Advanced Macroeconomics: Business Cycles

The course builds upon the macroeconomics courses in the undergraduate program and presupposes corresponding qualifications. The course extends models from these courses in different directions and introduces new models. The main focus is on the theoretical underpinning, solution, and empirical validation of dynamic stochastic general equilibrium (DSGE) models. 

The course combines theory, computation and empirics: Along with theoretical models of the business cycle, students will be introduced to the computational tools needed to solve and simulate such models. In addition, a selection of empirical tools will be covered in order to enable students to carry out similar analyses on their own. A number of lectures will take the form of computer lab sessions, where students are asked to carry out computational tasks.

Specific topics in the course include:

• Introduction to DSGE models: The Real Business Cycle model and the New Keynesian model. Introduction to Matlab and Dynare.
• Calibration and estimation of DSGE models using different empirical strategies, including Bayesian estimation.
• Precautionary savings and the buffer-stock model of consumption.
• Introduction to structural vector autoregressive (SVAR) models with applications to monetary and fiscal policy.
• The effects of fiscal policy in DSGE models and the connection with SVAR evidence.
• The macroeconomic implications of financial frictions at the household and/or firm level, the role of occasionally binding credit constraints, and the scope for macroprudential policy.