14.462  Advanced Macroeconomics II

As agreed today, let me add one lecture next tuesday, same room, same place.  I hope to finish in half an hour or so.  We can use more time if you want after that for questions, issues, and so on.  (In answer to an email request: I shall also try to give you a sense of generals)

 

1. you may want to download topic2-2 before the lecture, as there is a bit of math, and it may be easier to follow with a print-out of the notes.

2.  the seminar next week, by Heathcote, is on a topic relevant for the course (later).  you may want to attend.

 

(1)  I shall teach this thursday, on ``The great moderation''.  Guido will teach part of next tuesday, and then we shall shift to labor markets and unemployment.

(2)  I have put the Soderlind notes on Kalman filtering, used by Victor, in the materials section

(3)  Guido and I are looking for an RA for part of this summer (or even before)  to work on news and noise, and whether one can see business cycle fluctuations through those lenses.   Email if interested.

 

Two points

(1)  Victor has generously agreed to give a lecture on Kalman filtering this friday at 2.30, in the room in which you usually have recitations. 

(2)  At today's lecture, I was struck at the scope for intellectual arbitrage between macro and behavioral.  The models by Jaimovich and Rebello, and by Christiano et al, both do reverse engineering.  Given that we want to reduce the income effect on labor supply, what preferences do we need to achieve this?  But they both do this with many auxiliary assumptions (competitive markets, no other imperfections, and so on).   One could explore these issues without the auxiliary assumptions, through experiments, natural or not.   What do we know about the strength and the dynamics of the income effect on labor supply (as I indicated, the same issues arise in models with non-competitive labor markets.   The wage equation typically inherits many of the characteristics of the underlying labor supply).  

 

I have found an excellent presentation of VARs and associated time series issues in a new book, by Canova, ``Applied macroeconomic research'', coming out in Princeton University Press this year.  The chapters are on his web site, http://www.crei.cat/people/canova/publications.html  .  Chapter 3 is about VARs.  The other chapters are very useful as well.