Lecture notes on consumption, saving, growth, and asset pricing for advanced masters and first-year PhD students in economics.
Authors: Christopher D. Carroll and Alan E. Lujan Solis
Institution: Johns Hopkins University
1About¶
These lecture notes introduce the foundations of modern macroeconomic theory. Starting from first principles, we develop the mathematical tools and economic intuition needed to understand how agents make decisions over time under certainty and uncertainty.
We derive results analytically while connecting theory to computational methods and empirical applications. Each topic proceeds from simple benchmark models to extensions that incorporate additional features.
The notes originated from Christopher Carroll’s graduate macroeconomics lecture notes at Johns Hopkins University. Alan Lujan teaches from these materials in the advanced macroeconomics sequence of JHU’s masters economics program.
2Contents¶
2.1Consumption¶
From perfect foresight through OLG to buffer stock models:
Perfect foresight consumption under CRRA and CARA utility
The permanent income hypothesis and consumption smoothing
Precautionary saving and buffer-stock behavior
Risk premia and the effects of uncertainty
Overlapping generations and lifecycle models
Habits, hyperbolic discounting, and behavioral extensions
2.2Asset Pricing¶
Lucas, Mehra and Prescott, Blanchard, and others:
CRRA and CARA portfolio allocation
The consumption-based capital asset pricing model (C-CAPM)
The equity premium puzzle
Multi-asset portfolio optimization
2.3Growth¶
Models of economic growth:
The Ramsey-Cass-Koopmans model
Fiscal policy in growth models
Decentralization and competitive equilibrium
Endogenous growth (Romer, Lucas, Rebelo AK)
Overlapping generations growth models
2.4Investment¶
From Keynes to imperfections:
The Hall-Jorgenson neoclassical model
Tobin’s q and the marginal q model
Capital market imperfections
Investment and cash flow sensitivity
2.5DSGE Models¶
Dynamic stochastic general equilibrium frameworks:
The Brock-Mirman stochastic growth model
Real business cycle theory
2.6Mathematical Appendix¶
Derivations and methods useful for macroeconomics:
Useful facts for graduate macroeconomics
Aggregation methods
Approximation techniques for lognormal distributions
3License¶
Content: CC-BY-4.0
Code: Apache-2.0
5Citation¶
If you use these materials, please cite:
Carroll, Christopher D. and Alan E. Lujan Solis. A Gentle Introduction to Intertemporal Choice. Johns Hopkins University. https://
github .com /jhu -econ /intertemporal -choice