Econ 2416 Syllabus

Professor Gabriel Chodorow-Reich

Harvard University
Spring 2021

Course overview
Logistics
Meeting time: Thursday 3:00pm-5:45pm
Location: zoom
Course website: https://canvas.harvard.edu/courses/84799
Instructor: Gabriel Chodorow-Reich
Office hours: Tu 3-4pm (Zoom). Please sign-up ahead at https://docs.google.com/
spreadsheets/d/1QE6zaSLV9ON4xTw7bs1texR444ZQnroJ2ggNN1Oe8kI/edit?usp=sharing.
Email: chodorowreich@fas.harvard.edu. Please include “econ 2416” in the subject line.
TA: Armando Miano
Office hours: W 3-4 (Zoom). You may sign-up ahead at https://docs.google.com/
spreadsheets/d/1tF7W7Kww2znqiKbWPrqyuYm82yOBaXnu_J411j_ybWU/edit?usp=sharing.
Email: amiano@g.harvard.edu.
Prerequisites
Completion of the first year Ph.D sequence, or permission of instructor.
Requirements in brief
Weekly readings, preliminary “fact” presentation, two problem sets, and a final project and
presentation.
Grade
Final project (50%), other homeworks (25%), class participation (25%)

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Requirements details
Weekly readings
Much of the class will revolve around discussion of assigned readings. This makes it essential that
you read the starred papers before lecture and come prepared to discuss and critique them.

Homework I
For your first homework assignment, you will present one empirical result from a published or
working paper. Your selected paper must satisfy two criteria:

ˆ It is discussed in one of the February 4 readings.

ˆ It is not on this syllabus.

You will make an in-class, 5 minute presentation for which you should prepare one or two slides
(no more!). Your slides should describe relevant background (context, data, methodology) and
present the result. IMPORTANT: you are not meant to present an entire paper. Just one result
you found intriguing. Provide enough context for us to understand the result (what data was
used? empirical specification?). Do NOT try to contextualize the result within the full paper.
No two students may present results from the same paper. Students may claim papers by signing
up on Canvas on a first-come, first-claimed basis. You must email me your slides by 2pm on
February 4.
Homework II
The second homework will be a problem set. You may work together, but each student must
submit his/her own independent write up.
Homework III
The third homework will be a problem set. You may work together, but each student must submit
his/her own independent write up.
Final Project
This will be your main project for the course. The purpose of making the assignment a virtual
paper is that I would rather you get 50% of the way toward a project you are excited to continue
after the semester finishes than you complete a project in the timeframe of the course to which
you will never return. You will formulate an original research idea, develop a practical plan for
executing the idea, and take initial steps in the execution. The paper may take the following
form:

1. Introduction: What is the question and why is the question of interest?

2. Literature Review: How does your paper fit into the broader literature?

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 3. Theoretical Motivation: This could be actual theory or just a sketch of the relevant theory
that underlies your question.

4. Data: What data would you use to answer/address this question? Why are the data well
suited to the question?

5. Empirical Methodology: How would you use the data to answer your question? Be explicit
about causal identification, keeping in mind that the same set of empirical facts can often
support many theories. Depending on the nature of your question and the ease of accessing
and using the data, I may ask you to make significant progress in the actual implementation
of your proposed empirical work.

6. Falsification Tests: What other specifications, tests and investigations could either bolster
or cast doubt upon the primary tests of your hypotheses?

7. Preliminary Results: The extent of the results provided will differ across students based on
the project and discussions with me.

Deadlines for the virtual paper:

ˆ February 18: Email me a two page write up of proposed idea. Please include “econ 2416”
in the subject line.

ˆ March 25: Meet with me to receive feedback on proposed idea.

ˆ April 8/15 and 22: Class presentations, 25 minutes per student.

ˆ May 7: Papers due via email. Please include “econ 2416” in the subject line.

You may request approval from me to work jointly on the virtual paper. You may also develop
an idea you started in another course or independently. Of course the bar for sufficient progress
will be higher in these circumstances.

Audit policy
If you are a 3rd year or above and wish to audit the course, send me an email introducing yourself
and so you can be added to the class list (as always, please include “econ 2416” in the subject
line). Auditors are not required to complete the written assignments, but are expected to do the
starred readings and participate in class.

