Insegnamento a.a. 2024-2025

PART 1 - DSGE models and dynamic methods in macro

• Evolution of modern business cycles models.
• The neoclassical growth model: social planner problem and competitive equilibrium; recursive and sequential formulations and solution methods.
• The stochastic neoclassical growth model: adding uncertainty.
• The RBC model: divisible and indivisible labor.

PART 2 - Search frictions and aggregate labor market fluctuations

• Some labor market facts.
• Basic search and matching model, with random search and Nash bargaining.
• Aggregate uncertainty and Shimer's volatility puzzle. The role of new hires' wage rigidity.

PART 3 - Nominal rigidities, aggregate fluctuations, and monetary and fiscal policies

• Effect of money on output, role of demand shocks, and microeconomic evidence on nominal price and wage rigidities.
• The basic New Keynesian model. Monetary policy, inflation, and the business cycle.
• The design of monetary policy and monetary policy trade-offs. The zero lower bound and unconventional monetary policies.
• An introduction to Heterogeneous Agents New Keynesian (HANK) models.
• Current challenges for fiscal and monetary policies. Fiscal policy, aggregate demand management, and benefit extensions. Covid-19, sectoral shocks, and the current rise in inflation. Landings for central banks, soft and hard.

• Define concepts such as stabilization policy, structural shocks, intertemporal budget constraint, systematic monetary policy, liquidity trap, elasticity of labor supply, search frictions, nominal price frictions, social planner solution versus decentralized competitive equilibrium.
• Describe the appropriate policy to apply to make aggregate economies more resilient to underlying macroeconomic shocks.
• Identify the key sources of business cycle fluctuations.
• Recognize the role of monetary and fiscal policy in shaping the transmission of economic disturbances.
• Know three workhorses of modern macroeconomics: the stochastic neoclassical growth model, the search and matching model, and the New Keynesian model.
• Understand available solution methods for dynamic stochastic general equilibrium models.

• Interpret and assess the phenomena and the dynamics of the aggregate economic systems through economic theory.
• Assess the empirical reliability of the predictions stemming from macroeconomic models where agents' expectations play a key role.
• Choose and apply the proper model to understand which economic policy is more appropriate to tackle normal business cycles as opposed to economic depressions.
• Choose and apply the proper tools to solve intertemporal dynamic models that describe the behavior of aggregate economies in the presence of market imperfections.
• Identify the proper stabilization policies to tackle current macroeconomic challenges (e.g., the recent inflationary burst; the prevalence of sectoral shocks; managing aggregate demand in presence of liquidity-constrained agents; ...)

• Lectures
• Practical Exercises
• Individual works / Assignments
• Collaborative Works / Assignments

The learning experience of this course includes, in addition to synchronous face-to-face / online lectures, the solution of problem sets assigned to students throughout the course. Those exercises allow students to apply the analytical tools illustrated during the course and to solve dynamic general equilibrium models of aggregate fluctuations. Home assignments are an integral part of the course. In those assignments students are asked to solve formal exercises as well as to perform descriptive and statistical analysis of macroeconomic data.

With the purpose of measuring the acquisition of the above-mentioned learning outcomes, the students’ assessment is based on two main components:
 
1. Final written exam (worth 80% of the Final Grade with Problem Sets; worth 100% of the Final Grade without Problem Sets), consisting of exercises and open questions aimed to assess students’ ability to apply the analytical tools illustrated during the course, to solve and explain macroeconomic models of aggregate fluctuations as well as of the functioning of monetary policy. The exam will also include short statements to discuss, aimed to assess students’ ability to articulate economic reasoning;

2. Elective Problem sets (worth 20% of the Final Grade), consisting of take-home exercises with the aim of getting the students familiarized with the material presented in class.

• Lecture slides posted on Blakboard
• Krueger. 2012. “Macroeconomic Theory”. Manuscript.
• Pissarides. "Equilibrium Unemployment Theory". The MIT Press.
• Galì. "Monetary Policy, Inflation, and the Business Cycle". Princeton University Press.
• Scientific articles