Macroeconomics III 2017

Syllabus: syllabus_Macroeconomics III

Main Textbook:

  1. Romer, D. (2006). Advanced Macroeconomics. McGraw Hill
  2. Dornbusch, R. Fischer, S., and R. Startz (2010). Macroeconomics. McGraw Hill
  3. Mankiw, G. (2010). Macroeconomics. Worth Publishing
  • Note: Journal articles will be used throughout the course

Supplementary Textbooks and Readings:

  1. Blanchard, O. J., and S. Fischer (1989). Lectures on Macroeconomics. MIT Press
  2. Walsh, C. E. (1998). Monetary Theory and Policy. MIT Press
  3. Mishkin, F. S. (1997). The Economics of Money, Banking, and Financial Markets. Addison-Wesley
  4. Chiang, A., E. (1992). Elements of dynamic optimization, 1st ed. McGraw-Hill
  5. Simon P. C. and L. Blume. (1994). Mathematics for Economists. W. W. Norton & Company
  6. Sydsaeter K. and P. J. Hammond. (1995). Mathematics For Economic Analysis. Prentice Hall
  7. Chiang C. A. (1984). Fundamental Methods of Mathematical Economics (3rd ed). McGraw-Hill Higher Education

Course Topics

  1. Expectations
    • Introduction to the concept of expectations
    • Types of expectations
    • Traditional models with expectations
    • Effectiveness of monetary policy (with fixed rules)
    • Monetary policy under commitment and discretion
    • Discretion and political cycles
    • Inflation and monetary policy
  2. Business cycles
    • Introduction to the causes of business cycles
    • Classic model of business cycles
    • Simple Keynesian and post-Keynesian models
  3. Theories of real business cycles
    • The causes of real business cycles
    • Simple model of real business cycles
    • Limitations of the basic model of real business cycles
    • Co-movement in business cycles
    • New Keynesian economic cycles
  4. Expectations and financial markets
    • Bonds
    • Actions
    • Capital asset pricing model (CAPM)
    • Black-Scholes model

