There is not a prescribed text for the course.
For the first part of Business Cycle and Business cycle theories: David Romer, Advanced Macroeconomics.
The most complete book on monetary economics presently published is Walsh,
Carl. (2003) Monetary Theory and Policy. MIT Press. but the following are
also highly recommended books:
Gali Jordi (2008)
Monetary Policy, Inflation, and the Business Cycle Princeton University Press
-- the best introduction to New Keynesian models – we will follow this book
quite closely, especially chapters 2 to 5 – check material on Gali’s
Woodford, Michael, 2003, Interest and Prices. Princeton University
Press -- difficult read, very analytical – 1st
chapter is required reading – again, have a look at Woodford’s website
Obstfeld, Maurice, Kenneth Rogoff,
1996, Foundations of International Macroeconomics, MIT Press -- an open economy
focused presentation but probably the best macroeconomics book available at
the moment. Some open economy issues will be analyzed
following their presentation
Lectures – Tuesday 16.30-19.30
Visiting Hours: by appointment (just ask in class or send me an email)
Lectures and Readings
Lecture 1 – Macroeconomic Cycle and Economic Policy
Business Cycle in Emerging
Hodrick, R J and E C Prescott (1997), “Postwar US business cycles: An empirical
investigation”, Journal of Money, Credit and Banking, 29(1): 1-16.
Hamilton, J D “Why
you should never use the Hodrick-Prescott filter”,
Aguiar, M. and Gopinath,
G., 2007. Emerging Market Business Cycles: The Cycle is
the Trend. Journal of political Economy, 115(1),
History and Methodology
Lucas Jr, R.E., 1976, January. Econometric policy evaluation: A critique. In Carnegie-Rochester
conference series on public policy (Vol. 1, pp. 19-46). North-Holland.
Dornbusch, R. and Edwards, S., 1990. Macroeconomic populism. Journal of Development
Economics, 32(2), pp.247-277.
Taylor, J.B., 2007. Thirty‐Five Years of Model
Building for Monetary Policy Evaluation: Breakthroughs, Dark Ages, and a
Renaissance. Journal of Money, Credit and Banking, 39,
Bernanke 2004 The
Great Moderation Federal Reserve
Blanchard, O., Dell’Ariccia, G. and Mauro,
P., 2010. Rethinking macroeconomic policy. Journal of Money, Credit and
Banking, 42, pp.199-215.
Modelling in Dynare
Lecture 2 – The Basic Real Business Cycle Model - DSGE Modelling in Dynare
Reading – Dynare User Guide
Lecture 3 [pdf] Money and the Economy : the evidence
Carl Walsh -- Chapter 1
Sims, Christopher A. (1972):
"Money, Income and Causality," American Economic
Review 62: 540-552.
Christina D., and David H. Romer (1990): "New Evidence on the Monetary Transmission Mechanism,"
Cochrane, John H. (1998):
"What Do the VARs Mean? Measuring the Output Effects
of Monetary Policy,"
Var Analysis of Monetary Policy: an Introduction
Dataset in excel and here in Eviews
format – the dataset is used to replicate the results in the following
Eric M., Christopher A. Sims, and Tao Zha (1996):
"What Does Monetary Policy Do?" Brookings
Papers on Economic Activity 2: 1-63
Lecture 4 [pdf] The Cagan Model and Basic Classical Monetary Models
and Rogoff – Chapter 8
Walsh Chapters 2 and 3
African VAR Data Here
Lecture 4-1 [pdf] Introduction
to New Keynesian Models
Mathematics of New Keynesian Models
chapters 3 and 4
et all - Policy Analysis Using DSGE Models: An
New-Keynesian Model in Dynare
of New Keynesian Model: Note
New Keynesian Models and Optimal Monetary Policy
Lecture 5 [pdf]: Optimal Monetary Policy
R., J. Galí, and M. Gertler
(1999), "The Science of Monetary Policy: A New
Lecture 5-2 [pdf] Large Scale DSGE Models for policy analysis
and Wouters (2003) An estimated DSGE model of the
euro area - Journal of the European Economic Association –
Papers and Dynare Programs
Professor Harald Uhlig provides an implementation of the Smets and Wouters model which
makes easy experimenting with the calibration of the model Download here. This exe-file, once executed,
will install a program on your computer which allows you to get impulse
responses to various shocks in the Smets and Wouters (JEEA, 2003) model.
A Methodological Discussion:
Now that you have some idea of the working of this class of models
frequently used in policy analysis, it is worth thinking a bit methodologically.
Here are 4 contributions to start with.
Woodford M (2009) ‘Convergence in Macroeconomics: Element of the New Synthesis’
An overview of the state of Macro and the elements of convergence and
V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2009. New Keynesian Models:
Not Yet Useful for Policy Analysis – A critical assessment of the Smets and Wouters model from
the point of view of the RBC tradition
Wren-Lewis, S (2007) ‘Are There Dangers in the Microfoundations Consensus?
A critical view of the New Synthesis model from the point of view of the
policy making process.
Credit, Asset Prices and Monetary Policy
Lecture 6 [pdf]
imperfection and the Business Cycle
Blanchard, O. J., and S.
Fischer. Lectures on Macroeconomics. Cambridge , MA : MIT Press, 1989, pp. 478-488.
Stiglitz, J. E., & Weiss, A. (1981). Credit rationing in markets with imperfect information. The American economic review, 71(3), 393-410.
N., and J. Moore. (1997) "Credit Cycles."
Journal of Political Economy 105 : 211-248.
Bernanke, B., and M. Gertler (1989). "Agency Costs,
Net Worth, and Business Fluctuations."
Bernanke, B M. Gertler and S Gilchrist (2000) "The
Financial Accelerator in a Quantitative Business Cycle Framework",
in Taylor and Woodford, Handbook of
Macroeconomics, North Holland
Dynare Program for Bernenke
and Gertler Model
of Kiyotaki and Moore Model in Dynare
Lecture 7 [pdf] –
Fiscal Policy in Modern Macroeconomics
Sargent and Wallace (1981) “Unpleasant
Woodford, Michael (1995) "Fiscal Requirements
for Price Stability"
Eric M. (1991) "Equilibria Under 'Active' and 'Passive' Monetary and
Eric M (2010) “Monetary
Science, Fiscal Alchemy”