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My Ph.d. Macro reading list
For the first time in six (?) years, I will be teaching Ph.d. macro this fall. Here is a draft of my reading list. Comments are open and further suggestions are welcome, noting that we also have a Macro II course which covers wage and price stickiness as well as growth. Overall I am struck by how much the field is boiling down to common sense and a few key policy issues...
Books: J. Bradford DeLong: Intermediate Macroeconomics, and Paul Blustein, And the Money Kept Rolling in (and Out)
Real Business Cycles
Stadler, George. “Real Business Cycles,” Journal of Economic Literature, December 1994, 1750-1783.
Long, John B. and Plosser, Charles. “Real Business Cycles,” Journal of Political Economy, 1983, 39-69.
Barsky, Robert and Miron, Jeffrey. “The Seasonal Cycle and the Business Cycle,” Journal of Political Economy, 1989, 503-534.
Prescott-Summers debate, Quarterly Review, Minneapolis Fed., “Theory Ahead of Business Cycle Measurement,” “Some Skeptical Observations on Real Business Cycle Theory,” and “Response to a Skeptic.”
Bils, Mark. “The Cyclical Behavior of Marginal Cost and Price,” American Economic Review, 1987, 838-55.
Romer, Christina. “Changes in Business Cycles,” Journal of Economic Perspectives, Spring 1999, 23-45.
Black, Fischer. “Noise,” Journal of Finance, 1986.
Mehrling, Perry. “Understanding Fischer Black,” you can find this paper at: http://www.econ.barnard.columbia.edu/faculty/mehrling/understanding_fischer_black.pdf
Finance and interest rates
Ross, Stephen. “Finance,” In The New Palgrave, pp.322-336.
Chapters six and seven, “Objects of Choice,” and “Market Equilibrium”.
Jagannathan, Ravi and McGrattan, Ellen. “The CAPM Debate.” Federal Reserve Bank of Minneapolis, Fall 1995, 2-17.
Campbell, John Y. and Vuolteenaho, Tuomo, “Bad Beta, Good Beta,” American Economic Review, December 2004, 1249-1275.
Campbell, John, “Some Lessons for the Yield Curve,” Journal of Economic Perspectives, Summer 1995, 129-152.
Siegel, Jeremy and Thaler, Richard. “The Equity Premium Puzzle,” Journal of Economic Perspectives, Winter 1997, 191-200.
Kocherlakota, Narayana R. “The Equity Premium: It’s Still a Puzzle,” Journal of Economic Literature, March 1996, 42-71.
Lee, Charles, Shleifer, Andrei, and Thaler, Richard. “Anomalies: Closed End Mutual Funds,” Journal of Economic Perspectives, Fall 1990, 153-164.
Keynesian Economics Cowen, Tyler. “Why Keynesianism Triumphed Or, Could So Many Keynesians Have Been Wrong?”, Critical Review, Summer/Fall 1989, 518-530.
“Symposium: Keynesian Economics Today,” Journal of Economic Perspectives, Winter 1993, 3-82.
“Is There a Core of Practical Macroeconomics That We Should All Believe?” American Economic Review, symposium, May 1997, 230-246.
Taylor, John. “Reassessing Discretionary Fiscal Policy,” Journal of Economic Perspectives, Summer 2000, 21-36.
Bernheim, B. Douglas. “A Neoclassical Perspective on Budget Deficits,” Journal of Economic Perspectives, Spring 1989, 55-72.
Eisner, Robert. “Budget Deficits: Rhetoric and Reality,” Journal of Economic Perspectives, Spring 1989.
Stiglitz, Joseph E. “The Causes and Consequences of the Dependence of Quality on Price.” Journal of Economic Literature, March 1987, 1-48.
Hall, Robert E. “Employment Fluctuations with Equilibrium Wage Stickiness,” American Economic Review, March 2005, 50-65.
Summers, Lawrence. “The Scientific Illusion in Empirical Macroeconomics,” Scandinavian Journal of Economics, 1991, 129-148.
