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MACROECONOMICS

ADVANCED MACROECONOMICS I

Syllabus

EN IT

Learning Objectives

Part 1:
***Knowledge and understanding: Students will master the mathematical tools of dynamic optimization, including dynamic programming. These technical skills will be applied to economics for an understanding of the mechanisms driving economic growth, saving and investment in productive asset. These skills will be also used for the study of the business cycle in Macroeconomics II.
***Applying knowledge and understanding: By means of exercises, students will verify their understanding of the theories presented during classes and will apply them to a variety of economic scenarios (for instance, evalutating the effects of a demographic decline on economic growth).
***Making judgements: Students will be able to assess autonomously the implications of changes in exogenous conditions or of policy interventions on economic growth and on the investment in productive assets.
***Communication skills: Students will learn the meaning and use of terms related to economic growth commonly used by institutions, government and specialized scholars.
***Learning skills: Exercises will stimulate students’ learning ability.

Part 2:
Knowledge and Understanding
The course provides an introduction to modern macroeconomic modeling. Students will acquire knowledge of real business cycle models and monetary economies. They will learn essential numerical solution techniques and gain a solid understanding of central bank policies.

Applying knowledge and understanding
By the end of the course, students will be able to build modern macroeconomic models, solve these models numerically and assess them empirically.

Making judgements
Students will have the knowledge and tools to analyze and evaluate central bank policies using macroeconomic models and data.

Communication skills
Students will gain experience in communicating the results of their analysis by preparing and giving a presentation summarizing methodology and findings.

Learning skills
Students will not only be exposed to materials prepared by the lecturer, but will also be exposed to modern academic literature, as well as will learn about economic policy from the websites of central banks on their own. They will interact in groups, working on problems in teams and learning from each other.

Prerequisites

Calculus, Principles of Microeconomics, Principles of Macroeconomics

Program

1. Introduction to growth theory: The Solow model in discrete and in continuous time. Transitional dynamics. Sustained growth. Technological progress. Growth accounting and empirical evidence. 2. Foundations of neoclassical growth: The representative household, and the Euler equation. Competitive equilibrium. Welfare Theorems. Optimal Growth. An introduction to dynamic programming theorems. Steady-state equilibrium and transitional dynamics. Technological change, policy and comparative dynamics. 3. Overlapping generations: Failure of the First Welfare Theorem. Long-run growth and public debt. 4. Asset prices and consumption: An introduction to dynamic programming under uncertainty. The stochastic Euler equation. Optimal saving, intertemporal substitution and wealth effect. Hall’s random walk theory of consumption. Precautionary saving and prudence. Lucas’ model of asset prices. The Modigliani-Miller Theorem. Government debt and Ricardian EquivalEquivalenceequivalence.prudence. Lucas’ model of asset prices. The Modigliani-Miller ThernTheorem. Government debt and Ricardian equivalence.

Books

- Daron Acemoglu, Introduction to Modern Economic Growth, Princeton University Press, 2009.
- David Romer, Advanced Macroeconomics, McGraw-Hill, 2011.
- Lecture notes.

This material is necessary.

Bibliography

- Daron Acemoglu, Introduction to Modern Economic Growth, Princeton University Press, 2009.
- David Romer, Advanced Macroeconomics, McGraw-Hill, 2011.
- Lecture notes.

This material is necessary.

Teaching methods

In additional to conventional lectures, there will be 2/3 practice classes. In a practice class students will work on exercises under my guidance. These exercises will be similar to those in the final test.

Exam Rules

During the course students will be working on 2/3 home assignments. These assignments will be graded and, overall, will count for 40% of the final grade. The final exam will consist of a written test cointaining, tentatively, two exercises and two theoretical questions. The final exam will count for the residual 60% of the final grade.

The final evaluation will consist in a written exams containing two exercises and two short essays. Both will serve to verify the understanding of the mechanisms underlying economic growth and of policies promoting economic growth.

The students who withdraw or fail an exam may take the exam again in the same exam session.