Advanced Macroeconomics: Heterogenous Agent Models

Course content

This course introduces you to macroeconomic models, where agents are heterogeneous and face uninsurable idiosyncratic shocks. Such models play a central role in contemporary discussions on both long-run issues, regarding e.g. inequality, taxation and social security, and short-run issues, regarding e.g. the causes of business cycles and the effectiveness on monetary and fiscal policy. You will learn to both solve and simulate simple versions of such models, and interpret the results from full-scale models used in research papers.


The first part of the course is on stationary equilibrium Bewley-Huggett-Aiygari models, and the roles of uninsurable risk and demographics for the determination of the equilibrium interest rate and inequality. The second part of the course is on the analysis of transitional dynamics in sequence space, and feature discussions on the dynamics of income and wealth inequality and the secular trend of the neutral interest rate. The third part is on Heterogeneous Agent New Keynesian models with pricing frictions, where heterogeneity in the marginal propensity to consume and fluctuations in risk due to e.g. unemployment are important for understanding business-cycle fluctuations.


The analytical and numerical methods you learn in this course is generally applicable to questions in public finance, labor economics, trade and industrial organizations, where heterogeneity plays an important role. Understanding the causes and consequences of inequality is central for advising policy makers on a broad range of topics.


MSc programme in Economics – elective course


The PhD Programme in Economics at the Department of Economics:

  • The course is an elective course with research module. In order to register for the research module and to be able to write the research assignment, the PhD students must contact the study administration AND the lecturer.
  • The course is a part of the admission requirements for the 5+3 PhD Programme. Please consult the 5+3 PhD admission requirements.


The course is open to:

  • Exchange and Guest students from abroad
  • Credit students from Danish Universities
  • Open University students
Learning outcome

After completing the course the student is expected to be able to:



  • Account for, formulate and interpret precautionary saving models
  • Account for stochastic and non-stochastic simulation methods
  • Account for, formulate and interpret general equilibrium models with ex ante and ex post heterogeneity, idiosyncratic and aggregate risk, and with and without pricing frictions
  • Discuss the difference between the stationary equilibrium, the transition path and the dynamic equilibrium
  • Discuss the relationship between various equilibrium concepts and their solution methods
  • Identify and account for methods for analyzing the dynamic distributional effects of long-run policy (e.g. taxation and social security) and short-run policy (e.g. monetary and fiscal policy)



  • Solve precautionary saving problems with dynamic programming and simulate behavior with stochastic and non-stochastic techniques
  • Solve general equilibrium models with ex ante and ex post heterogeneity, idiosyncratic and aggregate risk, and with and without pricing frictions (stationary equilibrium, transition path, dynamic equilibrium)
  • Analyze dynamics of income and wealth inequality
  • Analyze transitional and permanent structural changes  (e.g. inequality trends and the long-run decline in the interest rate)
  • Analyze the dynamic distributional effects of long-run policy (e.g. taxation and social security) and short-run policy (e.g. monetary and fiscal policy)



  • Independently formulate, discuss and assess research on both the causes and effects of heterogeneity and risk for both long-run and short-run outcomes
  • Discuss and assess the importance of how heterogeneity and risk is modeled for questions about both long-run and short-run dynamics

Lectures with group work on small problems and pre-defined and open ended home assignments.

A combination of lecture notes and research papers.


It is recommended to have followed the course Macro III before or at the same time as the course.

It is recommended to have followed the course Introduction to Programming and Numerical Analysis before or at the same time as the course.

3 hours lectures a week from week 36 to 50 (except week 42).

The overall schema for the Master can be seen at KUnet:
MSc in Economics => "Courses and teaching" => "Planning and overview" => "Your timetable"

Timetable and venue:
To see the time and location of lectures and exercise classes please press the link/links under "Timetable"/​"Se skema" at the right side of this page (E means Autumn). The lectures are shown in each link.

You can find the similar information partly in English at
-Select Department: “2200-Økonomisk Institut” (and wait for respond)
-Select Module:: “2200-E22; [Name of course]”
-Select Report Type: “List – Weekdays”
-Select Period: “Efterår/Autumn”
Press: “ View Timetable”

Please be aware:
- The schedule of the lectures can change without the participants´ acceptance. If this occur, you can see the new schedule in your personal timetable at KUnet, in the app myUCPH and through the links in the right side of this course description and at the link above.
- It is the students´s own responsibility continuously throughout the study to stay informed about their study, their teaching, their schedule, their exams etc. through the curriculum of the study programme, the study pages at KUnet, student messages, the course description, the Digital Exam portal, Absalon, the personal schema at KUnet and myUCPH app etc.

