Tehran Institute for Advanced Studies (TeIAS)

/ Introduction to Modern Macro II, Fall 2020

Introduction to Modern Macro II, Fall 2020

Summary

This is the second course in the macroeconomics sequence of the master program at TeIAS. Purpose of this course is manifold. On the theory side, we review important literature on consumption, investment, financial markets and the labor market. Consumption, savings and investment decisions of economic agents are intertwined with interest rates in the economy. On the other, financial markets have proved to be crucial both for sustainable and long term economic development and stabilization of the economy in the short term. Therefore it is important to review how these parts of the economy work and how they are connected. While labor markets are very important topic in macro, we review only few theories to better understand unemployment. Further important topics remain for other labor courses.

On the empirical side, it is very important to be able to compare alternative theories. To do so, first we have to be able to use models to predict how the economy may work under the model’s assumptions and for given set of model parameters. Then we have to be able to “estimate” or “calibrate” best parameters for our models. Unfortunately, we don’t have time during this course to cover the latter which needs another separate full semester course. But we tangentially cover few topics in dynamic programing and quantitative tools to simulate those problems.

Finally, if time permits, we review macro economy of Iran and set up a DSGE model that fits special features of our economy including natural resources, speculation in the exchange market and persistent long term government budget deficit and high inflation rates. Syllabus

Textbooks

Pablo Kurlat has recently published a comprehensive and advanced level text book for undergrad and master’s program. I recommend this book to every student of modern macro. However, for each part of the course we use different books and readings:

  • Macroeconomics: Pablo Kurlat, A Course in Modern Macroeconomics
  • Macroeconomics: David Romer, Advanced Macroeconomics, fifth edition. 2016.
  • Theory of Dynamic programming: Ljungqvist and Sargent. Recursive macroeconomic theory. MIT press, 2018.
  • Tools of Dynamic Programming: Quantitative economics with Julia by Tom Sargent, John Stachurski and Jesse Perla. 2020: QuantEcon.org
  • Economy of Iran


Slides

Lecture 1 – Dynamic Optimization

Lecture 2 – The Principle Of Optimality

Lecture 3 – The Bellman Equation

Lecture 4 – Applications of DP and CMT

Lecture 5 – Discrete-Time Search Models

Lecture 6 – Consumption

Lecture 7 – Investment


Homework

problem set 1

problem set 2

problem set 3


Papers


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