Macroeconomic Theory I


The objective of this course is to study techniques to analyze macroeconomic issues such as economic growth, investment, the effect of government policies, and asset pricing.

We start with economic growth. We discuss the evolution of economic growth over the years. We solve problems of optimal growth formulated as optimal control problems in continuous time. We study topics such as growth, savings and the evolution of capital.

We then focus on models formulated recursively, in a way in which agents decide their next action based on the realization of the current state. Most of the course focuses on this part. This formulation is especially useful to study economies under uncertainty. We will see applications to topics such as growth under uncertainty, monetary economics, and asset pricing.

General characterization





Responsible teacher

André C. Silva


Weekly - Available soon

Total - Available soon

Teaching language



Available soon


The main textbooks are:

Barro, Robert J., and Xavier Sala-i-Martin (2004). Economic Growth, 2nd Ed. Cambridge: MIT Press.
Ljungqvist, Lars, and Thomas J. Sargent (2018). Recursive Macroeconomic Theory, 4th Ed.
Cambridge: MIT Press.
McCandless, George (2008). The ABCs of RBCs. Cambridge: Harvard University Press.

Barro and Sala-i-Martin will be used for economic growth. Ljungqvist and Sargent and McCandless will be used for recursive methods.

Teaching method

Available soon

Evaluation method

Midterm Exam: October 21, Monday, 14:30-16:00 Final Exam:    December 11, Wednesday, time TBA
The final grade is calculated by 0.4×Midterm + 0.6×Final. Problem Sets
There will be several problem sets to study the topics of the course in more detail. I will also use the
problem sets to introduce Matlab.

Subject matter

Class and Topic Economic Growth
1, 2    Introduction. Data
Data sets. Discussion
Barro and Sala-i-Martin Ch. 1. Acemoglu Ch. 2
Bourguignon and Morrison (2002), Deaton (2010), Fogel and Costa (1997), Sali-i-Martin (2006), Pinkovskiy and Sala-i-Martin (2014)

3, 4    The Neoclassical Growth Model
Optimal consumption and investment. Ramsey-Cass-Koopmans. Policy changes Barro and Sala-i-Martin Chs. 2, 3. Acemoglu Ch. 8. Romer Ch. 2
Solow (1956, 1957), Ramsey (1928), Cass (1965), Ljungqvist and Sargent (2018, ch. 11)

5, 6    Endogenous Growth
Human capital and growth
Barro and Sala-i-Martin Chs. 4.1, 4.2, 5
Lucas (1988), Romer (1986), Griliches (1994)

7, 8    Productivity and the Allocation of Talent
Incentives and the use of resources. Ideas and innovation
Murphy, Sheifer and Vishny (1991), Buera and Lucas (2018), Hansen and Prescott (2002), Grossman and Helpman (2018), Lockwood, Nathanson and Weyl (2017), Acemoglu, Robinson and Verdier (2017), Lucas (2015), Manuelli and Seshadri (2014), Silva (2010), Ferreira, Manso and Silva (2014)

Recursive Methods
9, 10    Economic Growth as a Dynamic Programming Problem
McCandless chs. 4

11, 12 Stochastic Economic Growth
McCandless chs. 5, 6 Using Dynare
Hansen (1985), Uhlig (1999)

13, 14 Quadratic Dynamic Programming
McCandless Ch. 7. Ljungqvist-Sargent chs. 3-5

15, 16 Kalman Filter. Stochastic Linear Equations in Macroeconomics
Ljungqvist-Sargent ch. 5. Ljungqvist-Sargent ch. 2
17, 18 Money
19    McCandless chs. 8, 9 Dynare (additional topics)
Cooley and Hansen (1989), Friedman (1969), Lucas (1990), Lucas (2000), Silva (2012)

20, 21 Optimal Taxation
Ljungqvist-Sargent chs. 16
Cooley and Hansen (1992), Chamley (1986), Judd (1985), Chari, Christiano and Kehoe (1996), Cavalcanti and Villamil (2003), Correia (2010), Adao and Silva (2019)

22, 23 Asset Pricing
24    Ljungqvist-Sargent chs. 13, 14
Lucas (1978), Mehra and Prescott (1985), Hansen and Jagannathan (1991), Hansen and Singleton (1983)


Programs where the course is taught: