Advanced Macroeconomics
A.Y. 2022/2023
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.
Lesson period: Third trimester
Assessment methods: Esame
Assessment result: voto verbalizzato in trentesimi
Single course
This course cannot be attended as a single course. Please check our list of single courses to find the ones available for enrolment.
Course syllabus and organization
Single session
Responsible
Lesson period
Third trimester
Lectures, classes and seminars will be held on MT. Additional Questions and Answers sessions will be arranged on a weekly basis on MT. All teaching activities will be in synchronous mode. Written examinations will be held on line. Guidelines for online examination will be published on Ariel.
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 and the "inflation bias" problem; central bank independence; monetary policy at the effective lower bound).
Topic 2. Fiscal policy rules and institutions: What should fiscal policy do? (The government budget constraint; fiscal dominance; seigniorage and inflation; tax smoothing; deficit bias; fiscal rules and fiscal councils; public debt sustainability)
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; macroeconomics of social security systems; myopia as a rationale for social security).
Topic 5. Introduction to dynamic general equilibrium models: 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 and seminar readings will be announced on the ARIEL website before the start of the course. As an example, 2022 seminar topics were as follows: i) Central bank independence: economics vs political science; ii) Do we need fiscal rules? iii) Public debt sustainability; iv) Pension systems and reform: economics and politics.
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 and the "inflation bias" problem; central bank independence; monetary policy at the effective lower bound).
Topic 2. Fiscal policy rules and institutions: What should fiscal policy do? (The government budget constraint; fiscal dominance; seigniorage and inflation; tax smoothing; deficit bias; fiscal rules and fiscal councils; public debt sustainability)
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; macroeconomics of social security systems; myopia as a rationale for social security).
Topic 5. Introduction to dynamic general equilibrium models: 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 and seminar readings will be announced on the ARIEL website before the start of the course. As an example, 2022 seminar topics were as follows: i) Central bank independence: economics vs political science; ii) Do we need fiscal rules? iii) Public debt sustainability; iv) Pension systems and reform: economics and politics.
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 O.J. Blanchard and S. Fischer (1989). Lectures on Macroeconomics, MIT Press; Campante, F., Sturzenegger, F. and Velasco, A. (2021). Advanced macroeconomics: An easy guide, London: LSE Press; B. B. Heijdra (2017). Foundations of Modern Macroeconomics, Oxford University Press (previous editions are also useful); D. Romer (2019). Advanced Macroeconomics. McGraw Hill.
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: Campante, F., Sturzenegger, F. and Velasco, A. (2021). Advanced macroeconomics: An easy guide, London: LSE Press; D. Romer (2019). Advanced Macroeconomics. McGraw Hill. Please contact the teacher ([email protected]) well in advance of your planned examination date to discuss the details of your alternative study program (including the selection of chapters from the textbooks).
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 O.J. Blanchard and S. Fischer (1989). Lectures on Macroeconomics, MIT Press; Campante, F., Sturzenegger, F. and Velasco, A. (2021). Advanced macroeconomics: An easy guide, London: LSE Press; B. B. Heijdra (2017). Foundations of Modern Macroeconomics, Oxford University Press (previous editions are also useful); D. Romer (2019). Advanced Macroeconomics. McGraw Hill.
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: Campante, F., Sturzenegger, F. and Velasco, A. (2021). Advanced macroeconomics: An easy guide, London: LSE Press; D. Romer (2019). Advanced Macroeconomics. McGraw Hill. Please contact the teacher ([email protected]) well in advance of your planned examination date to discuss the details of your alternative study program (including the selection of chapters from the textbooks).
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 two 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 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 a 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.
Students not attending the course will take a two-hour written examination, consisting of four theory open questions from which to choose two questions.
Educational website(s)
Professor(s)
Reception:
Office and feedback hours. Third term (from 11th April to 20th June 2025): Friday 8:30-11:30 hh. No office hours on Fri 13/6: office hours are rescheduled on Thur 12/6 at 8:30-11:30.
Online on MT.