Master
2021/2022
Macroeconomics (Advanced Level)
Type:
Compulsory course (Economics and Economic Policy)
Area of studies:
Economics
Delivered by:
Department of Theoretical Economics
Where:
Faculty of Economic Sciences
When:
1 year, 1, 2 module
Mode of studies:
offline
Open to:
students of one campus
Master’s programme:
Economics and Economic policy
Language:
English
ECTS credits:
6
Contact hours:
90
Course Syllabus
Abstract
This course is a master’s level introductory course on Macroeconomic theory. It aims to instill a firm understanding of the basic language of the modern macroeconomics. Macroeconomics addresses the “big” questions by asking: Why do economies grow over time, and what factors do determine the speed of economic growth? Why do we have business cycles, and how should monetary and fiscal policies react to short-run fluctuations? The course will seek the answers to these questions by applying modern tools to the analysis of macroeconomic processes. The evolution of total output can be conceptually decomposed into a long-term trend and business-cycles around this trend. Macroeconomists have developed two distinct groups of theories (e.g. employing different sets of assumptions) depending on whether they are interested in explaining the short-run dynamics or the long-run dynamics in the economy. Similarly, this course is divided into two parts. The first part of the course, taught by Eren Arbatli, is devoted to the process of trend-growth in output per capita. It offers an overview of a range of standard growth models, discuss their theoretical relevance and empirical success in explaining different aspects of the process of long-run economic growth and the emergence of income differences across countries. The second part of the course, taught by Arsenii Mishin, is focused on issues in a short-run macro. It presents basic theories of business cycle fluctuations with reference to the conduct of macroeconomic policies. We will do so by introducing the dynamic stochastic general equilibrium (DSGE) models that take agent optimization, dynamics, and expectations formation seriously. The primary focus will be on the main tools that are used for construction of business cycle models and their application to fiscal and monetary policies.
Learning Objectives
- To provide students with the stylized facts about economic growth and business cycle and the main questions macroeconomists try to address
- To present basic theories of economic growth and business cycle
- Introduce students to core concepts and standard methodological tools that lay the foundation of modern macroeconomic analysis
Expected Learning Outcomes
- Critically evaluate the logic behind modern approach to Macroeconomics.
- Show the role of heterogeneity and risk-sharing.
- Apply the Lagrangian method to solve models without production.
- Construct the Bellman equation to solve both finite and infinite horizon deterministic models.
- Construct the Bellman equation to solve stochastic problems.
- Differentiate between state and control variables.
- Derive model's equations, compute the solution to the RBC model, perform model's calibration and simulation.
- Apply Dynare to quantitative work with basic macroeconomic models.
- Solve basic macroeconomic models numerically.
- Learn how to introduce fiscal policy into the RBC set up and evaluate its effects on the main results.
- Learn how to introduce sticky prices into the RBC set up and evaluate the effects of monetary policy on aggregate variables.
- Introduce the main ideas and approaches of modeling the financial sector in macroeconomic models.
- Illustrate the mechanisms of how financial crises spill over to the real economy.
- At the end of the course, students are expected to show an awareness of the main debates and approaches in the literature on economic growth and business cycle that will help them decide on the direction of their future research.
- At the end of the course, students are expected to show a basic understanding of the workings of standard macroeconomic models that will enable them to learn and work with more advanced models in the future.
Course Contents
- Introduction to economic growth
- Neoclassical Growth Theory
- Overlapping Generations (OLG) Models
- Endogenous Growth Theory
- Technology transfer and cross-country convergence
- Business Cycle. Week 1: Preliminaries
- Business Cycle. Weeks 2-3: Dynamic Programming and Neoclassical Growth Model
- Business Cycle. Weeks 4-5: Real Business Cycle Models (RBC)
- Business Cycle. Week 6: Fiscal Policy in the Real Business Cycle Model
- Business Cycle. Weeks 7-8: New Keynesian Models
Assessment Elements
- Final test 1Two controls (at the end of each module) will contain problems similar to those in home assignments as well as some short questions testing students’ knowledge of the stylized facts and core concepts mentioned in the lectures
- Final test 2Two controls (at the end of each module) will contain problems similar to those in home assignments as well as some short questions testing students’ knowledge of the stylized facts and core concepts mentioned in the lectures.
- Home assignment 1Two home assignments in each module will contain problems that will test your analytical thinking skills and your ability to analyze the models (and their slightly modified versions) we covered in the lectures, i.e. solving the models, discussing their predictions and summarizing the lessons that can be drawn from them
- Home assignment 2Two home assignments in each module will contain problems that will test your analytical thinking skills and your ability to analyze the models (and their slightly modified versions) we covered in the lectures, i.e. solving the models, discussing their predictions and summarizing the lessons that can be drawn from them
- Home assignment 3Two home assignments in each module will contain problems that will test your analytical thinking skills and your ability to analyze the models (and their slightly modified versions) we covered in the lectures, i.e. solving the models, discussing their predictions and summarizing the lessons that can be drawn from them.
- Home assignment 4Two home assignments in each module will contain problems that will test your analytical thinking skills and your ability to analyze the models (and their slightly modified versions) we covered in the lectures, i.e. solving the models, discussing their predictions and summarizing the lessons that can be drawn from them.
- Class participation in Part 1
- Class participation in part 2
Interim Assessment
- 2021/2022 2nd module0.2 * Final test 1 + 0.075 * Home assignment 1 + 0.15 * Class participation in Part 1 + 0.075 * Home assignment 4 + 0.075 * Home assignment 2 + 0.075 * Home assignment 3 + 0.15 * Class participation in part 2 + 0.2 * Final test 2
Bibliography
Recommended Core Bibliography
- Advanced macroeconomics, Romer, D., 2012
- Campbell, J. (1994). Inspecting the Mechanism: An Analytical Approach to the Stochastic Growth Model. Scholarly Articles. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsrep&AN=edsrep.p.hrv.faseco.3196342
- King, R. G., & Rebelo, S. T. (1999). Resuscitating real business cycles. Handbook of Macroeconomics, 927. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsrep&AN=edsrep.h.eee.macchp.1.14
- Lucas, R., Jr. (1976). Econometric policy evaluation: A critique. Carnegie-Rochester Conference Series on Public Policy, (1), 19. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsrep&AN=edsrep.a.eee.crcspp.v1y1976ip19.46
- Mankiw, N. G. (1990). A Quick Refresher Course in Macroeconomics. Journal of Economic Literature, (4), 1645. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsrep&AN=edsrep.a.aea.jeclit.v28y1990i4p1645.60
- Mark Gertler, Jordi Gali, & Richard Clarida. (1999). The Science of Monetary Policy: A New Keynesian Perspective. Journal of Economic Literature, (4), 1661. https://doi.org/10.1257/jel.37.4.1661
- Monetary policy, inflation, and the business cycle : an introduction to the new Keynesian framework, Gali, J., 2008
- The ABCs of RBCs : an introduction to dynamic macroeconomic models, McCandless, G., 2008
Recommended Additional Bibliography
- Macroeconomic theory : a dynamic general equilibrium approach, Wickens, M., 2008