Peer feedback (Students give each other feedback)


Written, oral, individual and collective feedback are provided on the assignments handed in during the course by the lecturers.

Written peer feedback is provided on the open-ended assignment summary by the other students.

7,5 ECTS
Type of assessment
Portfolio, 36 hours
Type of assessment details
The exam is a written assignment consisting of two parts:
- Part 1: The first part is based on the three mandatory assignments worked on during the course. The student can use the peer feedback received during the course to improve the assignments. This can be done before the exam period begins.
- Part 2: The second part is a new assignment given in English. It takes approximately 24 hours to answer the new assignment.
The two parts are weighted equally (50/50) in the overall assessment.

Please be aware that:
- The new assignments must be written individually.
- The plagiarism rules must be complied.
- All parts must be answered in English
- All parts must be uploaded to Digital Exam in one file.
Exam registration requirements

To qualify for the exam the student must no later than the given deadlines during the course:

  • Hand in two pre-defined home assignment to be approved.
  • Hand in summary of idea for open-ended home assignment.
  • Provide useful written peer feedback based on specific criteria to other open-ended home assignment (the idea summaries).


Please be aware:

  • The lecturers control the assignments and the feedback.
  • The assignments must be written individually.
  • The peer feedback must be written individually.
  • The plagiarism rules must be complied.
  • The assignments and the peer feedback must be written in English.
  • The mandatory assignments and the peer feedback are part of a portfolio exam. See “Type of assessment”

All aids allowed for the written exams.


Use of AI tools is permitted. You must explain how you have used the tools. When text is solely or mainly generated by an AI tool, the tool used must be quoted as a source.


For further information about allowed aids for the re-examination, please go to the section "Re-exam".


Marking scale
7-point grading scale
Censorship form
No external censorship
for the written exam.
The oral re-examination may be with external assessment.
Exam period

Exam information:

More information is available in Digital Exam from the middle of the semester. In special cases decided by the Department, the exam can change to another day and/or time than announced. 

More information about examination, rules, aids etc. at Master (UK) and Master (DK).


The oral reexam takes place:

The reexam is a 20 min. oral exam with 20 min. preparation time.

All written aids allowed during the preparation time and the examination.


Reexam info:

More information in Digital Exam in February. In special cases decided by the Department, the re-sit can change to another day and/or time than announced.

More info: Master(UK) and Master (DK).

Criteria for exam assessment

Students are assessed on the extent to which they master the learning outcome for the course.


In order to obtain the top grade "12", the student must with no or only a few minor weaknesses be able to demonstrate an excellent performance displaying a high level of command of all aspects of the relevant material and can make use of the knowledge, skills and competencies listed in the learning outcomes.


In order to obtain the passing grade “02”, the student must in a satisfactory way be able to demonstrate a minimal acceptable level of  the knowledge, skills and competencies listed in the learning outcomes.


Single subject courses (day)

  • Category
  • Hours
  • Lectures
  • 66
  • Preparation
  • 92
  • Exam
  • 48
  • English
  • 206


Course number
7,5 ECTS
Programme level
Full Degree Master

1 semester

- Go to 'Signup' for information about registration and enrollment.

Information about admission and tuition fee:  Master and Exchange Programme, credit students and guest students (Open University)

and venue:
- For teaching: Go to 'Remarks'.
- For exam and re-sits: Go to 'Exam'.
Department of Economics, Study Council
Contracting department
  • Department of Economics
Contracting faculty
  • Faculty of Social Sciences
Course Coordinators
  • Jeppe Druedahl   (14-726d78786d366c7a7d6d6c697074486d6b777636737d366c73)
  • Patrick Moran   (13-77687b79706a72357476796875476c6a767535727c356b72)

See 'Course Coordinators'

Please read "Remarks" regarding the schedule of the teaching.

Saved on the 21-09-2023

Are you BA- or KA-student?

Are you bachelor- or kandidat-student, then find the course in the course catalog for students:

Courseinformation of students