Dynamic Macroeconomic Theory

ISBN-10: 0674218779

ISBN-13: 9780674218772

Edition: 1987

List price: $95.00 Buy it from $63.23
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Description:

The tasks of macroeconomics are to interpret observations on economic aggregates in terms of the motivations and constraints of economic agents and to predict the consequences of alternative hypothetical ways of administering government economic policy. General equilibrium models form a convenient context for analyzing such alternative government policies. In the past ten years, the strengths of general equilibrium models and the corresponding deficiencies of Keynesian and monetarist models of the 1960s have induced macroeconomists to begin applying general equilibrium models. This book describes some general equilibrium models that are dynamic, that have been built to help interpret time-series of observations of economic aggregates and to predict the consequences of alternative government interventions. The first part of the book describes dynamic programming, search theory, and real dynamic capital pricing models. Among the applications are stochastic optimal growth models, matching models, arbitrage pricing theories, and theories of interest rates, stock prices, and options. The remaining parts of the book are devoted to issues in monetary theory; currency-in-utility-function models, cash-in-advance models, Townsend turnpike models, and overlapping generations models are all used to study a set of common issues. By putting these models to work on concrete problems in exercises offered throughout the text, Sargent provides insights into the strengths and weaknesses of these models of money. An appendix on functional analysis shows the unity that underlies the mathematics used in disparate areas of rational expectations economics. This book on dynamic equilibrium macroeconomics is suitable for graduate-level courses; a companion book, Exercises in Dynamic Macroeconomic Theory, provides answers to the exercises and is also available from Harvard University Press.
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Book details

List price: $95.00
Copyright year: 1987
Publisher: Harvard University Press
Publication date: 2/27/1987
Binding: Hardcover
Pages: 384
Size: 6.50" wide x 9.75" long x 1.25" tall
Weight: 1.430
Language: English

Thomas J. Sargent is Donald Lucas Professor of Economics at Stanford University and Senior Fellow at the Hoover Institution. A pioneer of the rational expectations school of macroeconomics, he is the author of The Conquest of American Inflation (Princeton), Bounded Rationality in Macroeconomics, and Dynamic Macroeconomic Theory. François R. Velde is Senior Economist at the Federal Reserve Bank in Chicago and Lecturer in Economics at the University of Chicago.

Introduction
References and Suggested Readings
Real Dynamic Macroeconomic Models
Dynamic Programming
A General Intertemporal Problem
A Recursive Problem
Bellman's Equations
Nonstochastic Examples
The Optimal Linear Regulator Problem
Stochastic Control Problems
Examples of Stochastic Control Problems
The Stochastic Linear Optimal Regulator Problem
Dynamic Programming and Lucas's Critique
Dynamic Games and the Time Inconsistency Phenomenon
Conclusions
Exercises
References and Suggested Readings
Search Nonnegative
Random Variables
Stigler's Model of Search Sequential
Search for the Lowest Price
Mean-Preserving Spreads
Increases in Risk and the Reservation Price
Intertemporal Job Search
Waiting Times
Firing Jovanovic's
Matching Model
Conclusions
Exercises
References and Suggested Readings
Asset Prices and Consumption
Hall's Random Walk Theory of Consumption
The Random Walk Theory of Stock Prices
Lucas's Model of Asset Prices
Mehra and Prescott's
Finite-State Version of Lucas's Model Asset Pricing
More Generally
The Modigliani-Miller Theorem
Government Debt and the Ricardian Proposition
Remarks on Testing and Estimation
Conclusions
Exercises
References and Suggested Readings
Monetary Economics and Government Finance
Currency in the Utility Function
The Price of Inconvertible
Government Currency in Lucas's
Tree Model Issues and Models in Monetary Economics
Government Debt in the Utility Function
Government Currency in the Utility Function
Seignorage and the Optimum Quantity of Currency
A Neutrality Proposition
Conclusions
References and Suggested Readings
Cash-in-Advance Models
A One-Country Model
Fisher Equations
Inflation-Indexed
Government Debt Interactions of Monetary and Fiscal Policies Interest on Reserves
A Two-Country Model
Exchange Rate Indeterminacy
Conclusions
Exercises
References and Suggested Readings
Credit and Currency with Long-Lived Agents
The Physical Setup Optimal Allocations Competitive Equilibrium
A Digression on the Balances of Trade and Payments
The Ricardian Doctrine about Taxes and Government Debt
The Model with Valued Currency and No Private Debt
An Interventionist Optimal Monetary Equilibrium
Townsend's "Turnpike" Interpretation
Conclusions
Exercises
References and Suggested Readings
Credit and Currency with Overlapping Generations
The Overlapping-Generations Model
The Ricardian Doctrine about Taxes and Government Debt Again
A Ricardian Proposition Currency, Bonds, and Open-Market
Operations Computing Equilibria Interpretations as Currency
Equilibria Optimality
Four Examples on Inflation and Its Causes
Seignorage and the Laffer Curve
Dynamics of Seignorage Forced Saving International Exchange Rates
Conclusions
Exercises
References and Suggested Readings
Government Finance in Stochastic
Overlapping-Generations Models
The Economy Some Examples
A General Irrelevance Theorem Wallace's Modigliani-M
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