Course 2023-2024 a.y.


Department of Economics

Course taught in English

Student consultation hours
Class timetable
Exam timetable
Go to class group/s: 13
BESS-CLES (8 credits - I sem. - OB  |  6 credits SECS-P/01  |  2 credits SECS-P/03)
Course Director:

Classes: 13 (I sem.)

Synchronous Blended: Lessons in synchronous mode in the classroom (for a maximum of one hour per credit in remote mode)

Suggested background knowledge

Students attending this course should be familiar with concepts typically taught in Intermediate Macroeconomics and Microeconomics courses. Fundamentals of unconstrained and constrained optimization are also prerequisites.

Mission & Content Summary


Why, in an economy, periods of aggregate expansion follow periods of recession? What causes economic depressions? Why does unemployment exist? What can monetary and fiscal policies do to prevent and / or alleviate crises? What are the macroeconomic effects of banking crises? What causes deflation and liquidity traps? Compared to the basic course of Macroeconomics, the course introduces students to more advanced tools needed to respond to these (and several other) questions.


  • From Keynes to Lucas: the paradigm shift in modern macroeconomics.
  • The role of dynamics and expectations in macroeconomic models.  From the Neoclassical to the New-Keynesian revolution. From partial to general equilibrium analysis.
  • Microfoundations in macroeconomics: two-period model. The role of financial markets.
  • Government and fiscal policy in an intertemporal model with microeconomic foundations.
  • Intertemporal budget constraint, expectations, fiscal policy and Ricardian equivalence. The debate on the multiplier of public spending.
  • Monopolistic competition, nominal rigidity and aggregate fluctuations. The Neo Keynesian (NK) model.
  • The role of structural shocks and of systematic monetary policy for aggregate fluctuations. 
  • Credibility and time inconsistency of monetary policy. "Inflation bias" and "stabilization bias". 
  • Financial imperfections and the Great Recession. The "borrower-saver" model.
  • Bank crises and bank runs. The Diamond-Dybvig model.
  • Liquidity traps and monetary policy constraints. Paradox of savings and zero bound on the interest rate. The case of Japan and the advanced economies after 2007. The Krugman model.
  • Unemployment and the labor market. Search and matching approach.
  • Topics: The financial crisis of 2007-08.
  • The Eurozone crisis of 2011 and the ECB policy.
  • The aggregate economic implications of the Covid crisis

Intended Learning Outcomes (ILO)


At the end of the course student will be able to...
  • Define concepts such as stabilization policy, structural shock, government intertemporal budget constraint, systematic monetary policy, financial crisis, bank run, matching frictions in the labor market, liquidity trap.
  • 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.
  • Explain the main transmission channel at the heart of the 2008 Great Recession and of the 2011 Eurozone crisis.


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


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


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 (100% of the final grade), consisting of exercises and open questions aimed to assess students’ ability to apply the analytical tools illustrated during the course. The exam also includes short statements to discuss, aimed to assess students’ ability to articulate economic reasoning and to evaluate the potential effects of given macroeconomic policies. Students can take a partial written exam and complete the written exam at the end of the course. In this case the weight is: 50% for the partial exam and 50% for the end of term exam. Alternatively, students can take a final written exam that accounts for 100% of the final grade. 
  2. Problem sets Occasionally, problem sets are handed out. They are evaluated during TA classes, but do not count towards the final grade.

Teaching materials


The main teaching materials for both attending and non-attending students are:

  • S. WILLIAMSON, Macroeconomics, 6ed. (cap. 4, 5, 6, 9, 10, 11).

  • Lecture notes: T. MONACELLI, Macroeconomics and Economic Policy: Lecture Notes, September 2022.

  • Slides e handouts handed out in class.

Last change 29/05/2023 16:51