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Course 2019-2020 a.y.

20285 - ADVANCED MACROECONOMICS

Department of Economics

Course taught in English

Go to class group/s: 31

CLMG (6 credits - I sem. - OP  |  SECS-P/01) - M (6 credits - I sem. - OP  |  SECS-P/01) - IM (6 credits - I sem. - OP  |  SECS-P/01) - MM (6 credits - I sem. - OP  |  SECS-P/01) - AFC (6 credits - I sem. - OP  |  SECS-P/01) - CLELI (6 credits - I sem. - OP  |  SECS-P/01) - ACME (6 credits - I sem. - OP  |  SECS-P/01) - DES-ESS (6 credits - I sem. - OP  |  SECS-P/01) - EMIT (6 credits - I sem. - OP  |  SECS-P/01) - GIO (6 credits - I sem. - OP  |  SECS-P/01) - DSBA (6 credits - I sem. - OP  |  SECS-P/01) - PPA (6 credits - I sem. - OP  |  SECS-P/01) - FIN (6 credits - I sem. - OP  |  SECS-P/01)
Course Director:
TOMMASO MONACELLI

Classes: 31 (I sem.)
Instructors:
Class 31: TOMMASO MONACELLI


Suggested background knowledge

To feel comfortable in this course a student should be familiar with intermediate or advanced concepts in microeconomics, with methods of dynamic (constrained and unconstrained) optimization, and with basic knowledge of univariate and multivariate difference equations.


Mission & Content Summary
MISSION

The course introduces students to the techniques of modern macroeconomics analysis.

CONTENT SUMMARY

PART 1

  • Introduction: the Kydland and Prescott revolution.
  • Solving Dynamic Stochastic General Equilibrium (DSGE) models.
  • The RBC model.
  • Estimation vs. calibration in DSGE models.

PART 2

  • Nominal rigidities, aggregate fluctuations, and monetary policy
  • Imperfect information, rational expectations and monetary policy: the Lucas island model
  • The role of nominal frictions. The Dynamic New Keynesian Model.
  • Beyond RBC theory. The effect of money on output, the role of demand shocks, and the microeconomic evidence on nominal price rigidity.
  • Monetary policy, inflation, and the business cycle.
  • Credibility, time inconsistency, and optimal monetary policy.
  • Liquidity traps and the zero lower bound on nominal interest rates. The Great Recession.
  • Deflation and persistent recessions. The role of fiscal policy and unconventional monetary policy.

Intended Learning Outcomes (ILO)
KNOWLEDGE AND UNDERSTANDING
At the end of the course student will be able to...
  • Define concepts such as stabilization policy, structural shock, intertemporal budget constraint, systematic monetary policy,  liquidity trap, elasticity of labor supply, equilibrium of a system of linear difference equations.
  • Describe the appropriate policy to apply to make aggregate economies more resilient to underlying macroeconomic shocks.
  • Identify the key sources of business cycle fluctuations.
  • Recognize the role of monetary and fiscal policy in shaping the transmission of economic disturbances.
  • Understand the difference between calibration and estimation of a model.
  • Being able to solve a dynamic structural model after log-linear approximation. Implementation in a computer algorithm.
APPLYING KNOWLEDGE AND UNDERSTANDING
At the end of the course student will be able to...
  • Interpret and assess the phenomena and the dynamics of the aggregate economic systems through economic theory.
  • Assess the empirical reliability of the predictions stemming from macroeconomic models where agents' expectations play a key role.
  • Choose and apply the proper model to understand which economic policy is more appropriate to tackle normal business cycles as opposed to economic depressions.
  • Choose and apply the proper tools to solve intertemporal dynamic models that describe the behavior of aggregate economies in the presence of market imperfections.
  • Evaluate the social welfare effects of conventional and so-called unconventional macroeconomic policies.

Teaching methods
  • Face-to-face lectures
  • Exercises (exercises, database, software etc.)
  • Individual assignments
  • Group assignments
DETAILS

The learning experience of this course includes, in addition to face-to-face lectures, the solution in class of problem sets assigned to students throughout the course. Those exercises allow students to apply the analytical tools illustrated during the course and to solve dynamic general equilibrium models of aggregate fluctuations. Home assignements are integral part of the course. In those assignments students are asked to solve formal exercises as well as to perform descriptive and statistical analysis of macroeconomic time series data.


Assessment methods
  Continuous assessment Partial exams General exam
  • Written individual exam (traditional/online)
  • x x x
  • Individual assignment (report, exercise, presentation, project work etc.)
  • x x x
    ATTENDING AND NOT ATTENDING STUDENTS

    1. Attending students

     

    With the purpose of measuring the acquisition of the above-mentioned learning outcomes, the students’
    assessment is based on two main components:
    1. Written exam (90% of the final grade), consisting of exercises and open questions aimed to assess
    students’ ability to apply the analytical tools illustrated during the course, to solve and explain
    models of oligopolistic competition as well as to find optimal incentive schemes and organizational
    design. The exam will also include short statements to discuss, aimed to assess students’ ability to
    articulate economic reasoning and to evaluate the potential effects of a given business practice/policy
    action and the trade-offs involved in a given organizational choice.
    Students can take a mid-term written exam and complete the written exam at the end of the course. In this
    case the weight is: 45% for the mid-term exam and 45% for the end of term exam. Alternatively, students
    can take a final written exam that accounts for 90% of the final grade.

     

    2. Problem sets, worth 10% of the final grade. Problem sets consist of take-home exercises with the aim of getting the students familiarized with the material presented in class.

     


    Teaching materials
    ATTENDING AND NOT ATTENDING STUDENTS
    • Lecture notes handed out by teachers.
    • J. GALI, Monetary Policy, Inflation, and the Business Cycle, Princeton University Press.
    • D. ROMER, Advanced Macroeconomics, McGraw-Hill.
    Last change 24/04/2019 14:19