Because the Washington Post story, dated Oct 2 2015, by Steven Pearlstein about Olivier Blanchard (“The smartest economist you’ve never heard of” [sic]) has picked up considerable social media attention, I decided to post (way out of sample for me–Blanchard hardly deserves to be transported into the defunct class of academic scribblers) a transcription of a copy of his course outline and readings for the first half-semester course of macroeconomics in the MIT graduate program during the academic year 1996-97. The copy can be found in Robert Solow’s papers in the Economists’ Papers Project at Duke. Solow taught the same course in 1998 and undoubtedly wanted to see what material Blanchard had covered.
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14.451 Macroeconomics I Spring 1997
Olivier Blanchard, […]
TA: Brian Sack, […]
The purpose of this first course is to introduce the workhorses of the field, and use them to analyze current issues.
I shall assume familiarity with macroeconomics at the level of undergraduate macro-textbooks (you will get much more out of the course if you are very familiar with macroeconomics at the intermediate undergraduate level.) Two such textbooks, taken completely at random, are:
Dornbusch, R. and S. Fischer, Macroeconomics, McGraw Hill, 6th edition
Blanchard, O. Macroeconomics, Prentice-Hall, 1996
You should before you graduate, and preferably sooner, read some of the classics in the field. Three essential readings are:
Keynes, J. M. The General Theory of Employment, Interest, and Money, Harcourt Brace, New York, 1964 (first edition, 1936)
Hicks, J. R., Value and Capital, Oxford University Press, 1968 (first edition, 1939)
Modigliani, F., “Liquidity Preference and the Theory of Interest and Money”, Econometrica 12, January 1944, 45-88 (reprinted in Collected papers, Volume 1, MIT Press, 1982)
The textbook for the course is:
Blanchard, O. and Fischer, S. Lectures on Macroeconomics, MIT Press, Cambridge, 1989 (BF in what follows)
A text, which covers roughly the same set of issues at a slightly lower level, is:
David Romer, Advanced macroeconomics, McGraw Hill 1996.
A star denotes required reading.
1. Basic macroeconomic facts.
* BF, Chapter 1
Gordon, R., “Postwar Macroeconomics: The Evolution of Events and Ideas”, in The American Economy in Transition, Martin Feldstein ed., NBER and the University of Chicago, 1980, 101-182
Stock, J. and Watson, M., “Variable Trends in Economic Time Series”, Journal of Economic Perspectives, Summer 1988, 147-174
Blanchard, O. and Quah, D., “The Dynamic Effects of Aggregate Demand and Supply Disturbances”, AER, September 1989, 655-673
Abraham, K. and J. Haltiwanger, “Real Wages and the Business Cycle”, JEL, September 1995, volume 33-3, 1215-1264
Christiano, L., Eichenbaum M., and C. Evans, “The Effects of Monetary Policy Shocks: Evidence from the Flow of Funds”, Working paper, 1994.
2. The Ramsey Model and RBC’s.
*BF, Chapter 2 (Romer, Chapters 2, Part A, and 4)
Prescott, E., “Theory Ahead of Business Cycle Measurement”, Quarterly Review, Fed of Minneapolis, Fall 1986, 9-22
*Cooley, T. and E. Prescott, “Economic Growth and Business Cycles”, in Frontiers of Business Cycle Research, T. Cooley (ed), Princeton University Press, Princeton, 1995, 1-38
Evans, C. and F. Santos, “Monetary Policy Shocks and Productivity Measures in the G-7 countries”, WP 93-12, November 1993, Federal Reserve Bank of Chicago
3. The Diamond Model, and Capital Accumulation.
*BF, Chapter 3 (or Romer, Chapter 2, Part B)
*Kotlikoff, L., “Privatization of Social Security: How it Works and Why it Matters”, mimeo, Boston University, October 1995
Barro, R., “World Real Interest Rates”, NBER Macroeconomics, 1990, 15-60
Orr, A., Edey M. and M. Kennedy, “The Determinants of Real Long-Term Interest Rates: 17 Country Pooled-Time-Series Evidence”, OECD Working Paper 155, 1995
4. The Cagan Model, and Hyperinflations.
*BF, chapters 4-7, and 10-2 (Romer Chapter 9-7)
Dornbusch, R., Sturzenegger, F. and H. Wolf, “Extreme Inflation: Dynamics and Stabilization”, BPEA, 1990-2, 1-84
5. The AS-AD Model; Money, Prices and Output
*BF, chapter 8 (Romer, Chapters 5 and 6)
*Friedman, M., “The Role of Monetary Policy”, AER, March 1968, 1-17
*Lucas, R., “Some International Evidence on Output-Inflation Trade-offs”, AER, June 1973, 326-334
*Taylor, J., “Staggered Wage Setting in a Macro Model”, AER, May 1979, 69-2, 108-113
Tobin, J., “Keynesian Models of Recession and Depression”, AER, May 1975, 195-202
Chari, V.V., Kehoe Patrick, and Ellen McGrattan, “Sticky Price Models of the Business Cycle: Can the Contract Multiplier Solve the Persistence Problem?”, Staff Report 217, Minneapolis Fed, September 1966
Blanchard, O. and L. Summers, “Hysteresis in Unemployment,” European Economic review, 31, 1987, 288-295
Ball, L., “Disinflation and the Nairu,” NBER Working Paper 5520, March 1996
OECD, The OECD Jobs Study, Part I. Labour Market Trends and Underlying Forces of Change, 1994.
6. The IS-LM Model; Goods and Financial Markets Revisited.
*Blanchard, O., “Output, the Stock Market, and Interest Rates”, AER, 1981, 71-1, 132-143.
*Dornbusch, R., “Expectations and Exchange Rate Dynamics”, JPE, 84-6, December 1976, 1161-1176
Kashyap, A. and J. Stein, “Monetary Policy and Bank Lending”, in Monetary Policy, G. Mankiw (ed), NBER and the University of Chicago Press, 1994, 221-262
*Giavazzi, F. and M. Pagano, “Can Severe Fiscal Contractions Be Expansionary; Tales of Two Small European Countries”, NBER Macroeconomics Annual, 1990, 75-122
Alesina, A. and R. Perotti, “Fiscal Expansions and Adjustments in OECD Countries”, Economic Policy, 1995 (mimeo, Harvard, June 1995)
Obstfeld, M., “International Currency Experience: New Lessons and Lessons Relearned,” Brookings Papers on Economic Activity, 1995-1, 119-220
King, R. and A. Wolman, “Inflation targeting in a St Louis model of the 21st Century”, NBER WP 5507, March 1996
7. The Bigger Machines.
Bryant, R. et al, Empirical Macroeconomics for Interdependent Economies, Brookings Institution, Washington, 1988, chapters 1 to 3.
Taylor, J., Macroeconomic Policy in a World Economy, Norton, New York, 1993, chapters 3 to 5
Source: Robert M. Solow papers, Duke University Rubenstein Library, Box 69, Folder “Teaching Materials (2 of 2)”.