Macroeconomic Theory
Objectives
This course presents macroeconomic modeling at an intermediate level. We will cover three core models that are the basis for many more advanced and complex models used in the field. A strong grasp of the benchmark models is a necessary preliminary step both to go to more advanced topics and maybe more importantly to fully understand the basic economic channels that are almost always present even in more complex models. The course also presents the mathematical methods that are used both to specify and to solve the benchmark models. These methods are interesting by themselves as they can be applied to many other questions and fields.
General characterization
Code
2173
Credits
3.5
Responsible teacher
Francesco Franco
Hours
Weekly - Available soon
Total - Available soon
Teaching language
English
Prerequisites
Available soon
Bibliography
The course has a comprehensive set of slides and notes. The last edition of Advanced Macroeconomics (AM) by David Romer is a recommended text. I add optional readings as the original sources are always extremely interesting.
PART I
Notes
(AM) Chapter II, pages 49-77
Cass David, “Optimum Growth in an Aggregative Model of Capital Accumulation.” Review of Economic Studies 32 (July): 233-240.
Koopmans Tjalling, “On the Concept of Optimal Economic Growth”. In The Economic Approach toEconomic Planning. Amsterdam: Elsevier.
Ramsey Frank, “A Mathematical Theory of Saving”. Economic Journal 38 (December 1928): 543-559.
PART II
Notes
(AM) Chapter II, pages 78-93
Diamond Peter, “National Debt in a Neoclassical Growth Model” American Economic Review 55 (December 1965): 1126-1150.
PART III
Notes
(AM) Chapter 4 and Chapter 7
Olivier Jean Blanchard and Nobuhiro Kiyotaki “Monopolistic Competition and the Effects of Aggregate Demand” The American Economic Review Vol. 77, No. 4 (Sep., 1987), pp. 647- 666
Teaching method
The syllabus is divided in three parts. Each of the part presents one of the model. The teaching material is based on one of the main intermediate macroeconomics leading textbook completed with class notes. There is a problem set for each of the three parts. That will be corrected in class (one class per each problem resolution).
Evaluation method
The Final Exam weight in the final is 55%. The remainder of the evaluation consists in class participation, 5%, and problem sets, 45%.
DEMONSTRATION OF THE COHERENCE OF THE TEACHING METHODS WITH COURSE LEARNIG OBJECTIVES
Taking into consideration the fundamental purpose of this course, the learning method most suitable to this course is
? learning-by-doing (practice with the Problem Sets)
? Reading the papers in the syllabus
Subject matter
The course covers the mainstream models used in macroeconomics: (1) the neoclassical growth model (Ramsey), (2) the overlapping generation model (Diamond) and (3) the new Keynesian business cycle model (Woodford). The neoclassical growth model requires an introduction in continuous time optimal control, the overlapping generation model requires an introduction in optimization and difference equations and the new Keynesian model requires an introduction in linear approximation and system of difference equations. We will not cover the theory behind the mathematical methods but we will learn how to use them in a recipe book manner.