Ec 741B    

 

Penguins on the ice cliff and investors in an economy face a similar situation, whether to jump in the water when it is safe from killer whales or invest and hire in the business cycle under good economic conditions, ride a speculative bubble, run a speculative attack on a weak currency or a weak financial institution.

 

The second half of Ec 741 is devoted to current research in theoretical macroeconomics with special attention to: social learning and coordination without common knowledge, networks, financial networks and contagion, granular economy, aggregate demand with decentralized trade. 

1. (Oct. 4) Strategic complementarities and coordination 

As a preparation for the first lecture this coming Wednesday, download the set of notes that I have tailored for this session:

Focus on the following pages: 37-42, 55-57 (and whatever before that you need to read in order to understand pages 55-57), 76-94, 107-120. The purpose of the session will be to present an overview of the material that is required to understand the following paper. There will be no time to go farther than the introduction of the paper. The reading of the paper will be left to you after the lecture.

  • Fajgelbaum, Pablo, Edouard Schaal and Mathieu Taschereau-Dumouchel (2016). ``Uncertainty traps'', The Quarterly Journal of Ecomics (forthcoming)paper, slides.

References

  • Bikhchandani, S., D. Hirshleifer, and I. Welch (1992): “A theory of fads, fashion, custom, and cultural change as informational cascades,” Journal of political Economy, 992–1026.
  • Bloom, N. (2009): “The Impact of Uncertainty Shocks,” Econometrica, 77, 623–685.
  • Chamley, C. and D. Gale (1994). “Information Revelation and Strategic Behavior in a Model of Investment,” Econometrica, 62, 1065-1085.
  • Chamley, C. (2004). “Delays and Equilibria with Large and Small Information in Social Learning,” The European Economic Review 477-501.
  • Morris, s. and H.S. Shin (1998). Unique Equilibrium in a Model of  Self-fulfilling Currency Attacks," AER (1998). 587-597.
  • Carlsson, H. and van Damme, E. (1993). "Global  Games and Equilibrium Selection," Econometrica61, 989-1018.
  • Chamley, C. (1999). "Coordinating Regime Switches,'' Quarterly Journal of Economics, 114, 869-905,  in Chapter 12 of RT.
  • Morris, S. and H.S. Shin (2004). "Liquidity Black Holes," Review of Finance, 8, 1-18.  

 Problem 1 (the big push)