Readings

LEC # TOPICS READINGS
1 Introduction

Caballero, Ricardo J. "Macroeconomics After the Crisis: Time to Deal with the Pretense-of-Knowledge Syndrome." Journal of Economic Perspectives 24, no. 4 (2010): 85-102.

———. "A Caricature (Model) of the World Economy." MIT Working Paper No. 10-17; NBER Working Paper No. 16429, 2010.
2 Collateral and amplification

Bernanke B., and M. Gertler. "Agency Costs, Net Worth, and Business Fluctuations." American Economic Review 79, no. 1 (1989): 14-31.

Kiyotaki, Nobuhiro, and John Moore. "Credit Cycles." Journal of Political Economy 105, no. 2 (1997): 211-248. (This resource may not render correctly in a screen reader.PDF - 6.4MB)

Brunnermeier, Markus, and Yuliy Sannikov. "A Macroeconomics Model with a Financial Sector." Princeton working paper, 2011. (This resource may not render correctly in a screen reader.PDF - 2.1MB)

Greenwald, Bruce, and Joseph Stiglitz. "Financial Market Imperfections and Business Cycles." Quarterly Journal of Economics 108, no. 1 (1993): 77-114.

Dixit, A. "Whither Greenwald-Stiglitz?" Presentation at Joseph Stiglitz's 60th birthday conference, Columbia University, October 24, 2003.
3 The credit crunch

Bernanke, B., and A. Blinder. "Credit, Money and Aggregate Demand." American Economic Review 78, no. 2 (1988): 435-439.

Holmstrom, Bengt, and Jean Tirole. "Financial Intermediation, Loanable Funds, and the Real Sector." Quarterly Journal of Economics 112, no. 3 (1997): 663-691. (This resource may not render correctly in a screen reader.PDF - 2.5MB)

Kashyap, Anil, and Jeremy Stein. "Monetary Policy and Bank Lending." NBER Working Paper No. 4317, 1994. Chapter 7 in Monetary Policy. Edited by N. Gregory Mankiw. University of Chicago Press, 1997. ISBN: 9780226503097. (This resource may not render correctly in a screen reader.PDF - 1.8MB)
4 Runs, panics, and contagion

Diamond, Douglas W., and Philip H. Dybvig. "Bank Runs, Deposit Insurance, and Liquidity." Journal of Political Economy 91, no. 3 (1983): 401-419. (This resource may not render correctly in a screen reader.PDF)

Tirole, Jean. "Consumer Liquidity Demand." Chapter 12 in The Theory of Corporate Finance. Princeton University Press, 2005. ISBN: 9780691125565.

Caballero, Ricardo J. "Sudden Financial Arrest." IMF Economic Review (July 20, 2010).

Caballero, Ricardo, and A. Krishnamurthy. "Collective Risk Management in a Flight to Quality Episode." Journal of Finance 63, no. 5 (2008): 2195-2230.

Allen, Franklin, and Douglas Gale. "Financial Contagion." Journal of Political Economy 108, no. 1 (2000): 1-33.

Adrian, Tobias, and Hyun Song Shin. "Liquidity and Financial Contagion." Banque de France Financial Stability Review, no. 11 (2008): 1-7.

Caballero, Ricardo, and Alp Simsek. "Fire Sales in a Model of Complexity." NBER Working Paper No. 15479, 2009. MIT Working Paper, March 2011. (This resource may not render correctly in a screen reader.PDF)

Brunnermeir, Markus, and Lasse Heje Pedersen. "Market Liquidity and Funding Liquidity." NBER Working Paper No. 12939, 2007.
5 Bubbles

Tirole, Jean. "Asset Bubbles and Overlapping Generations." Econometrica 53, no. 6 (1985): 1499-1528.

Martin, Alberto, and Jaume Ventura. "Theoretical Notes on Bubbles and the Current Crisis." IMF Economic Review 59 (2011): 6-40. (This resource may not render correctly in a screen reader.PDF – 1.5MB)

Kocherlakota, Naranaya. "Bursting Bubbles: Consequences and Cures." Paper presented at the Macroeconomic and Policy Challenges following Financial Meltdowns Conference, International Monetary Fund. Washington DC, April 3, 2009. (This resource may not render correctly in a screen reader.PDF)

Farhi, Emmanuel, and Jean Tirole. "Bubbly Liquidity." Harvard draft paper, 2010. (This resource may not render correctly in a screen reader.PDF)

Allen, Franklin, and Douglas Gale. "Bubbles and Crises." Economic Journal 110 (2000): 236-255.

Abreu, Dilip, and Markus Brunnermeier. "Bubbles and Crashes." Econometrica 71, no. 1 (2003): 173-204.
6 Capital flows and sudden stops

Buy at MIT Press Obstfeld, Maurice, and Kenneth Rogoff. "Imperfections in International Capital Markets." Chapter 6 in Foundations of International Macroeconomics. MIT Press, 1996. ISBN: 9780262150477.

Caballero, Ricardo J., and Arvind Krishnamurthy. "Bubbles and Capital Flow Volatility: Causes and Risk Management." Journal of Monetary Economics 53, no. 1 (2006): 35-53.

Blanchard, Olivier, Francesco Giavazzi, and Filipa Sa. "International Investors, the U.S. Current Account, and the Dollar." Brookings Papers on Economic Activity 1 (2005): 1-49. (This resource may not render correctly in a screen reader.PDF)

Caballero, Ricardo J., Emmanuel Farhi, and Pierre-Olivier Gourinchas. "An Equilibrium Model of Global Imbalances and Low Interest Rates." American Economic Review (2007). Forthcoming. (This resource may not render correctly in a screen reader.PDF)

Caballero, Ricardo J., and Arvind Krishnamurthy. "Global Imbalances and Financial Fragility." American Economic Review Papers and Proceedings 99, no. 2 (2009): 584-588. (This resource may not render correctly in a screen reader.PDF)

Caballero, Ricardo J. "The Other Imbalance and the Financial Crisis." Paolo Baffi Lecture, Bank of Italy, December 10, 2009. (This resource may not render correctly in a screen reader.PDF)

Bernanke, Benjamin, Carol Bertaut, Laurie Pounder DeMarco, and Steven Kamin. "International Capital Flows and the Returns to Safe Assets in the United States, 2003-2007." Board of Governors of the Federal Reserve System, International Finance Discussion Paper No. 1014, February 2011.

Martin, Alberto, and Filippo Taddei. "International Capital Flows and Credit Market Imperfections: a Tale of Two Frictions." Centre for Economic Policy Research, Discussion Paper No. 8131, November 2010. (This resource may not render correctly in a screen reader.PDF)
7 Appreciations and overvaluations

Kiyotaki, Nobuhiro, and John Moore. "Balance-Sheet Contagion." The American Economic Review 92, no. 2 (2002): 46-50.

Tirole, Jean. "On the Possibility of Speculation under Rational Expectations." Econometrica 50, no. 5 (1982): 1163-1181.
8 Liquidity traps

Krugman, Paul. "Thinking About the Liquidity Trap." Journal of the Japanese and International Economies 14 (2000): 221-237. (This resource may not render correctly in a screen reader.PDF)

Svensson, Lars E. O. "Escaping from a Liquidity Trap and Deflation: The Foolproof Way and Others." NBER Working Paper No. 10195, December 2003.

Jeanne, O., and Lars E. O. Svensson. "Credible Commitment to Optimal Escape from a Liquidity Trap: The Role of the Balance Sheet of an Independent Central Bank." AER 97(1), March 2007, 474-490.