MA Advanced Macroeconomics

This is the class website for University College Dublin module MA Advanced Macroeconomics (ECON 41620) taught by Prof. Karl Whelan.

The focus in this course will be on the methods that modern macroeconomics uses to model and understand time series fluctuations in the major macroeconomic variables. The first part of the course focuses on Vector Autoregression studies and Dynamic Stochastic General Equilibrium models. Later lectures focus on modelling the interactions between the financial sector and the macroeconomy.

Information and Assessment

Here is a handout with a syllabus and a full reading list.

Here are guidelines on the format and content of the final exam. Here is last year’s final exam.

Important: I have changed the time for the final exam. It will now take place on Friday May 16 at 10AM in Theatre R.

Lecture Notes

1. Introduction: Time Series and Macroeconomics

2. Vector Autoregressions

3. Examples of VAR Studies

4. VARs With Long-Run Restrictions

5. Solving Models with Rational Expectations

6. The Real Business Cycle Model

7. The Phillips Curve

8. The Modern New-Keyesian Model (Technical background notes).

9. Estimating DSGE Models

10. The Smets-Wouters Model

11. Default Risk, Collateral and Credit Rationing

12. Banking: Crises and Regulation

13. Evidence on Bank Equity and Leverage

14. The Future of Macroeconomics

Programmes and Data

RATS programme generating charts for the first lecture. (Data set and required HP-filter programme.)

Two RATS programmes for Monetary Policy VARs: Identification One and Identification Two (Data Set).

The DSGE models in this course can be simulated and estimated using Dynare, a suite of programmes that work with Matlab. Here is a link to information on how to set up Dynare to work with Matlab.

Here are three examples of Dynare programmes that set up and simulate models.

A simple real business cycle model.

A simple new Keynesian model.

The Bernanke-Gertler-Gilchrist model (via Ambrogio Cesa-Bianchi)


Readings and Useful Links

John Cochrane (2005). Time Series for Macroeconomics and Finance (Chapters 2, 3, 5 and 7).

Christopher Sims (1980). Macroeconomics and Reality. (JSTOR).

Lutz Kilian (1998). Small-Sample Confidence Intervals for Impulse Response Functions.

Simon Jackman (2000). Estimation and Inference via Bayesian Simulation: An Introduction to Markov Chain Monte Carlo.

Marta Bańbura, Domenico Giannone, and Lucrezia Reichlin (2008). Large Bayesian VARs.

Lutz Kilian (2009). Not All Oil Price Shocks Are Alike: Disentangling Demand and Supply Shocks in the Crude Oil Market.  (Working paper version)

Olivier Blanchard and Roberto Perotti (2002). An Empirical Characterization of the Dynamic Effects of Changes in Government Spending and Taxes on Output (JSTOR).

James Stock and Mark Watson (2001). Vector Autoregressions.

Glenn Rudebusch (1998). Do Measures of Monetary Policy in a Var Make Sense? (JSTOR).

Christopher Sims (1998). Comment on Glenn Rudebusch’s Do Measures of Monetary Policy in a Var Make Sense? (JSTOR).

Olivier Blanchard and Danny Quah (1989). The Dynamic Effects of Aggregate Demand and Supply Disturbances (JSTOR).

Jordi Gali (1999). Technology, Employment and the Business Cycle: Do Technology Shocks Explain Aggregate Fluctuations? (JSTOR).

Karl Whelan (2009). Technology Shocks and Hours Worked: Checking for Robust Conclusions.

Robert Lucas (1976). Econometric Policy Evaluation: A Critique.

Harald Uhlig (1995). A Toolkit for Analyzing Nonlinear Dynamic Stochastic Models Easily.

Timothy Cogley and James Nason (1995). Output Dynamics in Real-Business-Cycle Models.

Milton Friedman: The Role of Monetary Policy.

Robert J. Gordon: The History of the Phillips Curve: Consensus and Bifurcation

John M. Roberts. New Keynesian Economics and the Phillips Curve (JSTOR).

Richard Clarida, Jordi Gali, and Mark Gertler (1999). The Science of Monetary Policy: A New Keynesian Perspective.

Jordi Gali and Mark Gertler (1999). Inflation Dynamics: A Structural Econometric Analysis

Jeremy Rudd and Karl Whelan (2005). Modelling Inflation Dynamics: A Critical Review of Recent Research

Julio Rotemberg and Michael Woodford (1997). An Optimization-Based Econometric Framework for the Evaluation of Monetary Policy.

Alistair Hall, Atsushi Inoue, James Nason and Barbara Rossi (2010). Information Criteria for Impulse Response Function Matching Estimation of DSGE Models.

Peter Ireland (2004).  A Method for Taking Models to the Data.

