Topics in the Microeconomic Foundations of Macroeconomics
Jean-Michel GRANDMONTLouis-Vuitton Japan Chaire, Keio University, Tokyo(September 24 – November 2, 2007)

This set of 8 lectures (2 hours each) is aimed at 2nd year Ph.D. students and is intended
to present them with the basic ideas and methods of a few research programs related to the“microeconomic foundations” of macroeconomics. Topics covered will include thefollowing.

1. Distributions of heterogeneous
macroeconomic aggregates

individual

characteristics

andSelected references
Calvet, L., Grandmont, J.-M. and I. Lemaire (1999), “Heterogeneous Probabilities inComplete Asset Markets”, Advances in Mathematical Economics, 1, 3-15.
Grandmont, J.-M. (1992), “Transformations of the Commodity Space, Behavioral
Heterogeneity and the Aggregation Problem”, Journal of Economic Theory, 57, 1-35.
Grandmont, J.-M. (1993), “Behavioral Heterogeneity and Cournot Oligopoly Equilibrium”,
Ricerche Economiche, 47, 167-187.
Hildenbrand, W. (1983), “On the Law of Demand”, Econometrica, 51, 997-1019.
Hildenbrand, W. (1994), Market Demand : Theory and Empirical Evidence, Princeton
University Press, Princeton.
Marhuenda, F. (1995), “Distribution of Income and Aggregation of Demand”,
Econometrica, 63, 647-66.
Quah, J. K.-H. (1997), “The Law of Demand When Income is Price Dependent”,
Econometrica, 65, 1421-1442.

2. Heterogeneous beliefs, risk sharing and asset pricing
Selected references
Calvet, L., Grandmont, J.-M. and I. Lemaire (2004), “Aggregation of HeterogeneousBeliefs, Assets Pricing and Risk Sharing in Complete Financial Markets”, CREST Working
Paper n° 2004-12.

Gollier, C. (2007), “Whom Should We Believe ? Aggregation of Heterogeneous Beliefs”,
Working Paper, University of Toulouse.

Jouini, E. and C. Napp (2006), “Heterogeneous Beliefs and Asset Pricing in DiscreteTime : An Analysis of Pessimism and Doubt”, Journal of Economic Dynamics andControl, 30, 1233-1260.
Jouini, E. and C. Napp (2007), “Consensus Consumer and Intertemporal Asset Pricing withHeterogeneous Beliefs”, Review of Economic Studies, 74, 1-26.

3. Non-linear dynamics, I : Basic methods
Selected references
Grandmont, J.-M. (1988), “Non-Linear Difference Equations, Bifurcations and Chaos : An
Introduction”, Stanford Technical Reports and CEPREMAP Working Paper, underrevision, forthcoming in Research in Economics, 2008.

4. Non-linear dynamics, II : economic applications
Selected references
Grandmont, J.-M. (1993), “Expectations Driven Non-Linear Business Cycles”, inProceedings of the German Academy of Sciences, Westdeutscher Verlag 1993 and in FIEF
Studies on Business Cycles, Oxford University Press, 1994.
Grandmont, J.-M. (2006), “Negishi-Solow Efficiency Wages, Unemployment Insurance
and Dynamic Deterministic Indeterminacy”, CREST Working Paper n° 2006-16,
forthcoming in International Journal of Economic Theory.
Grandmont, J.-M. (2007), “Negishi-Solow Efficiency Wages, Unemployment Insurance
and Stochastic Endogenous Unemployment Business Cycles”, Craig Hiemstra MemorialLecture, 15th Annual Meeting of the Society for Nonlinear Dynamics and Econometrics(SNDE), Paris.
Grandmont, J.-M., Pintus, P. A. and R. G. de Vilder (1998), “Capital-Labor Substitution
and Competitive Non-Linear Endogenous Business Cycles”, Journal of Economic Theory,80, 14-59.
Cazzavillan, G., Lloyd-Braga, T. and P. A. Pintus (1998), “Multiple Steady States andEndogenous Fluctuations with Increasing Returns to Scale in Production”, Journal ofEconomic Theory, 80, 60-107.
Lloyd-Braga, T., Nourry, C. and A. Venditti (2007), “Indeterminacy in Dynamic Models :When Diamond Meets Ramsey”, Journal of Economic Theory, 134, 513-536.
Seegmuller, T. (2004), “Market Imperfections and Endogenous Fluctuations : A General
Approach”, mimeo, EUREQua, University of Paris I.

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5. Learning and (non) convergence to rational expectations
Selected References
Grandmont, J.-M. (1998), “Expectations Formation and Stability of Large SocioeconomicSystems”, Econometrica, 66, 741-781.
Chatterji, S. and S. Chattopadhyay (2000), “Global Stability in Spite of “Local Instability”
with Learning”, Journal of Mathematical Economics, 33, 155-165.
Brock, W. A. and C. H. Hommes (1997), “A Rational Route to Randomness”,
Econometrica, 65, 1059-1095.
Evans, G. W. and S. Honkapohja (1999), “Learning Dynamics”, in Taylor, J. B. and M.
Woodford (Eds.), Handbook of Macroeconomics, Elsevier Science B.V., Chap. 7, 449-542.

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