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Advanced macroeconomics - Structure
Advanced macroeconomics - Structure

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MICHELE SANTONI , responsible for the course

Degree in ECONOMICS AND POLITICAL SCIENCE (EPS) Enrolled from 2014/2015 academic year - Laurea Magistrale - 2018/2019

Compulsory course or activityyes
Year of course1s
Term or semester3rd term
Scientific fields (settori scientifico-disciplinari)
  • SECS-P/01 - Economia politica
ECTS credits (CFU) compulsory6
ECTS credits - facultative-

General information

Aims and objectives: Knowledge and understanding: The aim of this course is to provide students with an introductory survey of some selected major aspects of modern macroeconomic theory. The course will enable students to better their knowledge and understanding of macroeconomics and of macroeconomic policy.

Applying knowledge and understanding: By the end of the course, students will be equipped with analytical tools for improving their knowledge and understanding of some major real-world macroeconomic issues (for example: why delegating monetary policy to an independent central bank? Should government fiscal policy be constrained by rules? Which factors can trigger bank runs or sovereign debt crises? how can government policy help to avoid them? What are the macroeconomic and welfare effects of different social security systems? Can government use fiscal policies to affect economic growth?)

Making judgements: By the end of the course, students should know how to use economic analysis to make informed judgements about macroeconomic issues.

Communication skills. Seminar presentations (on a voluntary basis) will enable students both to test their understanding and ability to communicate knowledge of the relevant topics and to discuss real-world macroeconomic issues with their pairs.

Learning skills. Topics will be presented mainly by using theoretical models, although references to empirical evidence will be made consistently throughout the course. Classes will reinforce student understanding of the materials presented in lectures by focusing on techniques. Students should be able to understand and explain the economic content, assumptions, limitations, policy implications and relevance of the models presented.

Language of instruction: English is the official language of the course.

Teaching methods: Lectures: 4 to 6 hours per week in term time (Total number of hours: 40). Classes: 4 two-hour classes. Seminars: 4 two-hour seminars.

Syllabus

Web:

http://msantonim.ariel.ctu.unimi.it

Syllabus: A selection of topics will be chosen among the following and will be announced on the ARIEL website before the start of the course:

Topic 1. Why delegating monetary policy to an independent central bank? (Money growth, inflation and the interest rate: the Fisher effect and the liquidity effect; The Rational Expectations Hypothesis (REH) and the Policy Ineffectiveness Proposition; Credibility of monetary policy: the “inflation bias” problem; Reputation; Central bank Independence; Escape-clause rules and central banking in times of crisis).

Topic 2. Do fiscal deficits lead to high inflation? (Seigniorage and inflation; Sargent and Wallace (1976) unpleasant monetarist arithmetic; the Intertemporal Government Budget Constraint; Fiscal rules and fiscal councils ).

Topic 3. Coordination failures (Multiple equilibria in macroeconomics; Bank runs and the Diamond-Dybvig (1983) model; Sovereign debt crises and the Calvo (1988) model).

Topic 4. Overlapping generations models and social security (The Samuelson-Diamond two-period OLG model: equilibrium and efficiency; Social security systems; Myopia as a rationale for social security).

Topic 5. Economic Growth (The Ramsey –Cass-Koopmans model with optimal saving: market solution vs. social planner’s solution; The AK model of endogenous growth. Government spending in the Ramsey and AK models ).

Topic 6. Macroeconomics and the labour market (Efficiency wage models; Search and matching models; Hysteresis).


Seminar topics will also be announced on the ARIEL website before the start of the course. As an example, last year's seminar topics were as follows: i) Central bank independence under threat? ii) Do we need fiscal policy rules? iii) Sovereign debt crises. iv) Pension systems and reforms.

Syllabus - non-attending students: Review of the AD-AS model. Dynamics in aggregate demand and supply; Rational expectations and economic policy; The government budget deficit; Dynamic inconsistency in public and private decision making; Exogenous economic growth; Overlapping generations.

Short course description english flag

The course will consist of a selection of the following topics: Topic 1. Why delegating monetary policy to an independent central bank? Topic 2. Do fiscal deficits lead to high inflation? Topic 3.Coordination failures in macroeconomics: bank runs and sovereign debt crises. Topic 4. Overlapping generations models and social security. Topic 5. Economic Growth and fiscal policy. Topic 6. Macroeconomics and the labour markets.

