Advanced Macroeconomic Theory

This course introduces advanced macroeconomic theory. The learning material is generally divided into four parts. The first part introduces the main growth models: the Solow growth model and models with microeconomic foundations, the Ramsey-Cass-Koopmans model, and the overlapping generations (OLG) models of Diamond. Particular attention is paid to the models' ability to satisfactorily explain differences in the level and rate of per capita income growth across countries and over time. The OLG model also forms the basis for theories of asset price bubbles and speculative behavior. The section concludes with a discussion of endogenous growth models, the AK model, with applications to learning-by-doing models. The second part discusses the main components of aggregate demand: consumption (the permanent income hypothesis), and investment (Tobin's Q-theory). The third part discusses the microeconomic foundations of price and wage rigidity: the Lucas island model, the Keynesian model of imperfect competition, and staggering contracts (Fisher). The final part discusses recent theories on labor markets and unemployment: efficiency wages, job search, implicit contracts, and insider-outsider models.