Table of Contents

Preface to Second Edition

1   Introduction

1.1 Equilibrium Theory as an Approach to Macroeconomics

1.2 Preview of the Argument

1.3 Example

1.4 Concluding Remarks

1.5 Problems

2   Linear Difference Equations: Part 1

2.1 Introduction

2.2 Linearizing Nonlinear Models

2.3 Solving First-Order Linear Models

2.4 Solving Higher-Order Linear Models

2.5 Concluding Remarks

Problems

3   Linear Difference Equations: Part 2

3.1 Introduction

3.2 Linear Rational Expectations Models

3.3 Solving Linear Rational Expectations Models

3.4 Cross-equation Restrictions and the Lucas Critique

3.5 Concluding Remarks

3.6 Problems

4   General Equilibrium Theory under Certainty

4.1 Introduction

4.2 Idea of Equilibrium

4.3 Theory of Consumer Choice

4.4 Excess Demand Functions

4.5 Equilibria and Their Properties

4.6 General Equilibrium Theory and Efficient Allocations of Resources

4.7 Concluding Remarks

4.8 Problems

5   Infinite Horizon Economies and Representative Agents

5.1 Introduction

5.2 Representative Agent Economy

5.3 Competitive Equilibrium and the Planner's Problem

5.4 Using the Representative Agent Model to Explain Time Series Data

5.5 Concluding Remarks

5.6 Appendix: Transversality Condition

5.7 Problems

6   Infinite Horizon Economies and Overlapping Generations

6.1 Introduction

6.2 Structure of the Overlapping Generations Economy

6.3 Consumer's Problem

6.4 Example of a Pareto Inferior Equilibrium

6.5 Institutions that May Improve Allocations

6.6 Set of Equilibria in the Overlapping Generations Model

6.7 Some Questions about the Model

6.8 More General Examples of Overlapping Generations Economies

6.9 Concluding Remarks

6.10 Problems

7   Infinite Horizon Economies with Nonconvexities

7.1 Introduction

7.2 Growth Model with Increasing Returns

7.3 Empirical Evidence for Increasing Returns

7.4 Equilibria in the Increasing Returns Economy

7.5 Comparing the Theoretical Properties of RA and IR Models

7.6 Comparing Some Empirical Predictions of RA and IR Models

7.7 Concluding Remarks

7.8 Problems

8   Some Recent Developments

8.1 Introduction

8.2 New Evidence against Big Increasing Returns

8.3 Nonseparable Preferences

8.4 Two-Sector Models

8.5 Concluding Remarks

8.6 Problems

9   General Equilibrium Theory and Uncertainty

9.1 Introduction

9.2 Debreu's Formulation of the Problem

9.3 Arrow's Formulation of the Problem

9.4 Infinite Horizon Economies with Uncertainty

9.5 Concluding Remarks

9.6 Problems

10   Sunspots

10.1 Introduction

10.2 Do Sunspots Matter?

10.3 Example of a Macroeconomic Model Where Sunspots Matter

10.4 Concluding Remarks

10.5 Problems

11   Macroeconomic Models of Money

11.1 Introduction

11.2 Models of Money

11.3 Dynamics of a Cash-in-Advance Model

11.4 Equilibrium under Interest Rate Control

11.5 Equilibrium under a Fixed Money Growth Rate Rule

11.6 Concluding Remarks

11.7 Problems

12   Applied Monetary Theory

12.1 Introduction

12.2 Monetary Facts: What There Is to Explain

12.3 Simple Monetary Model: Using Equilibrium Theory to Explain the Facts

12.4 How Do Equilibria Behave?

12.5 Concluding Remarks

12.6 Problems

Notes

Bibliography

Index