This course is devoted to the analysis of economic fluctuations and macroeconomic policies. We present the stylized facts of business cycles and present methods to estimate the sources of fluctuations. We start by the traditional aggregate-supply aggregate demand model to account for the fluctuations. We then lay down the basic real-business cycle models with intertemporal choices of saving, consumption and labor supply under uncertainty and shocks. We present methods to solve these stochastic models and estimate their empirical relevance. We then analyze the role of money, nominal rigidities and real rigidities in new Keynesian models to explain the effect of demand shocks and supply shocks on output and unemployment. This framework will be used to explain the effect of monetary and fiscal policies and discuss the credibility of public policy.

Syllabus:
1. Business Cycles: Stylized Facts
2. The Aggregate Supply – Aggregate Demand model
3. Phillips curve
4 - Real Business Cycle Model
5. Money and Fluctuations
6. Unemployment dynamics
7. Imperfect competition and Coordination Failures
8. New Keynesian Models
9. Monetary and Fiscal policy

References:
-Adda, J. et Cooper, R., Dynamic economics, MIT Press 2002.
-Blanchard, O. et S. Fischer, Lectures on Macroeconomics, MIT Press 1989.
-Romer, D., Advanced Macroeconomics, McGraw-Hill, 1997.
-Walsh, C., Monetary theory and Policy, MIT Press, 2003.
-Woodford, M. Interest and Prices, Princeton University Press, 2003.

Requirements : ECO431-Economic analysis : introduction

Last Modification : Friday 12 March 2010