Econ 204A

Fall 2018 - Henning Bohn

UC Santa Barbara

Welcome to Econ 204A! Posted here are course information, reading list, and various supplemental materials.Changes will be posted throughout the quarter. Please check before class.

Announcements:

• Problem set (8) deadline is extended to FRIDAY Dec.7; submit in section.

• In slides4c, we will skip p.2-3 and focus on fiat money.

• Problem set (4) deadline is extended to FRIDAY Nov.2; submit in section.

• Problem set (2): since we have not covered Practice problem 2.4 in class, let me DEFER this problem until next Tuesday, Oct. 23. Practice problems 2.1-2.3 are due 10/18 as scheduled.

• Problem set (1), problem 1.3 as originally posted, had slightly different notation than in class. I have now posted a modified version. Either way, you may use the same budget equation we used in class, and assume a0 is given, or use what was posted.

• On Tuesday, we will finish with main concepts (slides2a) and then move into applications.

Schedule Changes:

• Sept. 28 - lecture instead of section

• Nov. 27 - section instead of class

• Nov. 27 & 29 - no office hours. Please see me Nov.27 any time 9-12 or email for an appointment. (Sorry, I was asked to attend an State Assembly hearing Tu PM and will be at UC headquarters in Oakland all day Wed & Friday.)

Contact information:

E-mail: henning.bohn@ucsb.edu. Best use "Econ 204A" in the subject line.

Office: NH 3016. I am trying to be available to graduate students at all times. When the door is closed, don't hesitate to knock. Normal official office hours areTR1-2pm. See above for schedule changes.

Midterm: in class, Thursday, October 25

The final exam is scheduled by the registrar.

Class grade is based on midterm, final, and problem sets; details TBA in class.

:

Problem Sets

Problem sets are normally due Thursdays at the start of class.Assignments & due dates are subject to change: Please listen to class announcements and check this page.

Problem Sets are in part from Romer's book (4th or 5th edition), and in part from the Collection of Practice Problems:

(1) Due 10/4. Practice problems 1.1 and 1.3.

(2) Due 10/11. Romer problems 1.3, 1.4, 1.6.

(3) Due 10/18. Practice problems, 2.1-2.4.

(4) Due 11/1. Romer problems 2.1, 2.2, 2.4. Practice problem 3.1.

(5) Due 11/8. Romer problem 2.6. Practice problem 3.2.

(6) Due 11/15. Romer problems 2.9-2.10. Practice problems 3.3-3.4.

(7) Due 11/29. Practice problems 4.1(a,b), 4.2-4.3.

(8) Due 12/06. Romer problem 2.17. Practice problems 4.4-4.7.

Textbooks: There are many good textbooks on Economic Growth, but none is perfectly suitable for this class. I am also reluctant to require a purchase for a 10-week course that covers only selected chapters.

Romer "Advanced Macroeconomics" has the basics: some chapters will be required and I will assign problems from this book. The 4th and 5th editions are so similar that either one is fine.

Barro/Sala-i-Martin "Economic Growth" presents the Solow model and optimal growth in great detail and it has an excellent technical appendix (highly recommended), but it does not cover OG.

Jones and Williamson are undergraduate texts, perhaps useful if you find Romer or Barro/Sala-i-Martin difficult to follow.

Acemoglu "Modern Economic Growth" provides a high-level and quite encyclopedic coverage, perhaps appropriate for independent reading if you find the class too easy.

Course Outline:

Some overheads/lecture notes will be provided later, to be updated.

Required readings are exam-relevant even if not covered in class. The class covers more than the required reading, often extracted from a variety of other sources that are listed as recommended, optional, or for-reference (in order of relevance). Items not required are only tested to the extent they are covered in class.

- Slides01 .
- Recommended: Williamson, Macroeconomics, 4th ed., ch. 4, 5, 8, 10. [Good undergraduate text for background reading.]

__Part 1. Introduction__

Classes #1-2: Review of undergraduate macroeconomics.

Part 2. Exogenous Growth: The Solow Model

Classes #3-4: Main concepts.

Class #5: Applications.

- Slides02a
- Required: David Romer, Advanced Macroeconomics (4th or 5th edition), ch.1.1-1.5. [On Reserve in the Library]
- Note on Linear Differential Equations .

- Solow model - example worksheet.
- Recommended: Barro/Sala-i-Martin, Economic Growth, appendix A.1. [Good math reference.]

- Optional (easier): Charles Jones, Introduction to Economic Growth, ch.1-3. Or: Williamson, ch.6.