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Course outline
1. January 28: Overview and structural models
Jesus Fernandez-Villaverde, Juan Fabio Rubio-Ramirez, and Frank Schorfheide (2016). “Solution
and Estimation Methods for DSGE Models”. Handbook of Macroeconomics 2, pp. 527–724

2. February 4: Empirical macroeconomics

Homework I due
*Lawrence H. Summers (1991). “The Scientific Illusion in Empirical Macroeconomics”. The
Scandinavian Journal of Economics 93(2), pp. 129–148. url: http://www.jstor.org/stable/
3440321

*Paul Romer (Forthcoming). “The Trouble With Macroeconomics”. The American Economist.
url: https://paulromer.net/wp-content/uploads/2016/09/WP-Trouble.pdf

*V.A. Ramey (2016). “Chapter 2 - Macroeconomic Shocks and Their Propagation”. In: ed.
by John B. Taylor and Harald Uhlig. Vol. 2. Handbook of Macroeconomics. Elsevier, pp. 71–
162. url: http://www.sciencedirect.com/science/article/pii/S1574004816000045 (sec-
tions 1 and 2 only)

*Lawrence J. Christiano, Martin S. Eichenbaum, and Mathias Trabandt (2018). “On DSGE
Models”. Journal of Economic Perspectives 32(3), pp. 113–40. url: http://www.aeaweb.org/
articles?id=10.1257/jep.32.3.113

*Emi Nakamura and Jón Steinsson (2018). “Identification in Macroeconomics”. Journal of

Economic Perspectives 32(3), pp. 59–86. url: http://www.aeaweb.org/articles?id=10.
1257/jep.32.3.59

3. February 11: Applied time series I

James D. Hamilton (1994). Time Series Analysis. Princeton University Press, Chapters 10 and
11
Oscar Jorda (2005). “Estimation and Inference of Impulse Responses by Local Projections”.
American Economic Review 95(1), pp. 161–182. url: http://www.aeaweb.org/articles.php?
doi=10.1257/0002828053828518
Alan J. Auerbach and Yuriy Gorodnichenko (2013). “Fiscal Multipliers in Recession and Ex-
pansion”. In: Fiscal Policy after the Financial Crisis. Ed. by Alberto Alesina and Francesco

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Giavazzi. The University of Chicago Press. url: http://www.nber.org/papers/w17447.pdf

James Stock and Mark Watson (2016). “Factor Models and Structural Vector Autoregressions in
Macroeconomics”. Handbook of Macroeconomics, Section 4

4. February 18: Applied time series II

James D. Hamilton (1994). Time Series Analysis. Princeton University Press, Chapters 10 and
11
Oscar Jorda (2005). “Estimation and Inference of Impulse Responses by Local Projections”.
American Economic Review 95(1), pp. 161–182. url: http://www.aeaweb.org/articles.php?
doi=10.1257/0002828053828518
Alan J. Auerbach and Yuriy Gorodnichenko (2013). “Fiscal Multipliers in Recession and Ex-
pansion”. In: Fiscal Policy after the Financial Crisis. Ed. by Alberto Alesina and Francesco
Giavazzi. The University of Chicago Press. url: http://www.nber.org/papers/w17447.pdf

James Stock and Mark Watson (2016). “Factor Models and Structural Vector Autoregressions in
Macroeconomics”. Handbook of Macroeconomics, Section 4

5. February 25: VAR Applications

Homework II due.
Ben S. Bernanke and Ilian Mihov (1998). “Measuring Monetary Policy”. The Quarterly Journal of
Economics 113(3), pp. 869–902. url: http://qje.oxfordjournals.org/content/113/3/869

Lawrence J. Christiano, Martin Eichenbaum, and Charles L. Evans (1999). “Chapter 2 Mon-
etary policy shocks: What have we learned and to what end?” In: ed. by John B. Taylor and
Michael Woodford. Vol. 1, Part A. Handbook of Macroeconomics. Elsevier, pp. 65–148. url:
http://www.sciencedirect.com/science/article/pii/S1574004899010058

*Olivier Blanchard and Roberto Perotti (2002). “An Empirical Characterization of the Dynamic
Effects of Changes in Government Spending and Taxes on Output”. The Quarterly Journal of
Economics 117(4), pp. 1329–1368. url: http://qje.oxfordjournals.org/content/117/4/
1329

*Ben S. Bernanke, Jean Boivin, and Piotr Eliasz (2005). “Measuring the Effects of Monetary
Policy: A Factor-Augmented Vector Autoregressive (FAVAR) Approach”. The Quarterly Journal
of Economics 120(1), pp. 387–422. url: http://qje.oxfordjournals.org/content/120/1/
387.abstract

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Andrew Mountford and Harald Uhlig (2009). “What are the effects of fiscal policy shocks?” Jour-
nal of Applied Econometrics 24(6), pp. 960–992. url: http://dx.doi.org/10.1002/jae.1079
Christiane Baumeister and James D. Hamilton (2015). “Sign Restrictions, Structural Vector Au-
toregressions, and Useful Prior Information”. Econometrica 83(5), pp. 1963–1999. url: http:
//dx.doi.org/10.3982/ECTA12356
Christiane Baumeister and James Hamilton (2020). Drawing Conclusions from Structural Vector
Autoregressions Identified on the Basis of Sign Restrictions. Working Paper 26606. National
Bureau of Economic Research. url: http://www.nber.org/papers/w26606

