Advanced Macroeconomics II
Advanced Macroeconomics II
Course Basic Information
Instructor: Chunyang Wang, Ph.D.
Office hours: Friday 1:30-3:30pm, or by walk in, or appointment, C320
E-mail: cywang@phbs.pku.edu.cn; cywangecon@gmail.com
Date: Monday & Thursday 10:30am-12:20
Location: C107
Object student: economics elective
Credits: 3
Teaching assistant: pending
Class webpage: cywangecon.weebly.com (You need to check it frequently to get class announcements)
Course Objectives
This course studies Macroeconomics and Finance. We study this area from the perspective of both theory and empirics. This course is divided into four parts. The first part deals with financial crisis, with recent financial crisis as background. The second part, which is the main part, studies the relation between Macro Economy and Financial sector. Questions include whether financial crisis leads to economic crisis or the vice versa. Although the mainstream viewpoint is that financial sector only plays the role of acceleration effect, there are some contradictory facts from the recent crisis, which makes this area one of the hottest topics right now, both in industry and in academia. The third part is about bubbles. Even though traditionally people view bubbles as a negative factor by crowding out investment, we see strong correlation between economic growth and bubbles. Economists propose that bubbles may alleviate financial frictions since firms can use them as collateral to borrow. The last part studies all of these issues empirically. You might, in your future dissertation, study these issues by using Chinese data.
Grades
1. Attendance checks: 10 (10%)
2. Write a 3-7 pages summary of the news on the ongoing European debt crisis (please include a chronology), (20%)
3. There will be no exams, but you will be required to do at least one group presentation. Your final grade will depend on the quality of your presentation. (70%)
E-mail
We use pkusz emails as our basic communication tool, but I will collect your personal email address as a backup. I expect everyone to check their e-mail at least daily. Frequently, time-sensitive announcement will be distributed via emails. Please be sure that you are on the distribution list for the class during the first 2 weeks of the course.
Show courtesy to your classmates and instructor by coming to class on time, turning off your cell phones, and not leaving the classroom during class time.
Reading List
(Please refer to the class website to get updates.)
(Important: You can use “cite by” in google scholar to get an idea what other work has been done based on that paper.)
1. Financial Crisis
(*) Brunnermeier, M. “Deciphering the 2007/8 Liquidity and Credit Crunch,” March 2008.
Gorton, G and Metrick, Andrew (2010a) “Securitized Banking and the Run on Repo” Journal of Financial Economics.
(*) Diamond, Douglas W. and Philip H. Dybvig (1983), Bank Runs, Deposit Insurance, and Liquidity, Journal of Political Economy 91(3), pp. 401-419.
Gorton Gary, (2010) Slapped by the Invisible Hand: The Panic of 2007, Oxford University Press.
Franklin Allen and Doug Gale “Understanding Financial Crisis” 2007
Carmen M. Reinhart and Kenneth S. Rogoff, (2009) “This Time is Different: Eight Centuries of Financial Folly”, Princeton University Press, 2009.
Gorton, G and Metrick, Andrew (2010b "Haircuts" Federal Reserve Bank of St. Louis Review.
Gorton Gary, (2009) “Information, Liquidity, and the (Ongoing) Panic of 2007,” American Economic Review, Papers and Proceedings, Papers and Proceedings
Gorton Gary, (2009) “The Subprime Panic,” European Financial Management (15)1 (January), 10-46.
Brunnermeir, M. and L.Pedersen, “Market Liquidity and Funding Liquidity,” Review of Financial Studies,
2. Macroeconomics and Finance
(**)Urban Jermann and Vincenzo Quadrini (2011) “Financial Frictions in Macroeconomic Fluctuations”
(**)Kiyotaki, N., & Moore, J. H. (1997). Credit Cycles. Journal of Political Economy, 105 (2), 211{48.
Bernanke, B.S. (1983). "Nonmonetary Effects of the Financial Crisis in the Propagation of the
Great Depression," American Economic Review 73: 257-76.
(*)Bernanke, B., & Gertler, M. (1989). Agency Costs, Net Worth, and Business Fluctuations. American Economic Review, 79 (1), 14{31.
(*)Bernanke, B., Gertler, M., & Gilchrist, S. (1999). The Financial Accelerator in a Quantitative Business Cycle Framework. In Taylor, J. B., & Woodford, M. (Eds.), Handbook of Macroenomics, Vol. 1C, chap. 21, pp. 1341{96. North Holland, Amsterdam: Elsevier Science.
(*)Gertler and Kiyotaki (2011) “Financial Intermediation and Credit Policy in Business Cycle Analysis”
(*)Levine, R. (2005): “Finance and Growth: Theory and Evidence,” in Handbook of Economic Growth, ed. By P. Aghion, and S. N. Durlauf, vol. 1A, pp. 865–934. Elsevier, Amsterdam.
3. Bubbles
Barlevy, G., “Economic Theory and Asset Bubbles,” Economic Perspectives, FRB Chicago, 3rd Quarter: 44-59, 2007.
(*)Tirole, J. (1985), “Asset Bubbles and Overlapping Generations,” Econometrica, 53(6):
1499—1528.
Farhi and Tirole (2010) “Bubbly Liquidity”, mimeo Harvard University
(*) Kocherlachota, N. R. (2009). Bursting Bubbles: Consequences and Cures. Unpublished manuscript, Federal Reserve Bank of Minneapolis.
(*) Martin and Ventura (2011) “Economic Growth with Bubbles”
Ventura (2011) “Bubbles and capital flows” Journal of Economic Theory
Arce, O. and Lopez-Salido,(2011) “Housing Bubbles,”
Allen, F. and D. Gale, “Bubbles and Crises,” Economic Journal, 110:236- 255, 2000.
Allen, F. and G.Gorton, “Churning Bubbles,” Review of Economic Studies, 60:813-836, 1993.
4. Empirics
Gan, Jie, (2007a). “Collateral, Debt Capacity, and Corporate Investment: Evidence from a Natural Experiment”, Journal of Financial Economics, 85:709-734.
(*)Gan, Jie, (2007b.) “The Real Effects of Asset Market Bubbles: Loan- and Firm-Level Evidence of a Lending Channel”, Review of Financial Studies, 20:1941-1973.
(**)Thomas Chaney, David Thesmar and Sraer (2011) “The Collateral Channel: How Real Estate Shocks affect Corporate Investment”
Kaplan, Steven N. and Luigi Zingales, 1997. “Do Investment-Cash Flow Sensitivities provide Useful Measures of Financing Constraints?”, The Quarterly Journal of Economics, 112: 169-215.
(*)Covas, F., & DenHaan, W. (2011). “The Cyclical Behavior of Debt and Equity Finance”. American Economic Review, 101 (2), 877{99