Course Information

  1. The classes start on 06.02.2016 and end on 31.05.2016
  2. Lectures: Thursday and Friday, 10:00 – 11:30
  3. Exercise Sessions: Wednesday, 11:00 – 12:00
  4. By appointment and by default on Wednesday 3:00pm — 4:00pm
  5. Grading: See the syllabus
  6. Tentative dates of mid-term exams: 30.03.2016 and 18.05.2016
  7. There is an in class debate after the expectations topic and data exercise after the real business cycles topic.
  8. I have uploaded the current version of our lecture notes and your assignments assignment. The deadlines of the assignments are tentative and might be updated as we progress through the course.
  9. 11.02.2017
  10. During the last week we have discussed and seen on practical examples how expectations can matter for individual decisions. We have also defined several types of expectations. Next week we will start discussing the Cobweb model. I strongly recommend to start reading the corresponding parts in our lecture notes.
  11. I had to update our lecture notes since they were missing citations. This is not a big deal if you have already printed them.
  12. 20.02.2017
  13. We have finished covering the Cobweb model and have started covering the Cagan model. I strongly recommend reading the corresponding chapters from the lecture notes.
  14. 24.02.2017
  15. We have finished covering the Cagan model and have started discussing the Lucas’ Imperfect Information model. I strongly recommend to read the corresponding sections from our lecture notes.
  16. 07.03.2017
  17. We have finished covering the Lucas Imperfect Information and the Sticky Wage models. I strongly recommend to read the corresponding sections from our lecture notes.
  18. Most likely, we will solve together Assignment 1 this week during one the classes.
  19. There are no classes on March 17.
  20. 12.03.2017
  21. We have almost finished discussing the topic about stabilizing monetary policy. I strongly recommend reading the corresponding chapter from our lecture notes.
  22. During our previous class we briefly talked about world-known economists who have worked on the topics that we are covering these days in our classes. For example, you can read about Ben Bernanke, Jordi Gali, Alan Greenspan, and Janet Yellen, . All of them have significant academic contributions. Check, for example, Ben Bernanke’s financial accelerator framework, Jordi Gali’s New Keynesian perspective of monetary policy, Alan Greenspan’s monetary policy uncertainty, and Janet Yellen’s stabilization policy.
  23. There are no classes on March 17.
  24. 21.03.2017
  25. Please, remember to make your choice in the Virtual Campus whether you want to take the continuous assessment option or the unique assessment option.
  26. 05.04.2017
  27. I have managed to correct mid-term 1. You can come and see your result at from 11.30am to 12.15pm on this Friday.
  28. 13.04.2017
  29. We have finished covering the monetary policy with commitment and discretion topic. I strongly recommend reading the corresponding chapter from our lecture notes.
  30. Do you want to read more about commitment and discretion? Here is a seminal article by Kydland and Prescott (1977), this one is a non-technical summary of it, and bit more complicated story by Evans and Honkapohja.
  31. There are no classes on April 21.
  32. 25.04.2017
  33. We have finished discussing the Carlin and Soskice Model. I strongly recommend to read the corresponding section from our lecture notes.
  34. I would like you to start preparing for an in-class debate. The debate is tentatively scheduled on May 12. The instructions for the debate are given below.
  35. 06.05.2017
  36. The debate is rescheduled on May 26.
  37. Most probably there are going to be no classes on May 25 and 31.
  38. 15.05.2017
  39. The 2nd mid-term exam is not cumulative and covers all topics which were not covered in the 1st mid-term exam.
  40. These are the instructions to the 2nd mid-term exam:
    1. “The exam consists of true/false/uncertain, multiple choice, and short answer questions and is for 90 minutes. You can use our lecture notes and calculators in order to tackle the questions in this examination. Your answers to the questions must be based on the topics, models, and ideas/notions discussed and covered in this course.//
      The multiple choice questions can have several correct answers as well as several wrong answers. In order to earn points from an exercise you have to circle all correct answers and no wrong answer. Your calculations should be done with a precision of at least second decimal point. You must use the blank papers that I have provided for your calculations and derivations. Wrong answers to true/false/uncertain and multiple choice questions earn -2 points.//
      No mobile phones are allowed! Please put everything else that you have around the classroom walls. You should not have other papers or devices on your table. You have to write the number of your student ID and your full name above. The failure to comply with these rules can result in your expulsion from the exam!//
      In case you have a question rise your hand and I (we) will come to you. In case you spot a mistake, please let me (us) know. The number of points that you can earn from the exercise are in parenthesis (out of total 100 for this mid-term).”
  41. 20.05.2017
  42. You can come to check your mid-term 2 results on May 24 at 4pm.
  43. There are no classes on May 25.
  44. The deadline of RBC assignment is 3pm, June 16.
  45. 23.05.2017
  46. Please upload your answers to debate questions in the Debate forum available in the Virtual Campus.
  47. 29.05.2017
  48. There are no classes on May 31.
  49. 22.06.2017
  50. Final exam takes place in room #10 of building 690 tomorrow and starts at 9am.

Lecture Notes

Assignment Exercises (continuous evaluation)

  1. Assignment 1 (deadline: 3pm, 27.02.2017)
  2. Assignment 2 (deadline: 3pm, 13.03.2017)
  3. Assignment 3 (deadline: 3pm, 27.03.2017)
  4. Assignment 4 (deadline: 3pm, 10.04.2017)
  5. Assignment 5 (deadline: 3pm, 24.04.2017)
  6. Assignment 6 (deadline: 3pm, 02.05.2017)
  7. Assignment 7 (deadline: 3pm, 15.05.2017)
  8. Assignment 8 (deadline: 3pm, 31.05.2017)

Debate (scheduled on May 26!)

  1. Instructions and Topic
  2. Data – MS Excel File
    1. or download the Excel file from:

RBC Exercise

  1. Assignment and Instructions (Deadline: June 16)
  2. Country Assignment
      1. or download the Excel file from: