Midterm examination (20%)
Duration: 120 minutes. Closed-book except for a one-page formula sheet. Covers Lectures 1–7.
Section A — Money and the classical model (25%)
- Quantity theory, money demand and the welfare cost of inflation.
- Neutrality and price-level determinacy in the classical model.
Section B — Derivations (40%)
- Calvo pricing and the New Keynesian Phillips curve.
- Solution of the three-equation model by undetermined coefficients.
- Determinacy conditions under a Taylor rule.
Section C — Policy analysis (35%)
- Discretion versus commitment after a cost-push shock.
- Interpreting estimated Taylor rules and a short Dynare impulse-response table.
Final examination (20%)
Duration: 180 minutes. Closed-book except for a two-page formula sheet. Emphasis on Lectures 8–15.
Section A — Extensions of the New Keynesian model (30%)
Small open economy, financial accelerator and liquidity trap: derive the key equation and explain the mechanism.
Section B — Monetary–fiscal interactions and heterogeneity (25%)
Active and passive regimes, the fiscal theory of the price level, and TANK/HANK amplification.
Section C — Estimation and identification (25%)
State-space likelihood, priors and posterior diagnostics; VARs, local projections and external instruments.
Section D — Policy essay (20%)
Evaluate a recent policy episode (for example the 2021–23 inflation surge) using the models and evidence from the course.
Grading rubric
- Correct derivation and stated assumptions: 40%
- Economic interpretation and mechanism: 25%
- Quantitative accuracy: 20%
- Clarity and notation: 15%
Replication project (20%)
Replicate a published monetary DSGE or empirical result in Dynare and MATLAB (for example Galí–Monacelli 2005, Gertler–Karadi 2011, or Romer–Romer 2004), then extend it with one new experiment or data set. Submit the .mod and .m files, a parameter table with sources, determinacy checks, replicated figures, and a five-page report that states what was replicated, what differs and why.