Intertemporal Macroeconomics

This chapter reviews models of intertemporal choice consumption demand and labour supply. We discuss optimal decisions by individuals at the microeconomic level and the implications for the aggregate economy. The chapter describes the equilibrium in a market-clearing neoclassical model and analyses effects of productivity and government sector shocks on optimal decisions by consumers and workers. Predictions from the benchmark neoclassical model are contrasted with alternative theories and aggregate data for the US and UK. thank Xavier Sala-i-Martin, whose macroeconomics lectures at Columbia University provided inspiration and guidance to the material in this chapter, Donald Robertson for helpful discussions and the derivation of the Keynes-Ramsey rule, and several cohorts of students at Cambridge for helpful feedback. I thank Bhaavit Agrawal for excellent research assistance, the Economics Department at UW-Madison for their hospitality while completing this chapter and Trinity College for financial support. All errors are mine.