This is an archived course. A more recent version may be available at ocw.mit.edu.
A list of topics by session may be found in the calendar below.
Lectures: 2 sessions / week, 1.5 hours / session
Recitations: 1 session / week, 1.5 hours / session
This course covers three sets of topics. The first part will cover business cycle models with imperfect information. We will ask questions such as:
The second part will cover models of investment with credit constraints. We will ask questions such as:
The third part will cover search models of decentralized trade applied both to labor markets and to financial markets. In particular, the models will have informational imperfections.
The prerequisites for this course are 14.122 Microeconomic Theory II and 14.452 Economic Growth.
There are no required textbooks for this course. See readings for relevant books and articles.
The grade for each part is weighted equally in determining the overall grade.
| ACTIVITIES | PERCENTAGES |
|---|---|
| Problem sets | 30% |
| Mid-term exam | 70% |
| ACTIVITIES | PERCENTAGES |
|---|---|
| Problem sets | 30% |
| Final exam | 70% |
| SES # | TOPICS | KEY DATES |
|---|---|---|
| 1. Information and business cycles | ||
| 1-2 | News about the future and fluctuations | Problem set 1 out in Ses #2 |
| 3-6 | Dispersed information | Problem set 1 due in Ses #5 |
| 7-8 | Estimating models with imperfect information | Problem set 2 out in Ses #7 |
| 2. Financial frictions and investment | ||
| 9-10 | Models with limited pledgeability | Problem set 2 due in Ses #10 |
| 11-12 | Models with corporate control problems | |
| 13 | Models with intermediation and securitization | |
| Mid-term exam | ||
| SES # | TOPICS | KEY DATES |
|---|---|---|
| 3. Search models of decentralized trade with imperfect information | ||
| 14-18 | Labor market search and efficiency | Problem set 3 out in Ses #18 |
| 19 | Wage dispersion | |
| 20 | Moral hazard and optimal unemployment insurance | Problem set 3 due |
| 21-23 | Money search and liquidity | Problem set 4 out in Ses #23 |
| 24 | Adverse selection and lemons problem | |
| 25-26 | Decentralized trading in financial markets | Problem set 4 due in Ses #26 |
| Final exam | ||
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