Min Ouyang



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Econ 210F: Spring 2011

Macroeconomic Theory and Evidence



Time and Location of the Lecture:

·         Tue & Thu 9:30 – 10:50, SSPA 3132

Lecture Outline






Week #1

Empirical Explorations of Life Cycle Hypothesis: with aggregate data

Week #2

Empirical Evidence of Life Cycle Hypothesis: with household data.

Week #3

Empirical Exploration of Business Cycles: pro-cyclical productivity.

Week #4

Empirical Exploration of Business Cycles: expansionary or contractionary technology?

Week #5

Labor Market Evidence: unemployment and reallocation

Week #6

Labor Market Theories: search and matching models

Week #7

Labor Market Evidence: a revisit

Week #8

Labor Market Institutions: theories and evidence

Week #9

Business Cycles and Growth: the long-run impact of business cycles.

Week #10

Business Cycles and Growth: the creative destruction



Problem Sets:

Problem Set 1

Problem Set 2

Problem Set 3

Problem Set 4

READING LIST (subject to revisions)


I.             Consumption: Evidence


A. Life-cycle Permanent Income Hypothesis


Romer, Chapter 7.


Cochrane, J. “A Simple Test of Consumption Insurance,” Journal of Political Economy, 1991.


*Hall, R. “Stochastic Implications of the Life Cycle-Permanent Income Hypothesis: Theory and Evidence,” Journal of Political Economy, 1978.


Hsieh, C. “Do Consumers React to Anticipated Income Changes? Evidence from the Alaska Permanent Fund”, American Economic Review, 2003.


*Shea, J. “Union Contracts and the Life Cycle-Permanent Income Hypothesis,” American Economic Review, 1995.


*Shea, J. “Myopia, Liquidity Constraints, and Aggregate Consumption: A Simple Test,” Journal of Money, Credit and Banking, 1995.


*Wilcox, D. “Social Security Benefits, Consumption Expenditure, and the Life Cycle Hypothesis,” Journal of Political Economy, 1989.


*Zeldes, S. “Consumption and Liquidity Constraints: an Empirical Investigation,” Journal of Political Economy, 1989.



B. Alternative Models


*Deaton, A, “Saving and Liquidity Constraints,” Econometrica, 1991.


Carrol, Chris, “How Does Future Income Affect Current Consumption?” Quarterly Journal of Economics 109, 1994, pp111-147.


Fuchs-Schündeln, N. and M. Schündeln, “Precautionary Savings and Self-Selection - Evidence from the German Reunification ‘Experiment’,” Quarterly Journal of Economics, 2005.


Hubbard, Glenn, Skinner, Jonathan; and Stephen Zeldes, “Precautionary Saving and Social Insurance,” Journal of Political Economy 103, 1995, pp.360-399.


Laibson, David, “Golden Eggs and Hyperbolic Discounting,” Quarterly Journal of Economics, 1997.


*Zeldes, S. “Optimal Consumption with Stochastic Income: Deviations from Certainty Equivalence,” Quarterly Journal of Economics, 1989.

I.             Business Cycles: Evidence


Abraham, K. and J. Haltiwanger. “Real Wages and the Business Cycle,” Journal of Economic Literature, 1995.


*Christiano, L. and Fitzgerald, “The Business Cycle: It’s Still a Puzzle,” Economic Perspectives, Federal Reserve Bank of Chicago, 1998.


Cooley, Thomas and Prescott, Edward. "Economic Growth and Business Cycles", in Thomas Cooley, (Ed.), Frontiers of Business Cycle Research, Princeton, 1994.


*Bartelsman, B. and J. Haltiwanger. “Labor Productivity: Structural Change and Cyclical Dynamics,” Review of Economics and Statistics, 2001.


*Basu, S. “Procyclical Productivity: Increasing Returns or Cyclical Utilization?" Quarterly Journal of Economics, 1996.


*Basu, S., J. Fernald, and M. Kimball, “Are Technology Improvements Contractionary?American Economic Review, 2007, also available as NBER Working Papers 10592, 2004.


*Michelle Alexopoulos, "Read All About it: What happens following a technology shock," Department of Economics, University of Toronto, 2004.


*Shea, J. “What Do Technological Shocks Do?” Bernanke, B. and J. Rotemberg, (Ed.), NBER Macro Annual 1998.


*Yongsung Chang & Jay H. Hong, "Do Technological Improvements in the Manufacturing Sector Raise or Lower Employment?," American Economic Review, March 2006.


II.           Labor Market


Romer, Chapter 9.


* Davis, S., J. Faberman and J. Haltiwanger, “The Flow Approach to Labor Markets: New Data Sources and Micro-Macro Links,” Journal of Economic Perspectives,     Summer, 2006.


* Davis, S. and J. Haltiwanger, "Gross Job Flows,” Handbook of Labor
, Amsterdam: North-Holland, 1999.


*Hall, R. “Job Loss, Job Finding, and Unemployment in the U.S. Economy over the Past Fifty Years,” NBER Macro Annual 2005. Comment by Davis; Comment by Kennan.


*Shimer, Robert. “Reassessing the Ins and Outs of Unemployment,” Department of Economics, University of Chicago, 2005.


* Shimer, Robert. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies," American Economic Review, vol. 95(1), pages 25-49, March 2005.


Barlevy, G., “The Sullying Effect of Recessions,” Review of Economic Studies, 2002.


*Mortensen, D. and Pissarides, C. “Job Creation and Job Destruction in the Theory of Unemployment,” Review of Economic Studies, 1994.


* Caballero, R. and Hammour, M. “The Cleansing Effect of Recessions,” American Economic Review, 1994


Pries, M. "Persistence of Employment Fluctuations: a Model of Recurring Job Loss." Review of Economic Studies, 2004.


Pries, M. and Rogerson, R. “Hiring Policies, Labor Market Institutions, and Labor Market Flows,” Journal of Political Economy, 2005.


*Shimer, R. “The Cyclical Behavior of Equilibrium Unemployment and Vacancies,” American Economic Review, 2005.


Ouyang, M. “The Scarring Effect of Recessions,” University of California at Irvine, 2007.


III.          Business Cycles and Growth:


A. The Long-run Impact of Business Cycles


*Aghion, P. and G. Saint-Paul, “Virtues of Bad Times: Interaction Between Productivity Growth and Economic Fluctuations,” Macroeconomic Dynamics, 1998.


Barlevy, G. “The Cost of Business Cycles under Endogenous Growth,” American Economic Review, 2004.


Barlevy, G. “On the Timing of Innovation in Stochastic Schumpeterian Growth Models,” NBER Working Papers 10741, 2004.


Ramey, G., and V. Ramey, “Cross-country Evidence on the Link between Volatility and Growth,” American Economic Review, 1995.


B. Creative Destruction Models


*Aghion, P. and Howitt, P. “A Model of Growth through Creative Destruction,” Econometrica, 1992.


*Aghion, P. and Howitt, P. “Growth and Unemployment,” Review of Economic Studies, 1994.


*Caballero, R. and M. Hammour, “The Cleansing Effect of Recessions,” American Economic Review, 1994.


*Caballero, R. and M. Hammour, “On the Timing and Efficiency of Creative Destruction,” Quarterly Journal of Economics, 1996.


Caballero, R. and M. Hammour, “The Cost of Recessions Revisited: A Reverse Liquidationist View,” Review of Economic Studies, 2005.




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