Francisco Ruge-Murcia (2007). Methods to Estimate Dynamic Stochastic General Equilibrium Models.

Jesus Fernández-Villaverde (2009). The Econometrics of DGSE Models.

Frank Smets and Rafael Wouters (2007). Shocks and Frictions in US Business Cycles: A Bayesian DSGE Approach. (ECB working paper version here; appendix with full model here).

Chris Sims at INET conference: How Empirical Evidence Does or Does Not Influence Economic Thinking. Video and slides.

Ben Bernanke and Mark Gertler (1989). Agency Costs, Net Worth, and Business Fluctuations.

Ben Bernanke, Mark Gertler and Simon Gilchrist (1999): The Financial Accelerator in a Quantitative Business Cycle Framework.

Mark Gertler’s lecture notes on financial frictions.

Joseph Stiglitz and Andrew Weiss (1981). Credit Rationing in Markets with Imperfect Information.

Charles Goodhart (1998): Two Concepts of Money

Piergiorgio Alessandri and Andrew Haldane (Bank of England): Banking on the State

Simon Johnson: Economic Recovery And The Coming Financial Crisis.

Douglas Diamond and Raghuram Rajan: The Credit Crisis: Conjectures about Causes and Remedies

Documentation for the Basle 2 Internal Ratings Based model.

Philipp Hildebrand: Is Basel II Enough? The Benefits of a Leverage Ratio

New York Times: Risk Mismangement

Patrick Honohan: Bank Failures: The Limits of Risk Modelling

Andrew Haldane and Vasileios Madouros. The Dog and the Frisbee.

Karl Whelan: Containing Systemic Risk

Ben Bernanke: Implications of the Financial Crisis for Economics

Tobias Adrian and Hyun Song Shin (2008). Liquidity and Leverage.

Andrew Crockett: Marrying the Micro- and Macro-Prudential Dimensions of Financial Stability

Samuel Hanson, Anil Kashyap and Jeremy Stein: A Macroprudential Approach to Financial Regulation

Basle 3 Agreement

Accenture: Basle 3 Handbook

Andrew Haldane: The Bank and the banks.

Bank of England (2009). RAMSI: a top-down stress-testing model

Martin O’Brien and Karl Whelan (2014). Changes in Bank Leverage: Evidence from US Bank Holding Companies

Olivier Blanchard, Giovanni Dell’Ariccia, and Paolo Mauro (2010): Rethinking Macroeconomic Policy

Olivier Blanchard, Giovanni Dell’Ariccia, and Paolo Mauro (2013): Rethinking Macroeconomic Policy II: Getting Granular.

Olivier Blanchard: Five Lessons for Economists from the Financial Crisis

Lawrence Summers (1991): The Scientific Illusion in Empirical Macroeconomics

Ricardo Cabellero (2010): Macroeconomics after the Crisis : Time to Deal with the Pretense-of-Knowledge Syndrome

Advanced Macroeconomics (ECON30120)

This is the class website for University College Dublin module Advanced Macroeconomics (ECON 30120).

Here is a handout describing how the module will work.  This material will be covered in the opening lecture (slides here).

Assessment Information: Final Exam

Here is a handout describing the format for the final exam and containing sample questions for the first two sections of the exam. I have added some tips for studying for the final exam to this handout.

Here are some sample questions for the third section of the exam.

These are now the final editions of these handouts.

The final exam will take place on Monday May 12 at 3PM at RDS Simmonscourt.

Lecture Notes and Slides

1. Introducing the IS-MP-PC Model. Slides here.

2. Analysing the IS-MP-PC Model. Slides here.

3. The Taylor Principle. Slides here.

4. The Zero Lower Bound and the Liquidity Trap. Slides here.

5. Rational Expectations and Asset Prices. Slides here.

6. Rational Expectations and Consumption. Slides here.

7. Exchange Rates, Interest Rates and Expectations. Slides here.

8. Growth Accounting. Slides here.

9. The Solow Model. Slides here.

10. Determinants of Total Factor Productivity. Slides here.

11. The Malthusian Model. Slides here.

12. Population and Resources: Malthus and the Environment. Slides here.

13. Revision


Carl Walsh: Teaching Inflation Targeting: An Analysis for Intermediate Macro

Milton Friedman: The Role of Monetary Policy.

John Taylor: Discretion Versus Policy Rules in Practice

Bank of England: State of the Art of Inflation Targeting

Richard Clarida, Jordi Gali and Mark Gertler: Monetary Policy Rules
and Macroeconomic Stability: Evidence and Some Theory

Ben Bernanke:  Some Thoughts on Monetary Policy in Japan

Paul Krugman: Earth to Ben Bernanke. Chairman Bernanke Should Listen to Professor Bernanke

Eugene Fama: Efficient Capital Markets: A Review of Theory and Empirical Work

Eugene Fama: Efficient Capital Markets II

Robert Shiller: Do Stock Prices Move Too Much to be Justified by Subsequent Changes in Dividends?