Monetary Policy
Blinder, Alan. “What Central Bankers Can Learn From Academics – and Vice Versa,” Journal of Economic Perspectives, Spring 1997, 3-20.
Bernanke, Ben and Mishkin, F. “Inflation Targeting,” Journal of Economic Perspectives, Spring 1997, 97-117.
Aiyagari, S. Rao, “Deflating the Case for Zero Inflation,” Federal Reserve Bank of Minneapolis, Quarterly Review, Summer 1990, 2-11.
“Symposium on the Monetary Transmission Mechanism,” Journal of Economic Perspectives, Fall 1995, 3-96.
Roberds, William. “What Hath the Fed Wrought? Interest Rate Smoothing in Theory and Practice,” Federal Reserve Bank of Atlanta, Economic Review, January/February 1992.
Shafir, Eldar, Diamond, Peter, and Tversky, Amos. “Money Illusion,” Quarterly Journal of Economics, May 1997, 341-374.
Caplin, Andrew and Spulber, Daniel. “Menu Costs and the Neutrality of Money,” Quarterly Journal of Economics, November 1987, 703-725.
Sargent, Thomas and Wallace, Neil. “Some Unpleasant Monetarist Arithmetic,” Federal Reserve Bank of Minneapolis, Quarterly Review, 1985, 1-17.
Wallace, Neil. “A Legal Restrictions Theory of the Demand for “Money” and the Role of Monetary Policy,” Federal Reserve Bank of Minneapolis Quarterly Review, Winter 1983.
Posen, Adam. “Why Central Bank
Independence Does Not Cause Low Inflation: There is No Institutional Fix for Politics,” in Finance and the International Economy, edited by Richard O’Brien, 1993.
Garrison, Roger, “The Austrian Theory of the Business Cycle,” At href="http://www.auburn.edu/~garriro/a1abc.htm"
Krugman, Paul. “The Hangover Theory,” at http://www.slate.com/id/9593
Cowen, Tyler. Risk and Business Cycles, chapter three.
Savings and social security Hubbard, R. Glenn and Skinner, Jonathan. “Assessing the Effectiveness of Savings Incentives.” Journal of Economic Perspectives, Fall 1996, 73-90.
Choi, Laibson, Madrian, and Metrick, “Optimal Defaults,” American Economic Review, May 2003, also at ttp://post.economics.harvard.edu/faculty/laibson/papers/optimaldefaults.pdf
Samwick, Andrew. Voxbaby weblog, read the entries on social security.
International Economics
Current issues: http://www.roubiniglobal.com/archives/2005/05/global_imbalanc.html
“If I Believed in Austrian Business Cycle Theory,” by
Tyler Cowen, on MarginalRevolution.com.
Brad Setser’s WebLog.
Dornbusch, Rudiger. “Purchasing Power Parity,” in The New Palgrave.
Friedman, Milton. “The Case for Flexible Exchange Rates.” In Essays in Positive Economics, 1953, University Chicago Press.
Mundell-Fleming model, see Brad’s book.
The World
Japan
Krugman, Paul R. “It’s Baaack:
Japan’s Slump and the Return of the Liquidity Trap,” Brookings Papers on Economic Activity, 1998, 29, 2, 137-87.
Kashyap, Anil K. “Sorting out Japan’s Financial Crisis,” Federal Reserve Bank of Chicago Economic Perspectives, 2002, 26, 4, 42-55.
China
XXXX
Europe
XXXX
Developing Nations
XXXX
History
Bordo, Michael D. “Essays in Exploration: A Survey of the Literature,” Explorations in Economic History, 1986, 339-415.
“Symposium: The Great Depression,” Journal of Economic Perspectives, Spring 1993, 3-102.
Romer, Christina H “What Ended the Great Depression?” Journal of Economic History, 1992, 52, 4, 757-84.
