Course 2021-2022 a.y.


Department of Economics

Course taught in English
Go to class group/s: 31
CLMG (6 credits - I sem. - OP  |  12 credits 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:

Classes: 31 (I sem.)

Class-group lessons delivered  on campus

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


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



  • Evolution of modern business cycles models.
  • The neoclassical growth model: social planner problem and competitive equilibrium; recursive and sequential formulations and solution methods.
  • The stochastic neoclassical growth model: adding uncertainty.
  • The RBC model: divisible and indivisible labor.
  • The search and matching model. Wage rigidity: Barro's critique; new hires wages.


  • Nominal rigidities, aggregate fluctuations, and monetary policy
  • Monopolistic competition and nominal frictions. The New Keynesian Model. Technology, employment and the business cycle.
  • 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
  • An introduction to HANK models 


Intended Learning Outcomes (ILO)


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, social planner solution versus decentralized competitive equilibrium.
  • 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.
  • Know three workhorses of modern macroeconomics: the stochastic neoclassical growth model, the search and matching model and the New Keynesian model.
  • Understand available solution methods for dynamic stochastic general equilibrium models.


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
  • Online lectures
  • Exercises (exercises, database, software etc.)
  • Individual assignments


The learning experience of this course includes, in addition to synchronous face-to-face / online lectures, the solution 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 assignments are an 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)
  • Individual assignment (report, exercise, presentation, project work etc.)
  • Group assignment (report, exercise, presentation, project work etc.)


With the purpose of measuring the acquisition of the above-mentioned learning outcomes, the students’ assessment is based on two main components:
1. Final written exam (worth 80% of the Final Grade with Problem Sets; worth 100% of the Final Grade without Problem Sets), consisting of exercises and open questions aimed to assess students’ ability to apply the analytical tools illustrated during the course, to solve and explain macroeconomic models of aggregate fluctuations as well as of the functioning of monetary policy. The exam will also include short statements to discuss, aimed to assess students’ ability to articulate economic reasoning;

2. Elective Problem sets (worth 20% of the Final Grade), consisting of take-home exercises with the aim of getting the students familiarized with the material presented in class.

Teaching materials


Teaching materials for Part I


  • Slides
  • Krueger (2012). “Macroeconomic Theory”. Manuscript.
  • Pissarides. 2000. "Equilibrium Unemployment Theory". The MIT Press.
  • Scientific articles

Teaching materials for Part II

  • Lecture slides posted on Blackboard
  • Lecture notes
  • J. GALI, Monetary Policy, Inflation, and the Business Cycle, Princeton University Press (also available in e-format).
  • D. ROMER, Advanced Macroeconomics, McGraw Hill (also available in e-format).
Last change 06/09/2021 16:40