Table of Contents

Preface 

1 Introduction

    1.1 Review with AS–AD graphs 

2 Demand 

    2.1 Goods

    2.2 Money and Interest

    2.3 Monetary Policy 

    2.4 Crowding Out

3 Supply 

    3.1 Production 

    3.2 Expectations 

    3.3 Phillips Curve

    3.4 The Phillips Curve is Alive and Well 

4 Monetary Policy 26

    4.1 Targets

    4.2 Taylor Rules 

    4.3 Taylor’s Rule and the Fed 

5 Small Macro Model

    5.1 Equations of the Model 

    5.2 Solving for Equilibrium 

    5.3 Implications and Interpretations 

    5.4 Interest Rate Rule Stability 

6 The Great Recession & the Zero Lower Bound

    6.1 The Fisher Relation and Monetary Policy

    6.2 Loanable Funds and the Liquidity Trap 

    6.3 Policy at the ZLB 

    6.4 Policy Alternatives & Say’s Law 

         6.4.1 Forward Guidance

         6.4.2 Negative Rates

         6.4.3 Neo-Fisherian Policy 

         6.4.4 Say’s Law 

    6.5 Secular Stagnation

7 Fiscal and Monetary Policy Together

    7.1 A Model with Fiscal and Monetary Policy .

    7.2 Modern Monetary Theory 

    7.3 Fiscal Theory of Inflation 

         7.3.1 Unpleasant Monetarist Arithmetic 

         7.3.2 Evaluating MMT 

         7.3.3 Long Run Versus Short-Run Analysis 

    7.4 Real Debt Present Value Relation: Quick and Dirty Method

    7.5 Accommodative Fiscal Policy 

    7.6 Fiscal Theory of the Price Level 

    7.7 Compare and Contrast 

    7.8 Case Studies 

    7.9 Deriving the Present Value Relation: Straight and Narrow Version 

8 Consumption

    8.1 Empirical Foundations

    8.2 Utility Functions 

    8.3 Lifetime Consumption 

    8.4 Two-Period Model 

    8.5 Ricardian Equivalence 

9 Core DSGE Model

    9.1 The Household Problem 

    9.2 The Random Walk Hypothesis 

    9.3 Empirical Tests 

    9.4 IS–Fisher Relation 

    9.5 Money 

10 Asset Pricing

    10.1 Finance Lingo 

    10.2 The Weak EMH 

    10.3 The Strong EMH

    10.4 Empirical Evidence for the EMH 

    10.5 Rational Bubbles 

    10.6 Deep Thoughts about Expectations 

11 Solow Growth Model

     11.1 Model Assumptions 

    11.2 Evolution of Intensive Capital

    11.3 Growth Rates 

    11.4 Optimal Savings

    11.5 Wealth Inequality 

         11.5.1 Factors of Production 

         11.5.2 First Fundamental Law of Capitalism 

         11.5.3 Drivers of Inequality

    11.6 Endogenous Growth

12 Solow Model Empirics

    12.1 Cross-Country Data

    12.2 Time Series and Calibration 

         12.2.1 A Very Simple Example

         12.2.2 Real Business Cycles 

13 Growth and Climate Change

    13.1 Model with Damage

    13.2 Emissions 

    13.3 Social Cost of Carbon

14 Overlapping Generations Model

    14.1 Model Fundamentals 

    14.2 A Special Case

    14.3 A Not-So-Special Case

    14.4 Optimal Savings/Dynamic Efficiency 

    14.5 Secular Stagnation Redux 

15 Ramsey Model

    15.1 Baseline Model 

         15.1.1 Optimal Saving 

         15.1.2 Bonds 

    15.2 Optimal Taxation

         15.2.1 Households

         15.2.2 The Planner’s Problem 

    15.3 Growth

    15.4 Model for Simulation

         15.4.1 Shock to Productivity

         15.4.2 Deterministic Parameter Shifts 

         15.4.3 Pandemic Model

16 Conclusion

A Assorted Math Topics

    A.1 Geometric series 

    A.2 Rules for Expectations 

    A.3 Growth Rates 

    A.4 The Fisher Relation 

    A.5 Infinite Products

    A.6 The Chain Rule for Multi-Variate Functions 

B Difference Equations and Time Series 142

    B.1 Difference Equations

    B.2 Stochastic Models 

    B.3 The Lag Operator 

    B.4 Forward Operator

    B.5 Unit Roots 

C Programs

    C.1 EViews Time Series Simulation 

    C.2 Dynare simulation of the Small Macro Model

    C.3 Matlab Simulation of the Climate Model

    C.4 Dynare Simulation of the Ramsey Model 

    C.4.1 Stochastic Model 

    C.4.2 Deterministic Shift in the Discount Factor

    C.4.3 Pandemic Model

References