Macro III,  Fall 2023

• Syllabus

• Classes: Monday 16:15 - 17:45, SB209

• Seminars:  Monday 11:00 - 12:30, SB209

• Teachers: Aleš Maršál

• Office Hours:

  • Ales: after the Monday class 

• Grading: can be found here

• • Homework Assignments: 40%

  • Final Exam: 60%,  Last week but subject to change 

  • 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 and model dependend realism 

• These pages retell the story of modern macroeconomics in the form of fiction. 

• What is real? What is Matrix?

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

      1.2 Seminar: 

• matlab basics: slides, code solving the class exercise,  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, Eric Sims using Uhlig log-linearization, yet another lecture notes, and other,  very nice material on the story behind Lagrange Multipliers

• Problem set 1, due to 02.09.2023

• Solution to part of the PS1, 2017, 2019, 2020

• Problem set 2,  due to 09.09.2023,  submit here 

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 3,  due to 23.10.2023, data input for the second question - class project

3. Real Business Cycle Model 

      3.1 Model derivation:  

• Notes on Basic Growth Model with Labor-Leisure Choice

• Supplementary document to the solution to Brock and Mirman (1972) model 

• Slides discussing calibration, nice paper by Cooley (1997) on Calibration

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

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

• Methods for solving rational expectations models: slides, lecture notes, Undetermined coefficients (Uhlig 1997), Perturbation Methods by SGU, QZ decomposition (Klein 1999, JEDC)      

• Problem set 4, Brock and Mirman (1972) Model,  due to  06.11.2023

• Solution to Problem set 4

3.2 Supplementary code:

• 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,  stochastic growth model solution using Dynare in levels, loglin solution using exp, loglin by hand and dynare

• RBC model with balanced growth path

• Guess and verify solution

• Dynare solution

• Villaverde et.al. chapter on solution methods in the Handbook of Macro

Problem set 5, replicating KR  1999 model,due to November 27, 

please submit your solution here

PS5 solution, some derivations, dynare code,  dynare in levels, solab, using Klein QZ decomp, using guess and verify

4. Performance of RBC model

      4.1 Model Evaluation

• Summary of RBC performance as a motivation to NK model , 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

  • • clean dynare output function

    • this code shows  how to use Kalman filter to extract shocks from the observable series (watch Kalman filter explained in an extremely intuitive way, see  Pfeifer lecture notes on how to link observables with your model variables), and it also demonstrates one way how to run loops in dynare, you will also need this .mod file, this is the code for King Rebelo 99 when frish elasticity is different from one

    • files for the class today: clean dynare output function, m file to run it all, ExpKingRebeloMIII, Frish Elasticity mod file

5. Classical Monetary Model

• • •      4.1 Lecture:  slides,  Gali chapter 2, dynare code, code for hand solution code

6. Future of Macroeconomics

• choose one of the following papers and prepare for the discussion,  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, vi) The Past, Present, and Future of Macroeconomic Forecasting 

Galoci Peter: The Past, Present, and Future of Macroeconomic Forecasting 

Mašek Martin: Macroeconomics and Methodology by Chris Sims,

Líkeř Jan: trouble of Macro by Paul Romer

Matloch Matouš:  Blanchard

Nardele Alexander: Larry Christiano and Martin Eichenbaum 

Pejchl Jan: Larry Christiano and Martin Eichenbaum 

Vejmola Ondřej: J. Stiglitz assessment

7. Previous years exams

• Final 2021

• Final 2020

• Final 2019

• Final 2018

• Retake 2017