Macroeconomics

Aims of the course

Learn modern macroeconomic models and tools for economic policy analysis.

Modelling and solving macroeconomic models. Application of models to policy problems.

Course syllabus

This course gives standard tools for analyzing dynamic stochastic economies. It covers topics
from theory of stochastic economic growth, investments, search models to analyze search theories, frictions in financial markets, price stickiness, open-economy issues, monetary and
fiscal policy.

- Dynamic systems

1.Deterministic difference equations and systems

1.a. Linear difference equations
1.b. System of linear equations
1.c. Phase diagrams
1.d. Numerical solutions using Dynare

2. Stochastic difference equations

2.a. Univariate and multivariate linear rational expectations models
2.b. Nonlinear rational expectations models
2.c. Numerical solutions using Dynare

3. Markov processes
3.a. Markov chains
3.b. Convergence

- Dynamic optimization

1. Finite horizon dynamic programming
1.a. Principle of optimality
1.b. Optimal control
1.c. Maximum principle

2. Infinite horizon dynamic programming
2.a. Principle of optimality
2.b. Optimal control
2.c. Maximum principle and transversality condition

3. Applications
3.a. Consumption and Savings
3.b. Portfolio choice
3.c. Investment problems

- Equilibrium analysis

1. Complete markets exchange economies
1.a. Time 0 trading vs. sequential trading
1.b. Asset price bubbles
1.c. Asset pricing

2. Neoclassical growth model
2.a. Deterministic models
2.b. Basic RBC model
2.c. Extensions

3. Incomplete markets models
3.a. Production economies
3.b. Endowment economies
3.c. Aggregate shocks

4. Search and Unemployment
4.a. Basic model
4.b. Endogenous job destruction
4.c. Unemployment and business cycles
4.d. Models of directed search

Optimizing Models with Nominal Rigidities
1. A Basic Model of Sticky Prices
2. Ination Dynamics with Staggered Pricesetting

- A Neo-Wicksellian Framework for the Analysis of Monetary Policy
1. Interest-Rate Rules and Price Stability
2. Conditions for Determinacy of Equilibria
3. Examples of Interest-Rate Rules
4. Solving RE models
5. Delayed E_ects of Monetary Policy

- Inflation Stabilization and Welfare

1. Approximation of Loss Functions and Optimal Policies
2. A Utility-Based Welfare Criterion
3. The Case for Price Stability
4. Delayed Effects of Monetary Policy
5. Optimal Policy and Gains from Commitment

- Monetary Policy at the Zero-Lower Bound
1. Liquidity Trap
2. Taylor Principle and ZLB
3. Monetary Policy and ZLB

- Estimating DSGE models
1. Introduction to Bayesian Estimation
2. Bayesian DSGE models
3. Empirical application

Course director(s)