Course description
This course develops dynamic macroeconomic theory from household and firm optimization to quantitative general-equilibrium models. It covers neoclassical growth, RBC models, nominal rigidities, monetary and fiscal policy, open-economy macroeconomics, incomplete markets, HANK models, and DSGE estimation.
Prerequisites
Intermediate macroeconomics; single- and multivariable calculus; linear algebra; probability; and introductory econometrics. Students should be able to manipulate constrained optimization problems and interpret matrix eigenvalues.
Learning outcomes
- Derive Euler equations, firm optimality conditions, and equilibrium restrictions.
- Solve steady-state and transition problems in dynamic macroeconomic systems.
- Analyze rational-expectations determinacy and policy transmission.
- Implement and diagnose quantitative DSGE models.
- Explain the role of heterogeneity and distributions in aggregate outcomes.
- Evaluate model fit, policy counterfactuals, and welfare.
14-week schedule
| Week | Topic | Required preparation / output |
|---|---|---|
| 1 | Dynamic household optimization | Euler equation derivation and transversality |
| 2 | Firms, capital, and investment | Factor demands and Tobin's q |
| 3 | Solow and Ramsey growth | Steady state and phase diagram |
| 4 | Real business cycle models | RBC equilibrium conditions |
| 5 | Nominal rigidities and Calvo pricing | New Keynesian Phillips curve |
| 6 | Three-equation New Keynesian model | Shock transmission and determinacy |
| 7 | Monetary policy | Rules, commitment, and lower bound |
| 8 | Fiscal policy and public debt | Debt dynamics and multipliers |
| 9 | Open-economy macroeconomics | UIP and external adjustment |
| 10 | DSGE solution methods | Linearization, QZ, and BK conditions |
| 11 | DSGE estimation | Likelihood, priors, and MCMC diagnostics |
| 12 | Heterogeneous-agent macroeconomics | Household problem and invariant distribution |
| 13 | HANK and distribution dynamics | HJB, KFE, and distributional transmission |
| 14 | Quantitative policy and replication | Replication presentation and research design |
Teaching and learning
Each week combines a formal lecture, derivation session, problem-solving seminar, and computational exercise. Computational work may use Python, Julia, MATLAB, or Dynare. Students must document software versions, parameter values, data transformations, and numerical diagnostics.
Assessment
- Theory problem sets: 25%
- DSGE replication project: 25%
- Policy analysis: 15%
- Midterm examination: 15%
- Final research paper: 20%
Assessment standards
Mathematical derivations must state assumptions and timing conventions. Computational submissions must report convergence criteria, equilibrium residuals, and reproducibility information. Empirical or policy claims must be tied to model mechanisms and clearly distinguished from identifying assumptions.
Core texts
- Ljungqvist and Sargent, Recursive Macroeconomic Theory.
- Galí, Monetary Policy, Inflation, and the Business Cycle.
- Woodford, Interest and Prices.
- Heer and Maussner, Dynamic General Equilibrium Modeling.
- Acemoglu, Introduction to Modern Economic Growth.
- Obstfeld and Rogoff, Foundations of International Macroeconomics.