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. Causality in modern macroeconomic analysis

 

2. New Keynesian macroeconomic models

     i.      Recap on RBC and classical monetary theory

     ii.      Building the NKM

     iii.     Flexible price equilibrium

 

3. Solving and analyzing the New Keynesian model with numerical methods

     i.      Background: Recursive problems

     ii.      Solving the log-linearized NK model with the MUC

     iii.      Assessing model stability and determinacy

     iv.      Quantitative model evaluation

 

4. Deriving stylized facts from time series data: SVARs and local projections for monetary policy analysis

     i.      General remarks on VAR processes

     ii.      Some issues in VAR implementation

     iii.      Structural identification of monetary policy VARs

     iv.      VARs vs. local projections

     

5. Dynamic programming and value function iteration

 

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.

Olea, J. L. M., Plagborg-Møller, M., Qian, E., & Wolf, C. K. (2025). Local projections or VARs? A primer for macroeconomists, NBER Macroeconomics Annual 2025, Forthcoming.

Ramey, V. A. (2016). Macroeconomic shocks and their propagation. Handbook of Macroeconomics, 2, 71-162.

 

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

 

Time and venue:

• Lecture: Thursday, 10-12 am HS 108 (Garystr. 21), first meeting April 16th
• Tutorial: Wednesday, 4-6 pm HS 108 (Garystr. 21), first meeting April 22nd
• Seminar: tb
   

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