Readings: Outlines of lectures (slides and handouts) will be uploaded on the ARIEL website as the course proceeds. There is no single textbook for this module. However, lectures will refer to textbooks such as J.P.BÚnassy (2011) [JPB]. Macroeconomic Theory, Oxford University Press, O.J. Blanchard and S. Fischer (1989) [BF]. Lectures on Macroeconomics, MIT Press; B. B. Heijdra (2017) [H]. Foundations of Modern Macroeconomics (3nd edition), Oxford University Press (previous editions are also useful); D. Romer (2006, 2012) [DR06, DR12]. Advanced Macroeconomics. McGraw Hill; C. Walsh (2003, 2010) [WA03, WA10]. Monetary theory and policy, MIT Press. Note: Both BF, and JPB and WA are set at a higher technical level than either H or DR .

Readings - non-attending students: Ben Heijdra, Foundations of modern macroeconomics, third edition, 2017 Oxford University Press. Chapter 1 (review of the AD-AS model); chapter 3.1-3.4 ( dynamics in aggregate demand and supply); ch. 5.1-5.3 (rational expectations and economic policy); ch.6 (the government budget deficit); ch. 9 (Dynamic inconsistency in public and private decision making); ch. 12.1-12.3 (Exogenous economic growth: Solow-Swan); ch. 13.1-13.3 (Exogenous economic growth: Ramsey-Cass-Koopmans); ch. 16.1-16.2 (Overlapping generations in discrete time). Mathematical appendices are useful for techniques. Knowledge of static and dynamic optimization in continuous and (less heavily) discrete time is required.

Until April 2019, not attending students can prepare their examination using Ben Heijdra, Foundations of modern macroeconomics, second edition, 2009 Oxford University Press. chapter 2 (dynamics in aggregate supply and demand); ch. 3 (rational expectations and economic policy); ch.4 (anticipation effects and economic policy); ch. 5 (the government budget deficit); ch. 9 (macroeconomic policy, credibility and politics); ch. 13 (Exogenous growth excluding section 13.7.1); ch. 17 (Overlapping generations pp. 617-37 only). Please contact the teacher in advance of your examination if preparing your study program using Heijdra 2009’s second edition.

Alternatively, students may prepare their examination on one of the following textbooks: J.P. BÚnassy (2011) [JPB]. Macroeconomic Theory, Oxford University Press; O.J. Blanchard and S. Fischer (1989) [BF]. Lectures on Macroeconomics, MIT Press; M. Obstfeld and K. Rogoff (1996) [OR], Foundations of International Macroeconomics, MIT Press; D. Romer (1995, 2000, 2006, 2012) [DR]. Advanced Macroeconomics. McGraw Hill; C. Walsh (2003, 2nd edition, 2010 third edition) [WA]. Monetary theory and policy, MIT Press. Note: Both BF, and OR and WA are set at a higher technical level than either H (HVP) or DR or JPB. Please contact the teacher (Michele.Santoni@unimi.it) well in advance of your examination to discuss the details of your alternative study program.

Please note the following: 1. students willing to sit the examination as ‘studenti non frequentanti’ must contact the teacher in advance of their preparation. (Michele.Santoni@unimi.it) 2. you should also contact the teacher the week before your examination to confirm your enrolment.

Prerequisites, exams and assessment

Examunico
Type of assessmentEsame
Assessmentvoto verbalizzato in trentesimi

Prerequisites, exams and assessment Students attending the course will take a one-hour-and-half mid-term written examination (50% weight of the overall examination mark) consisting of three questions (either open questions, or exercises, or mixed), from which to choose one question. Students will moreover take a one-hour- and-half end-of-term written examination (50% weight of the overall examination mark) consisting of two questions (either open questions, or exercises, or mixed) from which to choose one question. The final examination mark can be raised up to two points in case of successful seminar presentation. Further details on seminar presentations will be provided at the start of the course.

Prerequisites, exams and assessment - non attendant students Students not attending the course will take a two-hour written examination, consisting of four theory questions from which to choose two questions.

Propaedeutical courses Students of this course are assumed to be familiar with intermediate macroeconomics taught on textbooks such as O.J. Blanchard (2005 or subsequent editions). Macroeconomics, Prenctice Hall, or S.D. Williamson (2014, fifth edition), Macroeconomics, Pearson. Students should also be familiar with static and dynamic optimization techniques (the latter are used selectively when presenting topics 4 and 5 of the course), which are taught in the Mathematics course.

Structure of the course

Scientific fields

  • SECS-P/01 - Economia politica - Credits: 6
Activities

Lezioni: 40 hours

Teachers ' office hours

Teacher's office hours
TeacherOffice location
MICHELE SANTONI , responsible for the courseProssimo ricevimento: mer 9/1/19 ore 12.30-15.30. Ricevimento secondo trimestre (gennaio-marzo 2019): martedý ore 10.30-11.30 (dal 15 gennaio); mercoledý ore 12.30-14.30.DEMM, via Conservatorio 7 (secondo piano), stanza 14.