Macro III, Fall 2018

• Syllabus

• Classes: Friday 9:15 - 10:45, RB106

• Seminars: Friday 11:00 - 12:30, RB106

• Teachers: Aleš Maršál

• Office Hours:

  • Ales: after the Friday class

• Grading:

• • Homework Assignments: 40%

  • In-Class Preliminary Exam 1: 20%, March 31, 9:15 - 10:45, RB105

  • Final Exam: 40%, Last week , 9:15 - 12:00

  • Course Material:

  • Textbook:

  • The ABCs of RBCs : an introduction to dynamic macroeconomic models, by McCandless;

  • Monetary Policy, Inflation, and the Business Cycle: An Introduction to the New Keynesian Framework, by J. Gali

  • Other: Course slides and problem sets: posted below

Course Content

1. Introduction

1.1 Lecture:

• slides with course motivation, outline, requirements, literature,

• short history of business cycles - the underlying paper, policy analysis with macro models

1.2 Seminar:

• matlab basics: slides, code solving the class exercise, NICHOLAS SIM code we did not mange to look at in class, Winistörfer P. and Canova F., 2006,''Introduction to Matlab'', Matlab cheat sheet, nice youtube lecture, source of some other materials

• Function approximation: slides, approx.m, classpolinomials.m

• Log-linearization: Katrin's lecture notes on log-linearization, Uhlig log-linearization, yet another lecture notes, very nice material on the story behind Lagrange Multipliers

• Problem set 1, due to 19.10.2018

2. Stylized facts

2.1 Lecture:

• Introduction to macro data: slides, matlab code to reproduce the class material: hpfilter.m, bandpass.m, stylizedfacts.m

• Recommended reading Stock and Watson (1998): "Business Cycle Fluctuations in U.S. Macroeconomic Time Series",

• Obligatory reading: King and Rebelo (2000): "Resuscitating Real Business Cycles", (chapter 2)

• Nice lecture notes by Eric Sims

2.2 Seminar:

• Matlab code: in class exercise solution, system of linear equations

• US data set, Guide to NIPA tables

• Problem Set 2, due to 26.10.2018

• slides on PS2 solution

3. Real Business Cycle Model

3.1 Lecture:

• First set of lecture notes

• code for the first model we did in the class: optimal growth model,

• code for the growth model with labor: optimal growth model with labor leisure choice, some algebra on the labor leisure choice growth model

• stochastic growth model,

• RBC model with balanced growth path,

• important reading King and Rebelo (2000): "Resuscitating Real Business Cycles",

• King Plosser Rebelo (2001): ".Production, Growth and Business Cycles: Technical Appendix"

• Problem set 3, due 6.4.2018

• Solution to PS3, Brock Mirman (1972, JET)

3.2 Seminar on solution methods:

• • Methods for solving rational expectations models: for every broad overview read my slides, for more details on Undetermined coefficients see (Uhlig 1997), the classic on Perturbation Methods by SGU, the main reference for QZ decomposition is Klein (1999, JEDC),

  • Nice overview lecture notes by K. P. Nimark on solution methods, for approachable exposition on solution methods see the series of really nice lecture notes by F. Collard , on QZ decomposition I also like this slides

  • Introduction to dynare: for nice lecture notes you can check: i) Eric Sims, ii) more in depth official User Guide, iii) if you like to watch youtube videos, there are many others, just google

• Stochastic Growth Model we worked out in the class solved in dynare: 1) stochastic growth model log-linearized by dynare, log-lin model by hand solved in dynare, linearized model (in levels) solved by dynare - shows you how to get out moments in %

• code for RBC model with balanced growth path

• Calibration - updated slides, paper by Cooley 1997, Calibrated Models

• model evaluation + observation equation based on Pfeifer lecture notes

• code to solve basic growth model by diagonalization

• Paul Klein solab function implementing QZ decomposition, application to our stochastic growth model

Problem sets results can be find here.

• Problem set 4, due 30.11.2018

• Problem set 4 solution:

• slides

• code to solve the King Rebelo 1999 by:

• method of undetermined coefficients

• QZ decomposition (using solab.m function)

• dynare in levels

• dynare imposing log-lin solution

Please fill the questionnaire after you solve the fourth problem set.

Please select the date(s) which best fits your preferences for the final exam.

Please select the date(s) which best fits your preferences for the makeup class.

4. Performance of DSGE models

4.1 Went Modern Macro Wrong?

• read i) J. Stiglitz assessment of what went wrong, ii) Larry Christiano and Martin Eichenbaum defense of DSGE models, iii) on the future of macro by Blanchard, iv) on the trouble of Macro by Paul Romer, v) Macroeconomics and Methodology by Chris Sims

4.2 Model Evaluation

• Model evaluation in my slides, underlying paper for the discussion is here, lecture by Chris Sims see here

• see critique by Galí (1999) of RBC models, some evidence and discussion on monetary policy neutrality Gali textbook ch.1

• for summary on what we know about shocks driving the cycle see Ramey 2016

• Problem set 5, due 17.12.2018

Please check in here if you would come on Monday 17th for the makeup class.