Topics in Macroeconomic Policy: Facts, Myths and Models

Instructor: Giovanni Di Bartolomeo (giovanni.dibartolomeo@uniroma1.it)

News. The COURSE is OVER.

Lectures

1. An introduction to dynamic programming & optimal control techniques [CH]

2. Consumption dynamics (permanent income theory and optimal inter-temporal consumption choices). [BB ch.1]

3. Extensions on consumption dynamics (empirical shortcomings, durable goods, habit formation, Ricardian equivalence). [BB ch.1, MatLab]

4. Optimal balanced growth (the social planner problem (Ramsey), decentralized growth (Cass-Koopmans), welfare theorems, log-linearization, and dynamic model stability). [CH]

5. Real Business Cycle models (introduction to time series properties, Hodrick-Prescott filtering, Brock-Mirman & a standard RBC model: Calibration and simulation). [CH, DM ch.4, MatLab]

6. Monetary policy in New Keynesian models (micro-foundations and monetary policy transmission in the basic forward-looking framework, extensions to the hybrid Phillips curve and monetary policy lags, McCallum’s MSV solution of RE models, MatLab).

7. Rational expectation, equilibrium stability, and the Taylor principle (Blanchard Kahn stability conditions with RE, instrumental and Taylor rules, inflation targeting). [CCG, W & CH]

8. Optimal monetary policy in New Keynesian models (the utility-based welfare criterion, discretion, commitment, restricted commitment, timeless perspective). [CCG, W & CH]

9. The fiscal theory of price level determination (Sims’ solution for RE models, stability, and sunspots) [CH].

References

• [BB] Bagliano F. and F. Bertola (1999), “Metodi dinamici e fenomeni macroeeocnomici, ” Il Mulino, Bologna.

• [CCG] Clarida R., J. Galì, and M. Gertler (1999), The Science of Monetary Policy, Journal of Economic Literature, 37: 1661-1707.

• [DM] De Vincenti C. and Marchetti E. (2005), “Temi di macroeconomia contemporanea,” Carocci, Roma.

• [W] Woodford, M. (2004), The Taylor Rule and Optimal Monetary Policy, American Economic Review, 91: 232-237.

• [CH] Class handouts.

• [MatLab] Computer exercises.