After successful completion of the course, students are able to...

The aim is to bring students closer to the research frontier in a specific area of macroeconomics: Dynamic Stochastic General Equilibrium (DSGE) models.

These models have become one of the leading tools for policy analysis in macroeconomics. These models are also part of the policy process in leading central banks such as Federal Reserve System or the ECB.

After successful completion of the course, students, on a basic level, are able to:

• list key empirical relationships between macroeconomic key variables such as inflation, real GDP and nominal interest rates;
• critically assess the basic theoretical models in modern macroeconomics that try to explain the key empirical relationships;
• set-up DSGE models to analyse and intuitively interpret the relationships between macroeconomic key variables;
• apply the key methods used to solve DSGE models;
• analyze DSGE models, e.g., compare their equilibrium predictions to the data;
• assess monetary policy within DSGE models;
• construct extensions of these DSGE models independently.

• Introduction
• A One-Period Real Macroeconomic Model
• A T-Period Real Macroeconomic Model
• The Ramsey-Cass-Koopmans Model
• The Real Business Cycle (RBC) Model
• The New Keynesian Model

• This is an interactive course and students have to be ready to work actively;
• Stylized facts about the business cycle are discussed;
• Rigorous exposition of theoretical models including detours to clarify methods and illustrative examples are used throughout the presentation to provide deeper insights to the theoretical issues;
• Self-study, i.e., autonomous work by students on all material covered in class;
• Students are encouraged to make use of office hours, which are meant to clarify specific problems students may have.

Technical equipment as participation requirement: one laptop/PC with the camera. The camera has to be activated while being in the virtual classroom (zoom meeting room).

Answering questions on the theories discussed.

Course materials will be provided successively via TUWEL.

This course is to a large extent based on Williamson (2013), McCandless (2008), and Galí (2015). Other useful literature is Walsh (2017).

1. Galí, J. (2015). Monetary Policy, Inflation, and the Business Cycle: An Introduction to the New Keynesian Framework and Its Applications. Princeton University Press, Princeton, NJ, Second edition.
2. McCandless, Jr., G. T. (2008). The ABCs of RBCs: An Introduction to Dynamic Macroeconomic Models. Harvard University Press, Cambridge, MA.
3. Walsh, C. E. (2017). Monetary Theory and Policy. The MIT Press, 4th edition.
4. Williamson, S. D. D. (2013). Macroeconomics. Pearson Education, Inc., Fifth edition.

• 105.606 Macroeconomics for WM (VO)
• 105.605 Microeconomics for WM (VO)