Here is a searchable link to Brad DeLong’s website: http://www.j-bradford-delong.net/movable_type/2005-3_archives/000084.html
Posted by Tyler Cowen on June 1, 2005 at 07:53 AM in Economics | Permalink
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Tyler Cowen writes, I will be teaching Ph.d. macro this fall. Here is a draft of my reading list. Comments... [Read More]
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» Macro Reading List from EconLog
Tyler Cowen writes, I will be teaching Ph.d. macro this fall. Here is a draft of my reading list. Comments... [Read More]
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Tyler Cowen writes, I will be teaching Ph.d. macro this fall. Here is a draft of my reading list. Comments... [Read More]
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» Macro Reading List from EconLog
Tyler Cowen writes, I will be teaching Ph.d. macro this fall. Here is a draft of my reading list. Comments... [Read More]
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Comments
"Overall I am struck by how much the field is boiling down to common sense and a few key policy issues..."
Wow,
All we did in grad school was read Romer, Farmer and Sargent textbooks until we were blue in the face. Neither I nor most of my colleagues had (or presently have) a clue what macroeconomics is really all about. I suspect many other graduates of similar programs would say the same thing. It looks like the GMU students are in for a good course. Unfortunately it's too late for me to learn.
-Mike
Posted by: Mike at Jun 1, 2005 10:19:23 AM
A probably false story about macro: Supposedly Cal Tech's econ program did not teach macro. When asked why, a professor replied "We teach fiction in the English Dept." That's always captured my feelings about a lot of it. Like Mike, my grad school experience of macro was dismal and technical. However.... since you are doing such an interesting course, how about making it "public" via a weblog - post your thoughts on each week's readings, let your students add comments, and open it to the great unwashed as well. We could all learn macro together.
Posted by: Andy at Jun 1, 2005 10:36:05 AM
A fine idea.
Posted by: Scott Scheule at Jun 1, 2005 10:47:17 AM
Most excellent - would love to read along.
Posted by: Jeremy from St. Louis at Jun 1, 2005 10:54:08 AM
Don't people love free lunch?
Posted by: Daniel Strauss Vasques at Jun 1, 2005 11:53:27 AM
Quite the change from Wagner's class!
Posted by: Noah Yetter at Jun 1, 2005 12:09:20 PM
disclaimer: I have not put much thought into this.
Barro's undergrad textbook is good on RBC view of the world.
Tools?
finance: Diamond-Dybvig (sp?); local interactions models
open economy stuff (6 puzzles paper; Obstfeld/Rogoff text);
home bias papers
Richmond Fed review article on price stickiness models
Hall 77 consumption; then Carroll's buffer-stock paper
Basu etc. on measuring productivity shocks and effects
at least one serious effects-of-aggregation paper
Posted by: randy at Jun 1, 2005 12:29:08 PM
Let me join the growing chorus - I'm so jealous. The first year Ph.D. students next year are in for real treat.
Posted by: Bill at Jun 1, 2005 1:13:01 PM
I just took Phd macro this past spring. We had a long reading list, but the course grade depended solely on cranking through analytical problems. Will your incentive scheme be different Tyler?
p.s. How many of my readings did I actually read?
Posted by: brian at Jun 1, 2005 1:13:34 PM
Since you have Cowen on "Why Keynesianism Triumphed", you might also want to add: Gene Smiley, "Can Keynesianism Explain the 1930s?: Reply to Cowen", Critical Review 5, and Cowen's rejoinder. Just a thought.
Posted by: Lawrence H. White at Jun 1, 2005 1:19:46 PM
Seems a bit short on the classics.
Posted by: cynic at Jun 1, 2005 4:22:44 PM
I think this entire syllabus contains maybe one paper I covered in my intire first year sequence at one school and none that I had at another. It just goes to show how much of Macro is unsettled (3 different programs cover almost 3 mutually exclusive sets of papers for their Macro sequences). You would never get this much variation in a Micro Sequence.
