Advanced Macroeconomics

Francesco Giavazzi (10 lectures) and Alessandro Di Nola (2 lectures)

Fall 2013
Syllabus
1. Fiscal policy
Theory (classes 1, to 5)
Fiscal multipliers in a Keynesian model

Blanchard O., Output, the Stock Market, and Interest Rates, The American Economic
Review, Vol. 71, No. 1 (Mar., 1981), pp. 132-143

Fiscal multipliers in a neo-classical model

Marianne Baxter and Bob King (1993), Fiscal Policy in General Equilibrium, AER
Nicola Fontana and Marco Tabellini (2013), Can Cuts in Government Spending Be
Expansionary? mimeo, Bocconi university

Fiscal multipliers in a calibrated DSGE models

Uhlig, H (1999), A Toolkit for Analyzing Nonlinear Dynamic Stohocastic Models Easily,
in R. Marimon and A. Scott: Computational Methods for the Study of Dynamic Economies.
Oxford and New York: Oxford University Press, pp. 30-61.
Uhlig, H. (2010): Some Fiscal Calculus, American Economic Review, 100(2), 3034.
Woodford, M. (2011): Simple Analytics of the Government Expenditure Multiplier,
American Economic Journal: Macroeconomics, 3(1), 135.
Gal J., J. D. Lpez-Salido and J. Valls (2007), "Understanding the Effects of Government
Spending on Consumption", Journal of the European Economic Association, 5, 227--270.
Giancarlo Corsetti and A. Meier (2009), Fiscal stimulus with spending reversals, CEPR
Discussion Paper no 7302
Cimadomo, J, S. Hauptmeier and S. Sola (2011), Identifying the effects of government
spending shocks with and without expected reversals: an approach based on US real-time
data, ECB working paper no 1361.

Monetary-Fiscal Interactions
One of the classes on this topic will be taught by Alessandro on Monday November 25

Sargent, T. and N. Wallace (1981), Some unpleasant monetary arithmetic, Federal

Reserve Bank of Minneapolis Quarterly Review/Fall 1981
Leeper E. M. (2011), Fiscal Limits and Monetary Policy
http://mypage.iu.edu/~eleeper/Papers/LeeperFLandMP.pdf "
Leeper E. M. (2011), Monetary Science, Fiscal Alchemy", NBER Working Papers No.
16510, National Bureau of Economic Research, Inc.
Eric Leepers notes on Monetary-Fiscal interactions available at
http://mypage.iu.edu/~eleeper/SNU/Leeper_SimsPaperMoney.pdf

Sims, C.A. (2013): Paper Money. AER Presidential

Addresshttp://sims.princeton.edu/yftp/PaperMoney/PaperMoneyAER.pdf
Christiano L., M. Eichenbaum, and S. Rebelo (2011), "When is the Government Spending
Multiplier Large?", Journal of Political Economy, 119(1), 78121.
Eggertsson G. (2009), "What fiscal policy is effective at zero interest rates?", Federal
Reserve Bank of New York Staff Report, No. 402.

Empirical issues (classes 6, to 9)

Overview

Alberto Alesina and Francesco Giavazzi (eds), Fiscal Policy after the Financial Crisis:
Introduction, University of Chicago Press. 2013

Event studies and old-style identification using cyclically adjusted data

Giavazzi F. and M. Pagano (1990), "Can Severe Fiscal Contractions Be Expansionary? Tales
of Two Small European Countries ", in NBER Macroeconomics Annual 1990.
http://www.nber.org/chapters/c10973.pdf
Giavazzi Francesco, T. Jappelli, M. Pagano and M. Benedetti (2005): Searching for NonMonotonic Effects of Fiscal Policy: New Evidence, Monetary and Economic Studies.
http://didattica.unibocconi.it/mypage/upload/48751_20100308_033126_NONMONOTONIC
EFFECTSNEWEVIDENCE.PDF
Perotti R (2013)," The Austherity Myth: Gain without Pain?" in Alesina and Giavazzi (eds),
Fiscal Policy after the Financial Crisis, University of Chicago Press.
Alesina A. and S. Ardagna (2010), "Large Changes in Fiscal Policy: Taxes versus
Spending", Tax Policy and the Economy, vol. 24, 35--68, edited by J.R. Brown.
Alesina A. and S. Ardagna (1998), "Tales of fiscal adjustment", Economic Policy, 13(27),
487--545.

