Course 2018-2019 a.y.

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
• 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.

• 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.

• 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.

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

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.

Attending students are evaluated on partial or general written exam, individual assignment and group assignment. 

Non attending students are evaluated only on the basis of a final general exam. 

• Lecture notes handed out by teachers.
• J. GALI, Monetary Policy, Inflation, and the Business Cycle, Princeton University Press.
• D. ROMER, Advanced Macroeconomics, McGraw-Hill.