Master
2018/2019
Macroeconomics II (advanced level)
Type:
Compulsory course (Financial Economics)
Area of studies:
Economics
Delivered by:
International College of Economics and Finance
When:
1 year, 2 semester
Mode of studies:
offline
Instructors:
Markus Gebauer
Master’s programme:
Financial Economics
Language:
English
ECTS credits:
5
Contact hours:
58
Course Syllabus
Abstract
Macroeconomics II deals with the analysis of the short-run macroeconomic phenomena. It introduces the Real Business Cycle approach and the New Keynesian approach to the problem of economic fluctuations. It also familiarizes students with models of Search and Matching and gives an introduction to open economy issues.
Learning Objectives
- To give a broad overview of substantive issues of modern macroeconomics;
- To teach analytical tools and methods of macroeconomic analysis to enable students to continue their education at a Ph.D. level and to read research papers in the area;
- To enable students to conduct applied analysis of macroeconomic policy while working for government agencies, think tanks, central banks or the private sector;
- To give students the essential knowledge for applied courses, including financial economics.
Expected Learning Outcomes
- outline the main approaches to modeling optimizing agents in macroeconomic models, including the ways to solve the models
- Explain basic statistical techniques used in Business Cycle Literature
- Define Recessions and Booms and outline patterns established about Business Cycles
- Apply the methodology of DSGE models
- Critically appraise the performance of models vis-à-vis reality
- Evaluate approaches on how to incorporate monetary frictions
- Intelligently discuss some aspects of monetary policy
- Apply methodology of search and matching models
- Assess the challenges and issues the search theory of unemployment still faces
- Explain and use the basic accounting concepts that describe the modern open economy, stylized facts about the world economy and capital flows.
- Outline models of international risk sharing and the role of financial frictions and incomplete markets
- Compare model predictions with empirical observations
- Explain recent developments in the international banking and financial regulatory environment and models of how policy can affect undesirable economic/financial fluctuations.
- Explain recent developments of the Russian economy
- Apply macro-finance modelling frameworks developed throughout the course.
Course Contents
- Business Cycle dynamics. The issues of business cycle movements definition. Statistical ways of economic dynamics decomposition into short- and long-run dynamics. Stylized facts about short-run movements.This section introduces Business Cycles, definitions and methods as well as lays the ground for the next section. We discuss statistical ways of decomposition and their merits as well as the derivation of “Stylized Facts”.
- The Real Business Cycle (RBC) models.2.1. RBC basic model. Set-up and solution of agents’ problems. 2.2. Solving RBC models. Methods of exact solution. Log-linear approximations. 2.3. Empirics of the standard RBC model.
- Dynamic optimizing macroeconomic models: an introduction and applications3.1. Two-period model. The Euler equation. Application to the current account in an open economy. 3.2. Infinitely-lived representative agent framework. Cass-Koopmans optimal growth model in continuous time. 3.3. Overlapping-generations framework and the Diamond model. Applications to fiscal policy and social security. 3.4. Ricardian equivalence: theory and evidence
- The New Keynesian models.3.1. Foundations for nominal frictions. Taylor Staggering and Lucas Model of Imperfect Information. Fischer’s contracting wage model. 3.2. The Model of Monopolistic Competition. 3.3. Calvo pricing. New Keynesian Phillips Curve.
- Search-Theoretic Models.4.1. The Diamond-Mortensen-Pissarides Model of Unemployment. The matching-function, Beveridge Curve, Nash-Bargaining. 4.2. The Hosios Condition of Efficiency. 4.3. Competetive Search Equilibrium. Search Clubs, Wage Posting 4.4. Extensions and Applications of Search Models. 4.5. Going beyond Labour Applications. Search Model in monetary economics
- International Accounting, Risk Sharing and Business CyclesHere we will look at the basics of national accounting for open economies and examine stylized facts about the world economy. We will construct a formal model that reflects the accounting relationships. We will also study the Russian and Brazilian crisis. These lectures will provide a motivation for the theoretical frameworks that will follow
- International Exchange Economies, Risk Sharing and Incomplete MarketsWe will first extend the basic asset pricing result of Arrow-Debreu to an international context and examine the predictions for risk sharing. We will extend this analysis first to International CAPM and then see how market incompleteness and default affect the results.
- Financial Stability, Macro/Micro-prudential policy and international spillovers.We will cover banking regulations, financial stability and international spillover of risk through the banking system.
- Russia as an Open Economy and ReviewThe post-soviet Russian experience will be examined through the lens of the course material covered. We will go through the material in the course and discuss how various aspects considered tie in together.
Interim Assessment
- Interim assessment (2 semester)0.05 * course participation + 0.2 * homework assignments + 0.45 * exam + 0.15 * midterm test 1 + 0.15 * midterm test 2
Bibliography
Recommended Core Bibliography
- Advanced macroeconomics, Romer, D., 2001
Recommended Additional Bibliography
- Blanchard, O., & Fischer, S. (1989). Lectures on Macroeconomics. Cambridge, Mass: The MIT Press. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=nlebk&AN=11345
- Economic growth, Barro, R. J., 2004
- Foundations of international macroeconomics, Obstfeld, M., 1996
- Gong, G., & Semmler, W. (2006). Stochastic Dynamic Macroeconomics: Theory and Empirical Evidence. Oxford University Press. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsrep&AN=edsrep.b.oxp.obooks.9780195301625
- Introduction to economic growth, Jones, C. I., 2002