VAR Identification

Blanchard O. and R. Perotti (2002), "An Empirical Characterization of the Dynamic Effects
of Changes in Government Spending and Taxes on Output", Quarterly Journal of Economics,
117(4), 1329--1368.
Caldara, Dario and Christophe Kamps (2008), What are the Effects of Fiscal Policy
Shocks? A VAR-based comparative Analysis, European Central Bank, WP 877
Uhlig, Harald and Andrew Mountford (2009), What Are the Effects of Fiscal Policy
Shocks?" Journal of Applied Econometrics, 2009, 24(6), pp. 960-92.
http://dx.doi.org/10.1002/jae.1079
Auerbach A. and Y. Gorodnichenko, (2012), "Measuring the Output Responses to Fiscal
Policy", American Economic Journal: Economic Policy, 4(2), 1--27.

Anticipation Effects

Leeper, E, T B Walker and S Yang (2012), Fiscal foresight and information flows
http://mypage.iu.edu/~eleeper/Papers/LWY_Foresight_Final.pdf
Ramey, Valerie A. (2008), Identifying Government Spending Shocks: It s All in the
Timing, mimeo, UCSD.

Mertens K. and M. O. Ravn (2011), "Understanding the Aggregate Effects of Anticipated

and Unanticipated Tax Policy Shocks", Review of Economic Dynamics, 14(1), 27--54.

Evidence from Micro Data

Giavazzi F. and M. McMahon (2013), "The Household effects of Government Spending", in

A. Alesina and F. Giavazzi (eds.), Fiscal Policy After the Financial Crisis, University of
Chicago Press.

Narrative Identification

Ramey V. A. (2011), "Can Government Purchases Stimulate the Economy?", Journal of

Economic Literature, 49(3), 673--685.
Barro R. J. and C. J. Redlick (2011), "Macroeconomic Effects from Government Purchases
and Taxes", The Quarterly Journal of Economics, 126(1), 51--102.
Romer C. and D. H. Romer (2010), "The Macroeconomic Effects of Tax Changes:
Estimates Based on a New Measure of Fiscal Shocks", American Economic
Review, 100(3), 763--801.
Leduc, Sylvain and Daniel Wilson (2013), Roads to Prosperity or Bridges to
Nowhere? Theory and Evidence on the Impact of Public Infrastructure Investment,
NBER Macroeconomics Annual. University of Chicago Press, May, p. 89 142.
Favero, C. and F. Giavazzi (2012), Measuring Tax Multipliers: The Narrative
Method in Fiscal VARs, American Economic Journal: Economic Policy:

Volume 4, Issue 2, May.

Devries P., J. Guajardo, D. Leigh and A. Pescatori (2011), "A New Action-based
Dataset of Fiscal Consolidation"IMF Working Paper No. 11/128
J. Guajardo, D. Leigh and A. Pescatori (2011), "Expansionary Austerity New
International Evidence", IMF Working Paper No. 11/158,
Alesina, A., C. Favero and F. Giavazzi (2012), The output effect of fiscal
consolidations, NBER WP 18336

Local Projections

Jord, Oscar (2005), "Estimation and Inference of Impulse Responses by Local

Projections," American Economic Review, 95(1), 161-182.
Ramey, Valerie, (2013) Are Government Spending Multipliers Greater During
Periods of Slack? Evidence from 20th Century Historical Data with Michael Owyang
and Sarah Zubairy, American Economic Review Papers and Proceedings.

1. Credit Cycles and Limited Pledgability (classes 10 to 12 TBD)

One of the classes on this topic will be taught by Alessandro on Monday December 2nd

Nobu Kioyotaki and John Moore, Credit Cycles, Journal of Political Economy, 97
Caballero, R. (2004), Fiscal policy and financial depth, NBER wp 10532
Caballero, R. (2007) On the macroeconomics of asset shortages, NBER wp 12753.
Caballero, R., E. Farhi, and P.O. Gourinchas, (2008). An equilibrium model of
Global Imbalances and low interest rates, American Economic Review