John Campbell and Robert Shiller. Valuation Ratios and the Long-Run Stock Market Outlook: An Update.

Gavyn Davies: The Nobel  Laureates on Equity Bubbles

NBER Workshop on Behavioural Finance.

Robert Lucas. Econometric Policy Evaluation: A Critique.

Robert Hall. Stochastic Implications of the Life Cycle-Permanent Income Hypothesis: Theory and Evidence.

Robert Solow: Technical Change and the Aggregate Production Function.

Bureau of Labor Statistics MFP Trends up to 2012

Karl Whelan: Is the U.S. Set for an Era of Slow Growth?

Kieran McQuinn and Karl Whelan: Europe’s Growth Crisis

Alwyn Young: A Tale of Two Cities: Factor Accumulation and Technical Change in Hong Kong and Singapore

Edward Miguel and Gerard Roland: The Long Run Impact of Bombing Vietnam

Paul Krugman: The Myth of Asia’s Miracle.

Paul Romer: Endogenous Technological Change.

Robert Gordon: Is U.S. Economic Growth Over? Faltering Innovation Confronts the Six Headwinds

Robert Gordon: The Demise of U.S. Growth: Restatement, Rebuttal and Reflections

Joel Mokyr: Is Technological Progress a Thing of the Past?

Robert E. Hall and Charles I. Jones. Why Do Some Countries Produce So Much More Output per Worker than Others?

Douglass North. Institutional Change: A Framework of Analysis.

Daron Acemoglu, Simon Johnson and James Robinson. The Colonial Origins of Comparative Development: An Empirical Investigation.

Dani Rodrik, Arvind Subramanian, and Francesco Trebbi. Institutions Rule: The Primacy of Institutions over Geography and Integration in Economic Development.

Robert Gillanders and Karl Whelan. Open For Business? Institutions, Business Environment and Economic Development.

Gregory Clark (2007). A Farewell to Alms. Chapter One: The Sixteen Page Economic History of the World.

Gregory Clark (2007). A Farewell to Alms. Chapter Two: The Logic of the Malthusian Economy.

Thomas Malthus (1798). An Essay on the Principle of Population.

Gapminder: Wonderful animated graphs on health, incomes and other things.

James Brander and M. Scott Taylor (1998). The Simple Economics of Easter Island: A Ricardo-Malthus Model of Renewable Resource Use.

International Money and Banking

This is the class website for University College Dublin module ECON 30150, taught by Prof. Karl Whelan in Semester 2 of 2013/2014. The module focuses on central banks, monetary policy and the role of the banking system in the economy.

Here is a handout describing the structure of the module, assessment and other details.


Your final grade will be based on 20% for a multiple-choice mid-term exam and 80% for a final exam. Your final grade is calculated by grade point averaging, i.e. your final grade will be decided by a weighted average of the calculation point for your midterm and the calculation point for your final exam.

Here is a final version of the sample questions for the final exam as well some tips on strategies for the taking the exam.

The final exam will take place on Saturday May 10 at 6PM at RDS Simmonscourt.

Lecture Notes

0. Introduction

1. Money as a Medium of Exchange

2. Banks and Financial Intermediation

3. Liquidity and Solvency

4. Central Banks

5. The Money Supply

6. Money and Inflation

7. The Fed and the ECB

8. Operational Strategies for Monetary Policy

9. Banking Crises

10. Incentive Problems in Banking

11. Banking Regulation

12. Europe’s Banking Problems

13. The Term Structure of Interest Rates

14. Default Risk

15. Real Interest Rates, the Zero Bound and Quantitative Easing

16. The Phillips Curve: Evidence and Implications

17. The Taylor Rule

18. Exchange Rate Regimes and the Euro

19. The Euro Crisis

Readings and Useful Links

Links to Data Sources and Economics Websites

A Comparative Chronology of Money. Website based on A History of Money from Ancient Times to the Present Day by Glyn Davies.

Jevons on Barter

Milton Friedman: The Island of Stone Money

R. A. Radford:  The Economic Organisation of a P.O.W. Camp

Charles Goodhart: Two Concepts of Money

A History of Money: From AD 800 by John F. Chown. Google Books version. Chapter 5 is “The Great Debasement of Henry VIII’s Reign”

Cleveland Fed: The Tale of Gresham’s Law

Bank of England: A Brief History of Bank Notes

Major Developments in the History of the Bank of England

Karl Whelan: How Is Bitcoin Different From The Dollar?