*Christiane Baumeister and James D. Hamilton (2019). “Structural Interpretation of Vector

Autoregressions with Incomplete Identification: Revisiting the Role of Oil Supply and Demand
Shocks”. American Economic Review 109(5), pp. 1873–1910. url: http://www.aeaweb.org/
articles?id=10.1257/aer.20151569

Christian Wolf (Forthcoming). “SVAR (Mis-)Identification and the Real Effects of Monetary
Policy Shocks”. American Economic Journal: Macroeconomics

Mark Gertler and Peter Karadi (2015). “Monetary Policy Surprises, Credit Costs, and Eco-
nomic Activity”. American Economic Journal: Macroeconomics 7(1), pp. 44–76. url: https:
//www.aeaweb.org/articles?id=10.1257/mac.20130329

James H. Stock and Mark W. Watson (2018). “Identification and Estimation of Dynamic
Causal Effects in Macroeconomics Using External Instruments”. The Economic Journal 128(610),
pp. 917–948. url: https://onlinelibrary.wiley.com/doi/abs/10.1111/ecoj.12593

6. March 4: Narrative approach

*Christina D. Romer and David H. Romer (1989). “Does Monetary Policy Matter? A New
Test in the Spirit of Friedman and Schwartz”. In: NBER Macroeconomics Annual. Ed. by
Olivier Jean Blanchard and Stanley Fischer. Vol. 4. MIT Press, pp. 121–184. url: http :
//emlab.berkeley.edu/users/cromer/MacroAnnual1989.pdf
François R. Velde (2009). “Chronicle of a Deflation Unforetold”. Journal of Political Economy
117(4), pp. 591–634. url: http://dx.doi.org/10.1086/605130
*Christina D. Romer and David H. Romer (2010). “The Macroeconomic Effects of Tax Changes:
Estimates Based on a New Measure of Fiscal Shocks”. American Economic Review 100(3),
pp. 763–801. url: http://www.aeaweb.org/articles.php?doi=10.1257/aer.100.3.763
Valerie A. Ramey (2011). “Identifying Government Spending Shocks: It’s all in the Timing”.
The Quarterly Journal of Economics 126(1), pp. 1–50. url: http://qje.oxfordjournals.

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org/content/126/1/1
*Karel Mertens and Morten O. Ravn (2013). “The Dynamic Effects of Personal and Corporate
Income Tax Changes in the United States”. American Economic Review 103(4), pp. 1212–47.
url: http://www.aeaweb.org/articles.php?doi=10.1257/aer.103.4.1212
*Juan Antolı́n-Dı́az and Juan F. Rubio-Ramı́rez (2018). “Narrative Sign Restrictions for SVARs”.
American Economic Review 108(10), pp. 2802–29. url: http://www.aeaweb.org/articles?
id=10.1257/aer.20161852
Sydney C Ludvigson, Sai Ma, and Serena Ng (2017). Shock Restricted Structural Vector-Autoregressions.
Working Paper 23225. National Bureau of Economic Research. url: http://www.nber.org/
papers/w23225

Michael Bauer and Eric Swanson (2020). The Fed’s Response to Economic News Explains the
”Fed Information Effect”. Working Paper 27013. National Bureau of Economic Research. url:
http://www.nber.org/papers/w27013

7. March 11: Shift-share designs

Homework III due.
Timothy J. Bartik (1991). Who Benefits from State and Local Development Policies? W.E. Up-
john Institute for Employment Research
*Gabriel Chodorow-Reich (2014). “The Employment Effects of Credit Market Disruptions: Firm-
level Evidence from the 2008-9 Financial Crisis”. The Quarterly Journal of Economics 129(1),
pp. 1–59. url: http://qje.oxfordjournals.org/content/129/1/1.abstract
Gabriel Chodorow-Reich and Johannes Wieland (2020). “Secular Labor Reallocation and Busi-
ness Cycles”. Journal of Political Economy 128(6), pp. 2245–2287. url: https://doi.org/10.
1086/705717
Emi Nakamura and Jón Steinsson (2014). “Fiscal Stimulus in a Monetary Union: Evidence from
US Regions”. American Economic Review 104(3), pp. 753–92. url: http://www.aeaweb.org/
articles.php?doi=10.1257/aer.104.3.753
*Paul Goldsmith-Pinkham, Isaac Sorkin, and Henry Swift (2018). Bartik Instruments: What,
When, Why, and How. Working Paper 24408. National Bureau of Economic Research. url:
http://www.nber.org/papers/w24408
*Kirill Borusyak, Peter Hull, and Xavier Jaravel (2018). Quasi-Experimental Shift-Share Re-
search Designs. Working Paper 24997. National Bureau of Economic Research. url: http:
//www.nber.org/papers/w24997
Rodrigo Adão, Michal Kolesár, and Eduardo Morales (2019). “Shift-Share Designs: Theory
and Inference”. The Quarterly Journal of Economics 134(4), pp. 1949–2010. url: https :
//doi.org/10.1093/qje/qjz025

