MACROECONOMIC ANALYSIS
Instructional goals
Provide basic notions and methods of advanced macroeconomic theory with special focus on consumption, asset pricing, economic growth and equilibrium
Intended learning outcomes
1. Knowledge and understanding:
Being able to grasp main factors explaining economic development, individuals' savings and consumption decisions, asset allocation, and the scope for economic policies in market economies.
2. Applying knowledge and understanding:
The students will be able to:
• apply theoretical results to make cross-country comparisons in growth performance and understand and interpret empirical regularities in macroeconomic models of consumption and savings • examine major public policies by comparing the experiences of countries in Europe as well as
in the rest of the world.
3. Communications Skills:
This course will give the students the possibility to acquire and understand major terms and concepts in order to communicate their ideas, proposals, analysis and critical reasoning in the field of public
policy in the most effective and appropriate way.
4. Learning skills:
This course will give students the tools to determine why certain public policies are followed and others are not and to evaluate and explain the models in an independent way.
Course Contents
Introduction to advanced macroeconomics with focus on the theory of consumption and asset pricing, neoclassical growth, endogenous growth and equilibrium.
Reference Books
Lecture notes provided on the instructor's webpage
Teaching Methods
Lectures, review sessions based on class assignments where students have to make presentations.
Assessment Method
Written exam supplemented by a mid term exam and evaluation of the presentations in the review sessions.
Thesis assignment criteria
NA
Week 1
The Solow growth model. Dynamic Efficiency.
Week 2
Optimal growth: framework and solution methods.
Week 3
Stability analysis, optimal growth with overlapping generations, introducing uncertainty
Week 4
Savings and consumption in market economies: preferences, budget sets, debt limits, Ponzi games, present value representation of the life-time budget constraint.
Week 5
The consumption function, the permanent income hypothesis.
Week 6
Savings and consumption and Euler equations under uncertainty with complete and incomplete markets.
Week 7
The certainty equivalence model and the notion of precautionary savings.
Week 8
Asset Pricing, risk premia and market fundamentals.
Week 9
Equilibrium with complete markets, consumption smoothing and risk sharing.
Week 10
Competitive equilibria in the Overlapping Generations Model.
Week 11
Validity and Failure of the First welfare Theorem.
Week 12
Review.