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.
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