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Advanced Macroeconomics

2018/2019
Учебный год
ENG
Обучение ведется на английском языке
5
Кредиты

Преподаватель

Course Syllabus

Abstract

The course of Advanced Macroeconomics is the part of master program in Finance and is realized on the base of the Department of Economics and Econometrics. Students study modern macroeconomic theories, tools, approaches which may help them in further education, writing research papers, coursework, in preparing the thesis. In the end of the course students will have knowledge about two main fields of macroeconomic theory: economic growth and business cycle.
Learning Objectives

Learning Objectives

  • The goals of the discipline Macroeconomics (Advanced level) are to expand and deepen students' knowledge in the field of macroeconomic analysis with significant use of the mathematical apparatus, as well as training in the use of acquired knowledge in professional activities.
Expected Learning Outcomes

Expected Learning Outcomes

  • Know the principles of the modern economy at the macro level
  • Have skills in macroeconomic modeling using modern tools
  • Apply modern mathematical tools to solve substantial macroeconomic problems
  • Own a methodology for conducting research in the field of macroeconomics
  • Know the main results of the latest research published in leading professional journals on macroeconomics
  • Use modern software to solve economic, statistical and econometric problems in the field of macroeconomics
Course Contents

Course Contents

  • Theme 1. Introduction. Solow model
    Economic growth and economic fluctuations. Introduction to the theory of economic growth. Stylized Caldor facts regarding economic growth. Economic growth and convergence between countries. Solow Model. The behavior of firms and the basic equation of the capital accumulation dynamics. The trajectory of balanced growth path. The rate of convergence to a stationary point. Changes in the savings rate and the Golden Rule of capital accumulation. Convergence. The Solow residual. Environment and economic growth. Natural resources in a model of economic growth. Technological progress and environmental pollution.
  • Theme 2. Ramsey-Cass-Koopmans model
    Assumptions. Representative household preference. Household optimization as optimal control problem. Household optimization as calculus of variations approach. Firm optimization. Linearization of the system around a steady state. Phase diagram of the dynamics of consumption and capital. Stability of the stationary point. The transversality condition and economic interpretation of the saddle path. The trajectory of balanced economic growth. The modified “golden rule” of capital accumulation. Shocks in the Ramsey-Kass-Kupmans model. Government spending in the Ramsey-Cass-Koopmans model. Temporary and permanent changes in government spending. Forward looking solution.
  • Theme 3. Mankiw-Romer-Weil model
    Model assumptions. Accumulation of physical and human capital equations. Steady state and comparative statics. Stability analysis. Reduced form equation. Econometric testing. Endogeneity problem. Hall and Jones analysis
  • Theme 4. Creative destruction model of Aghion-Howitt
    Schumpeterian approach to economic growth, the idea of creative destruction. Positive and negative externalities of growth. Model assumptions. The probability distribution of innovation modeling. Labor market equilibrium. The optimum of a monopolist. Arbitration equation. General equilibrium. Steady state. Comparative statics (balanced growth path). The effect of productivity growth in the innovation sector. The effect of increasing the innovation probability. The effect of interest rate. The effect of the scale of the labor market. Competition and growth. Social optimum and growth. Technology transfer and the idea of catching up. Gerschenkron’s advantage of backwardness. Assumptions of technology transfer model. The costs of adapting global technology. Technological frontier. Equilibrium distance from the technological frontier. Club convergence and outsiders club.
  • Theme 5. Unified growth theory
    Stylized facts of economic growth in historical perspective. Ideas of Malthus. Model of Malthusian stagnation. The role of restrictions on the amount of land resources. Endogenous population growth rate. The steady state level of the population. The effect of technology growth. Sustainability of per capita income dynamics. Agriculture and industry. Preconditions for exiting the Malthusian stagnation regime. Industrialization and urbanization. Education and growth. Deindustrialization and a shift towards the services production.
  • Theme 6. Real business-cycle model
    Stylized facts about fluctuations in business activity and approaches to building models. Empirical researches. Representative agent and choice of consumption demand and labor supply. Utility maximization and the effect of intertemporal substitution of consumption and labor supply. Household optimization in the face of uncertainty. Steady state and linearization of the model around the steady state. Predetermined and forward-looking variables. Solution of a system of forward-looking difference equations with rational expectations. The Blanchard-Kahn condition. Productivity shocks and aggregate demand shocks in the model. Inertia and persistence of inflation and GDP. Basic empirics of RBC. Calibration and simulation of the model. Model limitations and possible modifications.
  • Theme 7. New Keynesian model
    The traditional Keynesian approach. IS-LM: Aggregate Demand Model in a Closed and Open Economy. Aggregate supply under various assumptions about wage and price rigidities. Keynesian quasi-static analysis. The traditional Phillips curve and the problem of trade-off between inflation and unemployment: the Keynesian approach and its criticism. Imperfect information, money and output. Lucas' imperfect information model. Expected and unexpected changes in monetary policy. Phillips Curve and Lucas Critique Step-by-step price adjustment. The model of imperfect competition and external effects of aggregate demand. Time-dependent adjustment rules: case of stagered prices, case of fixed prices State-dependent adaptation rules: menu cost. Basic New Keynesian Model Optimization of households and firms behaviour. Calvo pricing. New Keynesian Phillips Curve Dynamic forward looking IS curve Taylor rule for interest rates. Analysis of stability and uniqueness of the solution.
  • Theme 8. Dynamic Stochastic General Equilibrium model (DSGE model)
    General information about DSGE models: creation, application limits, approaches to econometric testing. Economic agents: preferences, idiosyncratic shocks, aggregation. Economic markets: goods, labor, capital, financial, foreign exchange, etc. Optimization of households. Optimization of firms. The behavior of the government and the Central Bank. Exogenous shocks. Imperfections of the model: nominal and real rigidities, mechanisms for persistence modeling. General equilibrium. Steady state. Linearization of the model. Solution of the model by the Blanchard-Kahn method. DSGE models interpretation: Strong, weak and minimal econometric interpretation of DSGE models. Model calibration, Bayesian methods for DSGE model estimation.
Assessment Elements

Assessment Elements

  • non-blocking Work in the audience
  • non-blocking Tests
    Tests are performed by each student independently.
  • non-blocking The final exam
    The final exam is in written form. Students are offered qualitative questions and quantitative tasks.
Interim Assessment

Interim Assessment

  • Interim assessment (2 module)
    0.2 * Tests + 0.5 * The final exam + 0.3 * Work in the audience
Bibliography

Bibliography

Recommended Core Bibliography

  • Dorman, P. Macroeconomics: A Fresh Start / Peter Dorman. – Berlin: Springer-Verlag Heidelberg, 2014. - (Springer Texts in Business and Economics). - Текст: электронный // DB Springer Books [сайт]. – URL: https://link.springer.com/book/10.1007/978-3-642-37441-8

Recommended Additional Bibliography

  • Macroeconomics, 5th ed., updated edition, 613 p., Blanchard, O. J., 2011