Dynamic Macroeconomic Theory
Author: Thomas J Sargent
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 dynamicequilibrium 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.
Table of Contents:
Introduction
References and Suggested Readings
PART I REAL DYNAMIC MACROECONOMIC MODELS
1. 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
2. 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
3. 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
PART II MONETARY ECONOMICS AND GOVERNMENTFINANCE
4. 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
5. 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
6. 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
7. 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
8. Government Finance in Stochastic Overlapping-Generations Models
The Economy
Some Examples
A General Irrelevance Theorem
Wallace's Modigliani-Miller Theorem for Open-Market Operations
Chamley and Polemarchakis's Neutrality Theorem
Interpretation as a Constant Fiscal Policy
Indexed Government Bonds
A Ricardian Proposition
Further Irrelevance Theorems
Conclusions
Exercises
References and Suggested Readings
Appendix. Functional Analysis for Macroeconomics
Metric Spaces and Operators
First-Order Linear Difference Equations
A Formula of Hansen and Sargent
A Quadratic Optimization Problem in R
A Discounted Quadratic Optimization Problem
Predicting a Geometric Distributed Lead of a Stochastic Process
Discounted Dynamic Programming
A Search Problem
Exercises
References and Suggested Readings
Index
Interesting book: Vegetarian Soups for All Seasons or Japanese Cooking
Retaining Valued Employees
Author: Rodger W Griffeth
How do you keep valuable employees from leaving? With employee turnover at a ten-year high in the tightest labor market in recent memory, human resource professionals face this challenge daily. This book briefly summarizes the current research in the area of employee turnover and provides practical guidelines to implement proven strategies for reducing unwanted turnover. Topics covered include differentiating between functional and dysfunctional turnover, job enrichment, employee selection, orientation programs, compensation practices, easing conflicts between work and home, social integration, and managing exiting employees. Separate chapters are devoted to using employee surveys to predict turnover and diagnose turnover causes and reducing turnover among special groups -- minorities and women. Hands-on interventions are described and illustrated with cases drawn from companies who have been successful in retaining personnel. The appendix includes two sample employee surveys. Human resource professionals, trainers, consultants, students, and researchers will find this a timely and helpful resource.
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