Old MSc Handouts

For details of my current Oxford MPhil lectures, see here. I gave this MSc Macroeconomics course first at Strathclyde and then Exeter until 2007. It is based on handouts. These are short, and generally describe a simple model, or explore some aspect of a model. What follows is a complete list, and how they fit together. These handouts may also contain errors - please let me know if you find one.

Week 1

The course begins with the Solow growth model. A subsidiary handout based on a specific example of this model shows the impact of a savings rate shift over time, and illustrates how slow adjustment can be. A second subsidiary handout shows how to analyse stability using either diagrams or algebra.

This is the first model we explore. A handout describes some generic modeling terms and procedures, mainly using the Solow model as an example.

Weeks 2 and 3

Our analysis of intertemporal consumption is based on a two period example. Two handouts look at the infinite horizon case. The first sets out the 'infinite life' model in continuous time using Hamiltonians. The second uses a simpler discrete time version to examine the importance of expectations.

The infinite life consumption model is then added to the Solow model, replacing the assumption of a fixed saving rate, to give the intertemporal neoclassical growth model. A separate handout presents some simulations of a calibrated version of the model, while another addresses the issue of Ricardian Equivalence.

Week 4

Two variations on the intertemporal neoclassical growth model explore the implications of finite lives and different generations. The first presents the model of pepetual youth, and returns to the issue of Ricardian Equivalence.. The second presents an overlapping generations model, and looks at issues of social welfare. A handout on nominal extensions to the intertemporal model adds money to the infinite life model, and also looks at issues involving nominal debt.

Week 5

Real business cycle models endogenise labour supply, and a brief handout notes some of the issues this raises. A more extensive handout explores the impact of adding imperfect competition into the goods and labour market.

Week 6 and 7

Before examining New Keynesian models of business cycles, we first examine how rational expectations can be used to solve stochastic forward looking equations. We then look at two types of New Keynesian model. The first is based on contracts, while the second looks at menu costs. A handout describing Calvo contracts allows us to examine the relationship between excess demand and inflation.

Week 7 and 8

Rather than present one or two particular open economy models, the two handouts for this part of the course discuss some general issues in open economy macroeconomics. The first outlines Uncovered Interest Parity and compares PPP to an approach to long run exchange rate determination based on imperfect competition. The second looks at the interactions between output and consumption, and the implications for the current account. It also includes a discussion of recent movements in the US dollar. For those who want to take this analysis further, there are two notes that outline aspects of two particular open economy models. One outlines a model due to Giovannini, which shows how it is possible for a permanent increase in output supply to generate a long run appreciation, using a model based on imperfectly competitive goods and consumers with finite lives. Another outlines a model due to Obstfeld and Rogoff, which shows how money neutrality may not hold if consumers are infinitely lived.

Week 9 and 10

The first handout is a pretty technical discussion of how the objective function for a benevolant policy maker can be derived from taking a second order Taylor expansion of individual agent's utility. The second explores the issue of time inconsistency using a very simple inflation model.