Economics 114, no. 3 (1999): 739–67. html / pdf

Garicano, Luis. “Hierarchies and the Organization of Knowledge in Production.” Journal of Political Economy 108, no. 5 (October 1, 2000): 874–904. html / pdf

Luttmer, Erzo G. J. “Selection, Growth, and the Size Distribution of Firms.” The Quarterly Journal of Economics 122, no. 3 (2007): 1103–44. html / pdf

Gabaix, Xavier. “Power Laws in Economics and Finance.” Annual Review of Economics 1, no. 1 (September 2009): 255–293. html / pdf

Geerolf, François. “A Theory of Pareto Distributions.” Working Paper, 2016, 1–49. pdf

17.2 To go further

Champernowne, D. G. “A Model of Income Distribution.” The Economic Journal 63, no. 250 (1953): 318–51. html

Hsieh, Chang-Tai, and Peter J. Klenow. “Misallocation and Manufacturing TFP in China and India.” The Quarterly Journal of Economics 124, no. 4 (November 1, 2009): 1403–48. html / pdf

Atkinson, Anthony B., Thomas Piketty, and Emmanuel Saez. “Top Incomes in the Long Run of History.” Journal of Economic Literature 49, no. 1 (2011): 3–71. html / pdf

Garicano, Luis, and Esteban Rossi-Hansberg. “Organization and Inequality in a Knowledge Economy.” The Quarterly Journal of Economics 121, no. 4 (November 1, 2006): 1383–1435. html / pdf

Terviö, Marko. “The Difference That CEOs Make: An Assignment Model Approach.” American Economic Review 98, no. 3 (June 2008): 642–68. html / pdf

Gabaix, Xavier, and Augustin Landier. “Why Has CEO Pay Increased So Much?” The Quarterly Journal of Economics 123, no. 1 (February 1, 2008): 49–100. html / pdf

Benhabib, Jess, Alberto Bisin, and Shenghao Zhu. “The Distribution of Wealth and Fiscal Policy in Economies With Finitely Lived Agents.” Econometrica 79, no. 1 (January 1, 2011): 123–57. html / pdf

18 Optimal Taxation

18.1 Main readings

Mirrlees, J. A. “An Exploration in the Theory of Optimum Income Taxation.” The Review of Economic Studies 38, no. 2 (1971): 175–208. html

Diamond, Peter A. “Optimal Income Taxation: An Example with a U-Shaped Pattern of Optimal Marginal Tax Rates.” The American Economic Review 88, no. 1 (1998): 83–95.

Saez, Emmanuel. “Using Elasticities to Derive Optimal Income Tax Rates.” The Review of Economic Studies 68, no. 1 (January 1, 2001): 205–29. html

Scheuer, Florian, and Iván Werning. “The Taxation of Superstars.” The Quarterly Journal of Economics 132, no. 1 (February 1, 2017): 211–70. html

18.2 To go further

Ales, Laurence, Musab Kurnaz, and Christopher Sleet. “Technical Change, Wage Inequality, and Taxes.” American Economic Review 105, no. 10 (2015): 3061–3101. html

Evidence-Based Macroeconomics & Finance - Syllabus

UCLA - Econ 221 - Advanced Macro

François Geerolf