I am staring a Macro prelim in the face so maybe I am just bitter about the whole thing. But I think students would be better served in programs if the required tested core was Micro and Metrics with Macro as a field. I realize some schools test all three but for those that only test 2 I think Micro and Metrics is the better core.
Posted by: goodness_of_fit at Jun 1, 2005 5:28:57 PM
I always hated macro because the Keynesian stuff just seemed like castles in the air and the new classical stuff had all the things I didn't like about GE theory.
That said, you might want your students to know about sunspot equilibria and coordination theories of the business cycle. And Mortensen's labor search models cast a really different perspective on unemployement and macro policy.
Posted by: steve at Jun 1, 2005 7:08:21 PM
I always hated macro because the Keynesian stuff just seemed like castles in the air and the new classical stuff had all the things I didn't like about GE theory.
That said, you might want your students to know about sunspot equilibria and coordination theories of the business cycle. And Mortensen's labor search models cast a really different perspective on unemployement and macro policy.
Posted by: steve at Jun 1, 2005 7:08:21 PM
May have to sit in :) - FYI get a fair amount of Mundell-Fleming in Macro II. Have fun with it!
Posted by: Bex at Jun 1, 2005 8:36:03 PM
Shouldn't Kydland/Prescott be on your list?
Posted by: Bjørnar at Jun 2, 2005 5:45:32 AM
Can someone tell this curious reader how quant-heavy this class appears to be?
Also, Tyler, why not go the MIT Open Course route, and publish your lecture notes on the web?
Posted by: Bob Dobalina at Jun 2, 2005 10:25:07 AM
My son suggested I read your blog. I am thoroughly enjoying it. Andy's comment pertinent to the Macroeconomics reading list ("We teach fiction in the English department") brought back pleasant memories of doing economics with Professor Machlup at NYU. He despaired of people who thought they could be masters of the universe, a failing, I think, of all macroeconomists. When we, his students, said something silly (he thought that happened more than it should) his usual comment was, "Ach, rubbish!" Invariably, he was right. Being a modest but thoroughly arrogant man he said the only book anyone ever needs to read about macroeconomics was Schumpeter's work on the business cycle. He once told us he thought Keynes was the most clever fellow he ever met and dangerous because he was so clever. He also said Keynes' greatest achievment was giving academic varnish to the politics of Tammany Hall. Thank you for tickling my brain cells.
Posted by: Larry Glenn at Jun 2, 2005 11:32:35 AM
I am amazed that the General Theory is not part of the reading. Has anybody even heard of Minsky? No wonder macroeconomists have such a dismal record at understanding real-world issues.
BTW, let me say that RBC is a joke EVEN if you accepted the pardigms of neoclassical economics. No serious microeconomist will believe that the aggregation conditions required for representative agents to representative actually hold. And RBC theorists have the gall to demand microfoundations of others?
Regards
Posted by: tea at Jun 2, 2005 12:53:44 PM
Tea - No one has time to plow through a 385-page (I just checked my copy) tome like Keynes's General Theory in grad school. Especially since there's no effin model in that book, as with all books of that era. If you're a fan of Keynes, you can find plenty of specific, concrete Keynesian models in modern Macro, so that's a better option. Just crack open, e.g., Blanchard and Fisher's textbook. Models up the wazoo!
Posted by: Tom at Jun 2, 2005 4:37:58 PM
Surprised not to see Barro-Gordon 1983 on this list. Something to balance Posen. Or find a good survey on CBI. International econ: A fear of floating paper would help. And I'll second Kling's recommendation of Fischer's hyperinflation survey.
Hope you'll blog the course -- I miss teaching this.
Posted by: kb at Jun 3, 2005 12:19:20 AM
No specific model in Keynes's general theory ? Well - true - he does not draw pictures like an Econ 101 textbook, but there is certainly a model there. There are even a few equations, for those who think that words are meaningless. But what makes Keynes so tricky to read for those who started their economics with textbooks is that many of the things a textbook tells you about Keynes' general theory are not quite true. This makes reading Keynes disconcerting.
