ECOM-G313 Macroeconomics 2:

24 hours lectures and 8 hours exercises
Final examination; exercises
Grading (0 to 5) is based on the final examination (60 %) and quizzes (40%) based on homework assignments.

The course provides an introduction to real business cycle theory and the New-Keynesian approach modelling nominal frictions and analysing monetary policy. Consumption smoothing is the key part of the mechanism in both models. Therefore, the consumption-savings decision is studied thoroughly. The standard model and the concepts are introduced using a two-period model, which is then extended to the infinite horizon. The simple two-period model is used to study household behaviour under borrowing constraints. The household problem is extended to cover both the consumption-savings decision and the labour supply decision. The effect of taxation is examined. The firms’ problem relies on the Cobb-Douglas specification of the production function. Investment behaviour both in the frictionless economy and in the economy with the investment adjustment cost is studied. The dynamic optimisation relies on the Lagrange multiplier method. The above modelling ingredients are put together to make a complete general equilibrium macroeconomic model, the real business cycle (RBC) model. The propagation of technology shocks is studied using the model. The model is augmented by imperfect competition and price rigidities. These are introduced and their impact is analysed stepwise. The complete model is called the New-Keynesian model, which facilitates analysing monetary policy.

Literature (kirjallisuus): David Romer (2011): Advanced Macroeconomics (4^th ed); Sorensen P.B. & Whitta-Jacobsen H.J.: Introducing Advanced Macroeconomics (1st or 2nd ed.); Klaus Wälde: Applied Intertemporal Optimization (www.waelde.com), Part I and Chapters 7,8. Intermediate Macroeconomics by Julio Garín, Robert Lester and Eric Sims contains lot of useful material.

Learning outcome: Students learn the basics of the modern business cycle theories and issues related to them.

News

The slides come in two forms:

These are still unpolished. Hence, update/refresh often. The first page tells the date of the version. I try to update the two forms jointly.

Lectures 24 hours + exercises 8 hours. See course web for timetable

Professor Antti Ripatti

Exercises are taught by doctoral student Anni Norring. Exercises will be posted to Moodle. Timetable is in course web.

Use Ratkomo to help you in doing exercises.

Go to my homepage http://www.ripatti.net