- Optional (more detailed): Barro/Sala-i-Martin, Economic Growth, ch.1.

- For reference (more advanced): Acemoglu, Modern Economic Growth, ch.1-2.

Class #6: New Growth.

- Slides02b .
- Required: Romer, Advanced Macroeconomics, ch.1.6-1.8.

- Optional: Bohn (2006). Optimal Private

- ponses to Demographic Trends, in: Christopher Kent et al, eds. Demography and Financial Markets, Sydney: Reserve Bank of Australia (G-20 conference volume), 47-79.

- For reference (more advanced): Acemoglu, Modern Economic Growth, ch.3-4.

- Slides02c .
- Recommended: Charles Jones, Introduction to Economic Growth, ch.4-5. [On GauchoSpace]
- Optional: Romer, Advanced Macroeconomics, ch.3.1-3.5.
- For reference: Paul Romer, Endogenous Technical Change, JPE 1990, S71-102.
- For reference: Charles Jones, R&D-Based Models of Economic Growth, JPE 1995, 759-784.

Part 3. Optimal Growth in Continuous Time

Class #7: Main concepts.

- Slides03a .

- Required: Romer, Advanced Macroeconomics, ch.2.1-2.2.
- Optional (more detailed): Barro/Sala-i-Martin, Economic Growth, ch.2.

- For reference (more advanced): Acemoglu, Modern Economic Growth, ch.8.1-8.5.
Classes #8-9: Optimal Control.

MIDTERM, in class.

- Slides03b .

- Recommended: Barro/Sala-i-Martin, Economic Growth, appendix A.3.

- Recommended: Dixit, Optimization in Economic Theory, ch.10. [On GauchoSpace]
- For reference (more advanced): Acemoglu, Modern Economic Growth, ch.7.

Midterm will likely cover slides 1-3b, details TBA.

Exams cover the topics discussed in class and in the required readings. That is, required readings are exam-relevant even if not covered in class. Other, not-required readings are not tested except as covered in class.

Class #10: Digression into discrete-time optimal growth.

- Slides03c .
- For reference: Acemoglu, Modern Economic Growth, ch.8.
Classes #11-12: Dynamics of Optimal GrowthClass #13: Applications to Fiscal Policy.

- Slides03d .
- Required: Romer, Advanced Macroeconomics, ch.2.3-2.6.
- Note on the log-linearized optimal growth model .

- Slides03e .

- Required: Romer, Advanced Macroeconomics, ch.2.7 and sec.1-2 of the fiscal policy chapter (ch.12.1-12.2 in 4th ed; ch.13.1-2 in 5th ed).
Class #14: Introduction to Money. The Sidrauski model.

- Slides03f .
- For reference: Miguel Sidrauski: Rational Choice and Patterns of Growth in a Monetary Economy, American Economic Review 57, 1967, 534-544.
- For reference: Ricardo Lagos and Randall Wright: A Unified Framework for Monetary Theory and Policy Analysis, Journal of Political Economy 113, June 2005, 463-484.

Part 4. Overlapping Generations

Class #15: Main concepts.

Class #16-17: Applications to Fiscal Policy.

- Slides04a
- Required: Romer, Advanced Macroeconomics, ch.2.8-2.12.
- Notes on the OG model .
- For reference (more advanced): Acemoglu, Modern Economic Growth, ch.9.2-9.4.

Class #18: Dynamic efficiency and Fiat Money

- Slides04b .

- Recommended: Diamond, Peter: National Debt in a Neoclassical Growth Model, AER 55, 1965, 1126-1150. [Skim Sec.2-4. Focus on Sec.5ff as supplement to the class.]

- For reference: Barro, Robert: Are Government Bonds Net Wealth? JPE 82, 1974, 1095-1117.

- Slides04c .

- Optional: Blanchard/Fischer, Lectures on Macroeconomics, ch.3 (excl. 3.3) and ch.5.2. [Older book with more complete exposition than Romer]
- For reference (more advanced): Acemoglu, Modern Economic Growth, ch.9.1
- For reference: Abel, Mankiw, Summers, and Zeckhauser: Assessing Dynamic Efficiency: Theory and Evidence, Review of Economic Studies 56, 1989, 1-20.
Class #19: Exam Review.

This page and the resources listed are for the exclusive use of UCSB students enrolled in Econ 204A. If you run into technical glitches or errors on this page, please send me a message. Some links (notably to Jstor) can only be accessed from a UCSB server.

Please send any comments to henning.bohn@ucsb.edu