Fabio C. Bagliano
Dipartimento di Scienze Economiche e Finanziarie, Università di Torino
Giuseppe Bertola
Dipartimento di Economia Politica, Università di Torino

                           Oxford University Press, 2004, pp. 296, ISBN: 0199266824

                                                                 | Contents | Readership and use|
Description
This is a textbook for advanced students in macroeconomics. It provides the advanced student with key methodological tools for the dynamic analysis of a selection of core macroeconomic phenomena, including consumption and investment choices, employment and unemployment outcomes, and economic growth. The technical treatment of these tools will enable the student to handle current journal literature, while not assuming any particular familiarity with advanced analytical tools or mathematical notions. As these tools are introduced, they are related  to particular applications to illustrate their use.

Contents
Chapters are linked by various formal and conceptual threads. Discrete-time optimization under uncertainty, introduced in Chapter 1, is motivated and discussed by applications to consumption theory. Chapter 2 deals with continuous-time optimization techniques in the context of partial-equilibrium investment models. Chapter 3 revisits many of the previous chapters' formal derivations with applications to dynamic labor demand, in analogy to optimal investment models, and characterizes labor market equilibrium when not only individual firms' labor demand is subject to adjustment costs, but also individual labor supply by workers faces dynamic adjustment issues. Chapter 4 proposes broader applications of methods introduced by the previous chapters, and studies equilibrium dynamics of a representative-agent economy featuring both consumption and investment choices, in continuous time. Chapter 5 characterizes aggregate labor market dynamics in the presence of frictional unemployment. Chapters 4 and 5 pay particular attention to coordination problems, a peculiarly macroeconomic feature of real-life economies: even when each agent correctly solves his or her individual dynamic problem, strategic interactions and externalities play an essential role in many modern microfounded macroeconomic models. The text offers many exercises and outlines their solution.

Readership and use
The treatment is technical, but it is motivated as a natural sequel to the intuitive arguments of standard undergraduate textbooks, and does not require analytical tools beyond those covered by an introductory undergraduate mathematics course. The material is suitable for advanced undergraduate and basic graduate macroeconomics courses of about sixty lecture hours. When complemented by recent journal articles, the individual chapters can also be used in specialized topics courses. The last section of each chapter often sketches more advanced material and may be omitted without breaking the book's train of thought, while the chapters' appendices introduce technical tools and are essential for typical readers. Some exercises are found within the chapters and propose extensions of the model discussed in the text. Other exercises are found at the ends of chapters and should be used to review the material.