MA Advanced Macroeconomics

This is the class website for University College Dublin module MA Advanced Macroeconomics (ECON 41620) taught by Prof. Karl Whelan in the Spring term of 2015.

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 is a description of the final exam (final version) and here is last year’s final exam.

Lecture Notes

1. Introduction: Time Series and Macroeconomics

2. Vector Autoregressions

3. Examples of VAR Studies

4. VARs With Long-Run Restrictions

5. Latent Variables: The Kalman Filter

6. Solving Models with Rational Expectations

7. The Real Business Cycle Model

8. The Phillips Curve

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

10. Estimating DSGE Models

11. The Smets-Wouters Model

12. Default Risk, Collateral and Credit Rationing

13. Banking: Crises and Regulation

14. Evidence on Bank Equity and Leverage

15. The Future of Macroeconomics


RATS 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).

RATS replication files for the Laubach-Williams paper.

RATS programme that produces RBC graphs in Part 7 (using Binder-Pesaran)


Dynare Programmes

Dynare is software that works with Matlab to solve and simulate DSGE models.  You can download it here and here is a page has a quick guide to getting started.

A large number of macroeconomic models from academic papers have been coded up in Dynare and made freely available, most notably at Volker Wieland’s Macro Model Database.  See below for a number of papers and corresponding Dynare programmes.

Programme for the RBC model in Part 7

A simple new Keynesian model.

Dynare can also estimate DSGE models using Bayesian techniques. Here is a link to a working example, including data, by Joao Madeira from the University of York.


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)

St. Louis Fed: Oil Prices: Is Supply or Demand behind the Slump?

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).

Christina Romer and David Romer (2004). A New Measure of Monetary Shocks: Derivation and Implications

Olivier Coibion (2011). Are the Eff ects of Monetary Policy Shocks Big or Small?”

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.

Thomas Laubach and John C. Williams (2001). Measuring the Natural Rate of Interest. Updated estimates from the Laubach-Williams model from the San Francisco Fed.

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

Nicholas Higham and Hyun-Min Him (2002). Numerical Analysis of a Quadratic Matrix Equation.

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

Jon Danielsson et al (2001): An Academic Response to Basel 2

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) being taught by Professor Karl Whelan in Spring 2015.

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


Here are guidelines for the final exam including sample questions for Sections 1 and 2 of the exam (Final version: April 15). Here is the handout with sample questions for Section 3. (Final version: April 15).

The final exam will take place on Wednesday May 13th at Noon 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. Before Growth: The Malthusian Model. Slides here.

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

14. Revision



Carl Walsh (2002): Teaching Inflation Targeting: An Analysis for Intermediate Macro

Milton Friedman (1968): The Role of Monetary Policy.

John Taylor (1993): Discretion Versus Policy Rules in Practice

Bank of England (2012): State of the Art of Inflation Targeting

Richard Clarida, Jordi Gali and Mark Gertler (2000): Monetary Policy Rules
and Macroeconomic Stability: Evidence and Some Theory

Ben Bernanke (2003):  Some Thoughts on Monetary Policy in Japan

Lars Svensson (2003). Escaping from a Liquidity Trap and Deflation: The Foolproof Way and Others

Paul Krugman (2012): Earth to Ben Bernanke. Chairman Bernanke Should Listen to Professor Bernanke

Robert Shiller (1981): Do Stock Prices Move Too Much to be Justified by Subsequent Changes in Dividends?

John Campbell and Robert Shiller (2001). Valuation Ratios and the Long-Run Stock Market Outlook: An Update.

NBER Workshop on Behavioural Finance.

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

Robert Hall (1978). Stochastic Implications of the Life Cycle-Permanent Income Hypothesis: Theory and Evidence.

John Campbell and Gregory Mankiw (1990). Permanent Income, Current Income, and Consumption

Robert Barro (1974). Are Government Bonds Net Wealth?

Jonathan Parker, Nicholas Souleles, David Johnson and Robert McClelland (2011).Consumer Spending and the Economic Stimulus Payments of 2008.

Jonathan Parker (1999). The Reaction of Household Consumption to Predictable Changes in Social Security Taxes.

Chang-Tai Hsieh (2003). Do Consumers React to Anticipated Income Changes? Evidence from the Alaska Permanent Fund

Bureau of Labor Statistics MFP Trends up to 2013

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

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

Robert Solow: A Contribution to the Theory of Economic Growth

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

Paul Krugman: The Myth of Asia’s Miracle.

Kieran McQuinn and Karl Whelan: Europe’s Long-Term Growth Prospects: With and Without Structural Reforms

Paul Romer: Endogenous Technological Change.

Robert Gordon (2012): Is U.S. Economic Growth Over? Faltering Innovation Confronts the Six Headwinds

Robert Gordon (2014): The Demise of U.S. Growth: Restatement, Rebuttal and Reflections

Joel Mokyr (2013): 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.

Jared Diamond (2005). Collapse: How Societies Choose to Fail or Succeed.

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