Advanced Macroeconomics (honours/masters), 2019

This is an 'advanced introduction' to macroeconomics for honours undergraduates or masters students.

The course covers core topics in macro -- long run economic growth, business cycle fluctuations, unemployment, inflation, optimal stablization policy, etc -- but with a greater emphasis on formal models, especially dynamic models, than is often found in undergraduate classes.

The first half covers models of long-run economic growth and real business cycles that are essentially 'frictionless' and do not generally admit any interesting role for macroeconomic policy. The second half covers various kinds of frictions, including nominal rigidities that give rise to monetary non-neutralities, labor market frictions that give rise to unemployment, and financial market frictions that can amplify exogenous shocks and also serve as an endogenous source of volatility. Other applications, including the economics of climate change, technological change, product market imperfections, public debt and fiscal policy, and the implications of house price dynamics for monetary policy, are discussed in a series of student-led presentations.


Lecture 1 Introduction and course overview. Solow model in discrete time. Linear difference equations.

Dynamics and growth theory
Lecture 2 Solow model in continuous time. Linear differential equations. Golden rule, speed of convergence.
Lecture 3 Ramsey-Cass-Koopmans model in discrete time. Introduction to saddle-path dynamics.
Lecture 4 Linear systems of difference equations. Eigenvalues, stability.
Lecture 5 Log-linearizing. Method of undetermined coefficients. Introduction to Matlab.
Lecture 6 Ramsey-Cass-Koopmans model in continuous time. Control theory. Systems of differential equations.
Lecture 7 Imperfect competition. Markups. Implications for wages and factor shares.
Lecture 8 Automation. Implications for wages and factor shares.
Extra lecture Romer model. Knowledge accumulation and endogenous growth.

Real business cycles
Lecture 9 Stochastic difference equations. Solving the stochastic growth model "by hand".
Lecture 10 Labor supply. General equilibrium. Real business cycles.
Lecture 11 Solving the stochastic growth model using Dynare.
Lecture 12 Random walks. Stochastic trends. Cointegration.

Monetary economics
Lecture 13 Background. Flexible price models with perfect and imperfect competition.
Lecture 14 Sticky prices. Output gaps. New Keynesian Phillips curve.
Lecture 15 Optimal policy in the new Keynesian model. Stability and uniqueness. Simple rules.
Lecture 16 Policy tradeoffs in the new Keynesian model. Discretion versus commitment.
Lecture 17 New Keynesian model in continuous time. Zero lower bound.
Lecture 18 Optimal policy in a liquidity trap with commitment.

See here for more lectures on monetary economics

Unemployment and labor market frictions
Lecture 19 Search frictions. Labor market flows. Beveridge curve. Wage bargaining.
Lecture 20 Transitional dynamics in search model. Sources of inefficiency.
Extra lecture Mortensen-Pissarides model with endogenous job destruction.

Financial crises
Lecture 21 Diamond-Dybvig model of bank runs. Securitized banking.
Lecture 21 Geanakoplos model of heterogeneous beliefs and the leverage cycle.
Extra lecture Brunnermeier-Sannikov model with nonlinear dynamics and endogenous risk.

See here for more lectures on financial frictions

Tutorial 1, solutions
Tutorial 2, solutions
Tutorial 3, solutions
Tutorial 4, solutions
Tutorial 5, solutions
Tutorial 6, solutions, code
Tutorial 7, solutions, code
Tutorial 8, solutions
Tutorial 9, solutions, code
Tutorial 10, solutions, code
Tutorial 11, solutions

Problem sets
Problem set 1, solutions
Problem set 2, solutions, code
Problem set 3, solutions, code

Scraps of code
Optimal growth model (by hand)
Simulating an AR(1)
Stochastic growth model (by hand)
Stochastic growth model (Dynare)