Gali, Jordi (2008), “Monetary Policy, Inflation and the Business Cycle: An Introduction to the New Keynesian Framework”, Princeton University Pres.

Canova, Fabio (2007), “Methods for Applied Macroeconomic Research”, Princeton University Pres.

Quantitative Macroeconomics

Summer 2023

 

This course aims to introduce students to state-of-the-art quantitative macroeconomics with a focus on monetary policy analysis and nominal rigidities. In particular, students learn to work with dynamic structural general equilibrium (DSGE) models and to confront these models with data using structural vector autoregressions (SVARs). Theory is accompanied by applications using the software Matlab.

Contents (preliminary):

                               1.            Introduction

                                                              i.      Overview

                                                            ii.      Recap on RBC theory

                                                          iii.      A classical monetary model

                               2.            A basic New Keynesian macroeconomic model

                                                              i.      Towards nominal rigidities

                                                            ii.      Model overview

                                                          iii.      Households

                                                           iv.      Firms and production

                                                             v.      Policy and shocks

                               3.            Solving quantitative DSGE models

                                                              i.      Background

                                                            ii.      Log-linearizing the New Keynesian Model

                                                          iii.      Solving and assessing stability of linearized models

                                                           iv.      Dynamic programming and value function iteration

                                                             v.      Solving a DSGE model with Dynare

                               4.            Monetary policy in the New Keynesian model

                                                              i.      Monetary policy transmission

                                                            ii.      Towards inflation targeting

                                                          iii.      Discretion vs commitment

                                                           iv.      Monetary and fiscal interactions and the zero lower bound

                                                             v.      Quantitative evaluation: Model vs data

                                                           vi.      Model critique and potential solutions

                               5.            Deriving stylized facts from time series data: SVARs for monetary policy analysis

                                                              i.      Introduction

                                                            ii.      General remarks on VAR processes

                                                          iii.      Some issues in VAR implementation

                                                           iv.      Structural identification of monetary policy VARs

 

Language: English

Literature:

Gali, Jordi (2008), “Monetary Policy, Inflation and the Business Cycle: An Introduction to the New Keynesian Framework”, Princeton University Pres.

Canova, Fabio (2007), “Methods for Applied Macroeconomic Research”, Princeton University Pres.

Examination: Term paper on project work (about 12 pages), presentation of project work in seminar (approx.. 30 minutes), additional assignments

Contact: Prof. Dr. Britta Gehrke, ls-makrooekonomik@wiwiss.fu-berlin.de