Advanced macroeconomics

A.Y. 2020/2021
Overall hours
Learning objectives
The aim of this course is to provide students with an introductory survey of some selected major aspects of modern macroeconomic theory. The course will enable students to better their knowledge and understanding of macroeconomics and of macroeconomic policy.
Expected learning outcomes
By the end of the course, students will be equipped with analytical tools for improving their knowledge and understanding of some major real-world macroeconomic issues (for example: why delegating monetary policy to an independent central bank? Should government fiscal policy be constrained by rules? Which factors can trigger bank runs or sovereign debt crises? how can government policy help to avoid them? What are the macroeconomic and welfare effects of different social security systems? Can government use fiscal policies to affect economic growth?) Students should know as well how to use economic analysis to make informed judgements about macroeconomic issues. Seminar presentations (on a voluntary basis) will enable students both to test their understanding and ability to communicate knowledge of the relevant topics and to discuss real-world macroeconomic issues with their pairs.
Course syllabus and organization

Single session

Lesson period
Third trimester
Lectures, classes and seminars will be held on MT (or Zoom). Additional Questions and Answers sessions will be arranged on a weekly basis on MT (or Zoom). All teaching activities will be in synchronous mode. Written examinations will be held on line using and Zoom.
Course syllabus
A selection of topics will be chosen among the following and will be announced on the ARIEL website before the start of the course:

Topic 1. Why delegating monetary policy to an independent central bank? (Monetary policy effects in the short and long runs; the Rational Expectations Hypothesis (REH) and the Policy Ineffectiveness Proposition; credibility of monetary policy: the "inflation bias" problem; central bank independence; monetary policy and central banking in times of crisis).

Topic 2. Fiscal policy rules and institutions: What should fiscal policy do? (The government budget constraint; public debt solvency; fiscal dominance; seigniorage and inflation; tax smoothing; deficit bias; fiscal rules and fiscal councils.)

Topic 3. Coordination failures (multiple equilibria in macroeconomics; bank runs; sovereign debt crises).

Topic 4. Overlapping generations models and social security (The Samuelson-Diamond two-period OLG model: equilibrium and efficiency; social security systems; myopia as a rationale for social security).

Topic 5. Economic Growth (The Ramsey -Cass-Koopmans model with optimal saving: market solution vs. social planner's solution; The AK model of endogenous growth. Government spending in the Ramsey and AK models ).

Topic 6. Macroeconomics and the labour market (efficiency wage models; search and matching models).

Seminar topics will be announced on the ARIEL website before the start of the course. As an example, 2019 seminar topics were as follows: i) Central bank independence under threat? ii) Do we need fiscal policy rules? iii) Sovereign debt crises. iv) Pension systems and reforms.

Study program for not attending students
1. Review of the AD-AS model.
2. Dynamics in aggregate demand and supply;
3. Rational expectations and economic policy;
4. The government budget deficit;
5. Dynamic inconsistency in public and private decision making;
6. Exogenous economic growth;
7. Overlapping generation models and social security.
Prerequisites for admission
Students of this course are assumed to be familiar with intermediate macroeconomics taught on textbooks such as O.J. Blanchard, A. Amighini, F. Giavazzi (2013 or subsequent editions). Macroeconomics: A European Perspective, Pearson, or S.D. Williamson (2014 or subsequent editions), Macroeconomics, Pearson. Students should also be familiar with static optimization techniques, which are taught in the Optimization course. The course will also use dynamic optimization techniques selectively.
Teaching methods
20 two-hour lectures; 4 two-hour problem-solving classes; 4 two-hour students' seminar presentations.
Teaching Resources
Students attending the course.
Outlines of lectures (slides and handouts) will be uploaded on the ARIEL website as the course proceeds. There is no single textbook for this module. However, lectures will refer to textbooks such as G. Alogoskoufis (2019). Dynamic macroeconomics, MIT Press; O.J. Blanchard and S. Fischer (1989). Lectures on Macroeconomics, MIT Press; B. B. Heijdra (2017). Foundations of Modern Macroeconomics, Oxford University Press (previous editions are also useful); D. Romer (2019). Advanced Macroeconomics. McGraw Hill; C. Walsh (2010). Monetary theory and policy, MIT Press.

Students not attending the course.
Ben Heijdra, Foundations of modern macroeconomics, third edition, 2017 Oxford University Press. Chapter 1 (review of the AD-AS model); chapter 3.1-3.4 ( dynamics in aggregate demand and supply); ch. 5.1-5.3 (rational expectations and economic policy); ch.6 (the government budget deficit); ch. 9 (Dynamic inconsistency in public and private decision making); ch. 12.1-12.3 (Exogenous economic growth: Solow-Swan); ch. 13.1-13.3 (Exogenous economic growth: Ramsey-Cass-Koopmans); ch. 16.1-16.2 (Overlapping generations and social security). Mathematical appendices are useful for techniques. Knowledge of static and dynamic optimization techniques in continuous and discrete time is required for a thorough knowledge of the material.

Alternatively, students may prepare their examination on one of the following textbooks: G. Alogoskoufis (2019). Dynamic macroeconomics, MIT Press; D. Romer (2019). Advanced Macroeconomics. McGraw Hill. Please contact the teacher ( well in advance of your planned examination date to discuss the details of your alternative study program.
Assessment methods and Criteria
Students attending the course will take a one-hour-and-half mid-term written examination (50% weight of the overall examination mark) consisting of three questions (either open questions, or exercises, or mixed), from which to choose one question. Students will moreover take a one-hour- and-half end-of-term written examination (50% weight of the overall examination mark) consisting of two or three questions (either open questions, or exercises, or mixed) from which to choose one question. The final examination mark can be raised up to two points in case of successful seminar presentation. Further details on seminar presentations (on voluntary basis) will be provided at the start of the course. The final mark is out of 30. The pass mark is 18/30. The maximum mark is 30/30 cum laude.

Students not attending the course will take a two-hour written examination, consisting of four theory open questions from which to choose two questions.
SECS-P/01 - ECONOMICS - University credits: 6
Lessons: 40 hours
Professor: Santoni Michele
Please send an email to to contact me, I'll reply you back. If needed, we shall arrange an online meeting on Microsoft Teams.