EC813B Macroeconomics and its Mathematical Foundations (PhD first-year sequence)  Michigan State University (Spring 2025)

• Sequence versus Recursive Formulation

• Contraction Mapping Theorem and Principle of Optimality

• Guess and Verify, Functional Euler Equation, and Value Function Iteration

• Stochastic Dynamic Programming

• Recursive Competitive Equilibrium

• Matlab: Value Function Iteration and Model Simulation


2. Search-Theoretical Models: Rogerson, Shimer, and Wright (2005)

• McCall Random Search Model

• Diamond-Mortensen-Pissarides: Matching and Wage Bargaining

• Burdett-Mortensen: On-the-Job Search and Wage Posting

• Directed/Competitive Search

• Search in the OTC Market


3. Income Fluctuation Problem:

• Consumption-Savings Problems:

– Permanent Income Theory

– Consumption Smoothing and Precautionary Savings

• Neoclassical Investment Models:

– User Cost Model and Tobin’s Q

– Investment with Convex and Non-Convex Adjustment Costs


4. Real Business Cycles with Financial Frictions:

• Vanilla RBC Models: Dynare Implementation, Simulation, and Impulse Response Functions

• Working Capital Constraints: Jermann and Quadrini (2012)


5. Endogenous Growth Models:

• Continuous-Time Dynamic Programming

• Expanding Variety Models: Inputs and Products, and Social Planner’s Problem

• Quality Ladder Model

• Quality Ladder Model with Firm Dynamics: Klette and Kortum (2004)


6. Introduction to Heterogeneous Agent Models:

• Incomplete Market Model and Wealth Distribution:

– Huggett Model (1993) and Aiyagari Model (1999)

• Models of Firm Dynamics: Entry, Exit, and Firm Size Distribution

– Hopenhayn (1990) and Hopenhayn and Rogerson (1993)