Lecture 2: Micro-Founded Macro Models

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Description: This lecture explains how micro-founded macro models can be used in economic research and the formulation of policy. 

Instructor: Prof. Robert M. Townsend

Video Index

  • Overview of micro-founded macro models
  • Example of how to use micro-founded macro models to do welfare analysis
  • The marriage of theory and data
  • Broad overview of Lloyd-Ellis & Bernhardt (LEB) model and Greenwood & Jovanovic (GJ) model; Townsend’s empirical simulations of them
  • Occupational choice map
  • Introduction of financial deepening to model
  • Model versus data outcomes
  • Welfare experiments using the models
  • Motivation for GJ model
  • GJ model advantages of participating in financial system
  • Savings functions and portfolio choice
  • Model simulation

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