Karl Whelan: So What’s So Special About Bitcoin?

Bank of Ireland’s Interim Report with June 2013 results.

Cleveland Fed: Bank Capital Requirements: A Conversation with the Experts

Patrick Honohan’s Report: The Irish Banking Crisis Regulatory and Financial Stability Policy 2003-2008.

Bad Journalism on Bank Capital Example One: London Review of Books

Bad Journalism on Bank Capital Example Two: Fortune

Bad Journalism on Bank Capital Example Three: New York Times

Federal Reserve: Recent Balance Sheet Trends

The weekly consolidated balance sheet of the Eurosystem from the ECB.

Karl Whelan:  Is the ECB Risking Insolvency? Does it Matter?

Karl Whelan: Should Monetary Policy be Separated From Banking Supervision?

Information on Payments Systems: TARGET2 and Fedwire.

ECB: The demand for currency in the euro area and the impact of the euro cash changeover

Guy Debelle: On Europe’s Effects on Australian Financial Markets

Todd Keister and James McAndrews Why Are Banks Holding So Many Excess Reserves?

Paul De Grauwe and Magdalena Polan: Is Inflation Always and Everywhere a Monetary Phenomenon?

Steve H. Hanke and Nicholas Krus: World Hyperinflations

Top Five Hyperinflations

ECB Protocol (i.e. the legal statute underlying the ECB and Eurosystem).

ECB Press Conferences: Transcripts and Video

Technical Features of Outright Monetary Transactions

ECB: Banking Supervision

Karl Whelan: The Secret Tool Draghi Uses to Run Europe

San Francisco Fed: Information on the the Fed’s role in banking supervision.

FOMC Statements, Minutes, and Transcripts

Ben Bernanke: Five Questions about the Federal Reserve and Monetary Policy

Ben Bernanke: Implementing Monetary Policy

Daily Data from the NY Fed: Fed Funds Rates and Details of Open Market Operations

Ben Bernanke: Nonmonetary Effects of the Financial Crisis in the Propagation of the Great Depression (American Economic Review, June 1983. Not available outside UCD. Go through UCD Connect and the Library Page.)

FDIC Failed Bank List.

Karl Whelan: Containing Systemic Risk

Piergiorgio Alessandri and Andrew Haldane (Bank of England): Banking on the State

Simon Johnson: Economic Recovery And The Coming Financial Crisis.

Douglas Diamond and Raghuram Rajan: The Credit Crisis: Conjectures about Causes and Remedies

Documentation for the Basle 2 Internal Ratings Based model.

Philipp Hildebrand: Is Basel II Enough? The Benefits of a Leverage Ratio

New York Times: Risk Mismangement

Patrick Honohan: Bank Failures: The Limits of Risk Modelling

Andrew Haldane and Vasileios Madouros. The Dog and the Frisbee.

Andrew Crockett: Marrying the Micro- and Macro-Prudential Dimensions of Financial Stability

Samuel Hanson, Anil Kashyap and Jeremy Stein: A Macroprudential Approach to Financial Regulation

Basle 3 Agreement

Accenture: Basle 3 Handbook

Andrew Haldane: The Bank and the banks.

European Banking Authority: Basle 3 Monitoring Exercise

ECB webpage for the Comprehensive Assessment

Selected Interest Rates from the Federal Reserve.

Bloomberg Yield Curve Page

Ben Bernanke: The Financial Accelerator and the Credit Channel

Joseph Gagnon, Matthew Raskin, Julie Remache, Brian Sack: Large-Scale Asset Purchases by the Federal Reserve: Did They Work?

Stefania D’Amico and Thomas B. King: Flow and Stock Effects of Large-Scale Treasury Purchases

Milton Friedman: The Role of Monetary Policy.

Ben Bernanke: The Benefits of Price Stability

Olivier Blanchard, Giovanni Dell’Ariccia, and Paolo Mauro: Rethinking Macroeconomic Policy

Olivier Blanchard, Giovanni Dell’Ariccia, and Paolo Mauro (2013): Rethinking Macroeconomic Policy II: Getting Granular.

Brad DeLong: Central Bank Credibility and Consistency: The Analytics

John Taylor: Discretion Versus Policy Rules in Practice

Glenn Rudebusch: The Fed’s Monetary Policy Response to the Current Crisis

Karl Whelan: Sovereign Default and the Euro

Karl Whelan: Macroeconomic Imbalances in the Euro Area

Karl Whelan: Would a Greek Exit Really be Manageable?

ECB Legal Paper: Withdrawal and Expulsion from the EU and EMU: Some Reflections

Barry Eichengreen: The Breakup of the Euro Area (May 2007)