Compare the Walsh VAR identification restriction based on
the long-run neutrality of a policy shock (bottom of page 24) with the
restriction given in my handout. Are they the same once notation differences
are allowed for? Explain.
What is the significance for empirical research of the "observational
equivalence" argument given by Sargent ("The observational equivalence
of natural and unnatural rate theories of macroeconomics," JPE, 84, 3,
1976, 631-40) and explained by Walsh on pages 20-22?
Does application of the Schur theorem confirm Blanchard's
claim (p. 785) that the equation system given by (1.1), (1.4), and (1.5)
is stable if parameter a > 0?
Consider the model that incorporates the Sargent-Lucas wage
process (Blanchard, p. 786) and is set out on page 2-9 of the class notes.
Use the results from the handout to write out the reduced
form for the model in terms of the structural parameters.
Do unexpected money shocks affect output?
What are the effects of a change in the growth rate of money
(µ)?
Does the reduced form that you have computed allow you to
agree with the points made by Lucas and Sargent as explained on page 786
of Blancard?
Does the transversality condition given by Walsh for the
Sidrauski model (p. 53) agree with the transversality condition given by
Ljungqvist and Sargent (p. 129)?
What is the relationship between the envelope theorem used
by Walsh (p. 53) and the Benveniste-Scheinkman formula explained by Ljungqvist
and Sargent in Chapter 2?