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8. March 18: Cross-section and aggregation
Gabriel Chodorow-Reich, Laura Feiveson, et al. (2012). “Does State Fiscal Relief during Re-
cessions Increase Employment? Evidence from the American Recovery and Reinvestment Act”.
American Economic Journal: Economic Policy 4(3), pp. 118–45. url: http://www.aeaweb.
org/articles.php?doi=10.1257/pol.4.3.118
*Atif Mian and Amir Sufi (2014). “What Explains the 2007-2009 Drop in Employment?” Econo-
metrica 82(6), pp. 2197–2223. url: http://dx.doi.org/10.3982/ECTA10451
Emmanuel Farhi and Ivan Werning (2016). “Fiscal Multipliers”. Handbook of Macroeconomics 2,
pp. 2417–2492. url: http://www.sciencedirect.com/science/article/pii/S1574004816300192

*Martin Beraja, Erik Hurst, and Juan Ospina (2019). “The Aggregate Implications of Regional
Business Cycles”. Econometrica 87(6), pp. 1789–1833. url: https://onlinelibrary.wiley.
com/doi/abs/10.3982/ECTA14243
*Gabriel Chodorow-Reich (2019). “Geographic Cross-Sectional Fiscal Spending Multipliers: What
Have We Learned?” American Economic Journal: Economic Policy 11(2), pp. 1–34. url: http:
//www.aeaweb.org/articles?id=10.1257/pol.20160465
Kilian Huber (2018). “Disentangling the Effects of a Banking Crisis: Evidence from German
Firms and Counties”. American Economic Review 108(3), pp. 868–98. url: http : / / www .
aeaweb.org/articles?id=10.1257/aer.20161534
Gabriel Chodorow-Reich, Gita Gopinath, et al. (2020). “Cash and the Economy: Evidence from
India’s Demonetization”. Quarterly Journal of Economics 135(1), pp. 57–103. url: https :
//doi.org/10.1093/qje/qjz027
Gabriel Chodorow-Reich (2020). “Regional Data in Macroeconomics: Some Advice for Practi-
tioners”. Journal of Economic Dynamics and Control 115. url: http://www.sciencedirect.
com/science/article/pii/S0165188920300440

9. March 25: individual project meetings

10. April 1: Measurement: unemployment

Christopher A. Pissarides (2000). Equilibrium Unemployment Theory. The MIT Press. url:
http://mitpress.mit.edu/books/equilibrium-unemployment-theory
Richard Rogerson, Robert Shimer, and Randall Wright (2005). “Search-Theoretic Models of the
Labor Market: A Survey”. Journal of Economic Literature 43(4), pp. 959–988. url: http :
//www.aeaweb.org/articles.php?doi=10.1257/002205105775362014
Robert Shimer (2005). “The Cyclical Behavior of Equilibrium Unemployment and Vacancies”.
The American Economic Review 95(1), pp. 25–49. url: http://www.jstor.org/stable/

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4132669
Marcus Hagedorn and Iourii Manovskii (2008). “The Cyclical Behavior of Equilibrium Unem-
ployment and Vacancies Revisited”. American Economic Review 98(4), pp. 1692–706. url:
http://www.aeaweb.org/articles.php?doi=10.1257/aer.98.4.1692
Christopher A. Pissarides (2009). “The Unemployment Volatility Puzzle: Is Wage Stickiness the
Answer?” Econometrica 77(5), pp. 1339–69. url: http://dx.doi.org/10.3982/ECTA7562
Gabriel Chodorow-Reich and Loukas Karabarbounis (2016). “The Cyclicality of the Opportu-
nity Cost of Employment”. Journal of Political Economy 124(6), pp. 1563–1618. url: http:
//dx.doi.org/10.1086/688876
John Grigsby, Erik Hurst, and Ahu Yildirmaz (forthcoming). “Aggregate Nominal Wage Adjust-
ments: New Evidence from Administrative Payroll Data”

11. April 8: Wellness day

12. April 15: Student presentations

13. April 22: Student presentations