MACROECONOMICS 1

Why are some countries rich and others poor? What types of countries grow more rapidly? Why do certain societies fail to improve their technologies? Why do economies undergo significant short-run variations in output and employment? This course will introduce students to these major questions and to the theoretical, mathematical, and conceptual tools necessary for answering them. The presentation of the theories will be supplemented with examples of relevant empirical works and policy implications.

Students will get a graduate-level introduction to economic theories, models, and empirical evidence on modern macroeconomics. By the end of the course, students will be able to outline and manipulate several workhorse models, derive and analyze the relevant policy conclusions implied by them, and refer to the available evidence. Moreover, students will be familiar with the conceptual and mathematical foundations of modern macroeconomics analysis.

The technical prerequisite is the knowledge of the mathematical tools presented in an undergraduate course in Mathematics (i.e. multiple-variable functions, derivatives, static optimization, integrals, matrix algebra) and Probability (i.e. expected values, variances, independent and identically distributed random variables). Students may also find it useful to be familiar with any undergraduate-level book in macroeconomics (e.g. Mankiw’s “Macroeconomics” by Worth or Blanchard’s “Macroeconomics” by Pearson).

We will attempt to cover the following topics:
1. Growth Facts – we will start with a quick look at some basic facts about economic growth and evidences on cross-country income differences
2. The Solow-Swan Model – we will develop a framework to think about causes and mechanics of the process of economic growth and cross-country income differences
3. Neoclassical Growth Model – we will analyse the Ramsey model, while introducing the mathematical and conceptual foundations of modern macroeconomic analysis (e.g. preferences, transversality conditions, optimal control);
4. Overlapping Generations Models – we will depart from the representative household assumption and introduce a model where different agents arrive over time; we will use this framework to think about e.g. the role of money and social security
5. Endogenous Growth Models – we will talk about the role of human capital in fostering growth and start considering models of endogenous growth, like the AK model and Romer’s model of expanding variety
6. Equilibrium Growth Under Uncertainty – we will turn our attention to the short-run and focus on economic fluctuations, through the Brock-Mirnan and the Real Business Cycle models

If time allows, we will also cover Equilibrium Unemployment Theory.

The main references for this course are:
• Romer, P. Advanced Macroeconomics, McGraw Hill.
• Barro, R. J., and Sala-i-Martin, X. Economic Growth, MIT Press.
• Acemoglu, D. Introduction to Modern Economic Growth, Princeton University Press. (more advanced)

Useful but more advanced texts include:
• Stokey, N. L., Lucas, R., and Prescott, E. Recursive Methods for Economic Dynamics, Harvard University Press.
• Ljunqvist, L., and Sargent, T. Recursive Macroeconomic Theory, MIT Press.
Additional references may be pointed out in class. Before each class, slides will be made available to students.

In the course of the academic year, there will be four exam sessions. The first session, which takes place during the first semester, is articulated in a midterm written exam (worth 50% of the final mark) on the contents covered in the first part of the course and a final written examination (worth 50% of the final mark) on the contents covered in the second part of the course; the final mark will be the weighted average of the two exams. The remaining sessions (Dec – Sep) consist of a single written examination on the full contents covered in the course.

All my exams have the same structure: 2 questions, each worth 50%, in 90 minutes; in the Dec – Sep sessions, the first question will be on the first part of the course and the second question will be on the second part of the course. Students for whom this course is worth 6 ECTS, are only evaluated on the first half of the course and can take the first mid-term exam or any session (for them, both questions will be on the first part of the course).

There will be three two-academic-hour classes per week for ten weeks, for a total of 60 academic hours. Classes will usually consist of frontal lectures, discussions, and practical sessions based on take-home tutorials.

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Please note that this course outline may be subject to change. Up-to-date information on scheduled meetings, the course outline, et cetera can be found on the Moodle for this class.

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This subject deals with topics related to the macro-area "Human capital, health, education" and contributes to the achievement of one or more goals of U. N. Agenda for Sustainable Development