Objectifs

This course is offered to 1st year students in the Master in Economics (MScE) program. Students from other MSc programs are also encouraged to attend, subject to Professor’s consent. It covers modern macroeconomic theory at a graduate level. Students are expected to have a solid grasp in Macroeconomics, as well as in theoretical, mathematical, as well as statistical tools including optimization, equilibrium, unconditional and conditional moments, … Other key mathematical instruments such as Dynamic Programming will be introduced early on and will be used throughout the semester.

There are four central concepts in modern Macroeconomics, which will pervade all the topics we will cover (detailed below):

1. Micro-foundations and consistency with empirical facts: Modern Macroeconomic analysis heavily relies on solid foundations provided by Microeconomics. Moreover, Macro analysis is based on models that eventually must explain empirical facts identified by Econometric evaluations. Macro students are therefore encouraged to consider Macro-, Micro- and Econometrics holistically, i.e. as essential, non-separable components towards rigorous Economic analysis.
2. Endogenous and rational expectations: We will construct theories where the agent's expectations about stochastic processes are determined endogenously and rationally. In particular, the dynamic decisions are chosen by a representative agent who reacts to her contemporaneous environment and formulates expectations about future developments.
3. Dynamic consistency: We will develop methodologies to analyze dynamically-consistent decisions, whereby making a choice today has an effect on tomorrow's opportunities and decisions, and where these effects are fully internalized in contemporaneous choices. A consequence is that we will abstract from deviations identified by the Behavioral Economics literature and favor compliance with Neo-Classical orthodoxy.
4. Dynamic general equilibrium: The dynamic allocations we will be considering correspond to settings where all markets (e.g. labor, capital, final goods) are simultaneously in equilibrium. We will also consider situations where market imperfections (e.g. nominal rigidities) alter general equilibrium allocations (e.g. sticky wages resulting in involuntary unemployment).

Contenus

Course outline is tentative and subject to change:
1. Introduction

• Overview and organization
• Math preliminaries

2. Economic growth

• Preliminaries
• Neo-classical model
• Endogenous growth
• Growth accounting
• Extensions

3. Consumption and savings

• Consumption : Deterministic and stochastic
• Investment Theory

4. Business cycles

• Real Business Cycle and DSGE
• Nominal Rigidities and Neo-Keynesian Theories
• Unemployment

5. Fiscal policy

• Expenditures, taxes, deficits and debt
• Long-run determinants
• Recent developments

6. Monetary policy

• Introduction
• Rules vs discretion
• Recent developments

Références

There is no single textbook used exclusively for this course. Nevertheless, the following textbooks will often be relied upon:

• [CSV-21] Filipe Campante, Federico Sturzenegger and AndreÌ¿s Velasco, Advanced Macro-Economics: An easy guide, LSE Press, 2021, available at LSE Press website .
• [R-12] David Romer, Advanced Macroeconomics, 4th Edition, McGraw-Hill Irwin, 2012.
• [W-11] Michael Wickens, Macroeconomic Theory: A Dynamic General Equilibrium Approach, 2nd Edition, Princeton University Press, 2011.
• [StA-22] Pascal St-Amour, Macro II: Notes de cours, (in French) HEC Lausanne, 2022, available at course website.

In addition, the following textbooks may be useful to review and/or develop mathematical concepts:

• Chiang, A. C., Fundamental Methods of Mathematical Economics, Mc-Graw-Hill Book Company, 1984.
• Simon, C. P. and L. Blume, Mathematics for Economists, W.W. Norton & Company, 1994.

Pré-requis

Students are expected to have a solid 3rd-year BSc level Macroeconomics background for this course. Similar level backgrounds in Microeconomics and Econometrics are also encouraged. In addition, Mathematics for Economists concepts and tools, such as constrained optimization and functional analysis should be well understood.

Evaluation

1ère tentative

Examen:

Ecrit 2h00 heures

Documentation:

Non autorisée

Calculatrice:

Non autorisée

Evaluation:

The course grade is computed from the following three evaluations:

1. Mid-term exam

• 40% of course grade
• On-site digital exam (ENEP)
• In class, around week 7 of semester
• Covers only 1st half of course
• Closed-book

2. Final exam

• 40% of course grade
• On-site digital exam (ENEP)
• During official exam period
• Covers only 2nd half of course material
• Closed-book

3. Exercises

• 20% of course grade
• Compulsory
• Two series (10% each)
• Single or in group (3 students max.)

Rattrapage

Examen:

Ecrit 2h00 heures

Documentation:

Non autorisée

Calculatrice:

Non autorisée

Evaluation:

The retake exam is integrative, i.e:

• 100% of course grade, i.e. only the grade from this exam will be used to compute the final grade.
• On-site digital exam (ENEP)
• During formal Summer exam session
• Covers all course material (1st and 2nd half of course)
• Closed-book