- For example - which textbook tells you that in the GT you are typically off the labour supply curve (ie inside the curve) but that firms remain on the labour demand curve? Almost none.
- How many textbooks assume that Keynes's results arise from "non-rational" expectations about real wages and prices - hundreds. Something which is not true - Keynes largely assumed rational expectations (entrepreneurs are assumed to guess right)
- How many textbooks explain clearly that in Keynes's model aggregate saving is purely a residual? That aggregate saving is driven entirely by the level of aggregate investment and that changes in individial saving behaviour affect only aggregate consumption, and not aggregate saving?
- Which textbook explains clearly the difference between Keynes's theory of interest rate determination (based on demand for asset stocks) as opposed to the classical view of the world (flow based)? Almost none.
(As an aside, almost every explanation of interest rate determiniation I see in textbooks is in terms of naive cross diagrams with demand and suppply of "loanable" funds on the axes. The text then goes on the explain that interest rates are "determined" by the supply and demand for "loanable" funds, as if this was obvious. But "loanable funds" are almost never properly defined. And almost never is there any discussion about whether loanable funds are a stock or a flow variable, or what difference this makes to the theory)
In short - Keynes is difficult to read because we are used to nice pat textbook explanations with nice simple supply demand diagrams. You don't get these in the GT. What you get is a book that requires you to question your ideas about causality, and that requires you to think about how the stocks and flows fit together.
And having read through explanations of these issues in many textbooks, and having read Keynes' GT thoroughly, I learnt a lot more from the GT. And Certainly any PhD student should have read the General Theory. Critically, of course.
If the problem is that Grad School means one doesn't have enough time to read such books, because you are all too busy solving dynamic programming problems - well - too bad - another generation of mathematically trained economists with no sense of the history of the subject on the way. And I guess that means you one also doesn't have any time to read Kuhn, Popper, Lakatos, Blaug, Elster, Mirowski or anyone else on the methodology and history of social science. But of course - I'd forgotten - economics is a "hard" science that develops linearly, so no need to read anything more than about 20 years old (hey - the maths is getting tougher - that must be progress? right?)
On the list itself - my suggestion would be that you add a couple of good papers up front that highlight the national and sectoral accounts, the differences between stock and flow variables, and the difference between identities and behavioural relationships. There are a few good papers around looking at the current US macro imbalances in this kind of framework (eg - a couple of good papers from Godley et all on levy.org) Everyone assumes that students understand the basic accounting framework if they've done an undergrad degree. But it just ain't true.
Posted by: rjw at Jun 3, 2005 7:34:47 AM
RJW - I like specific models because they force the economist to be clear and consistent. For example, consider expectations. You mention that Keynes largely assumed rational expectations. Yet there's also the famous passage about "animal spirits" and the denial that rationality even means anything, for practical purposes, when one is forecasting at long horizons. This is what is invalid, not just about this book, but about "literary" economics in general - too much freedom to contradict oneself.
No, more advanced math is not necessarily progres, but internal consistency is.
Posted by: Tom at Jun 3, 2005 8:29:29 AM
Do you think rational expectations is passe or now
encompassed in some more modern school of thought ?
Posted by: dc at Jun 4, 2005 1:34:35 AM
Tom,
Keynes essentially assumes "rational expectations" in the short run - in the sense that he assumes entrepreneurs guess right about the market demand for their product in the current production period. They do not systematically have expectations that are falsified. Keynes does this to explain the mechanics of the model without overcomplicating the discussion of equilibrium.
However - Keynes is at pain to stress that in reality, when it comes to investment spending, forming expectations is very tricky, as the profitability of investment depend on myriad factors. At that points Keynes starts to stress the difficulty of forming reasonable expectations about the long run. And animal spirits come into play.
Keynes is not being inconsistent.
He is simply talking about two different things.
Posted by: rjw at Jun 6, 2005 6:04:16 AM
