Tehran Institute for Advanced Studies (TeIAS)

/ Introduction to Modern Macroeconomics II, Fall 2019

Introduction to Modern Macroeconomics II, Fall 2019


This is the second course in the macroeconomics part of the master program. This course has 3 modules. In the first part, we will review mathematical perquisites for solving dynamic problems, which is the case for most of macro problems. We introduce Bellman Equations and the principle of optimality and using fixed point theorems show how to use iteration methods to find the value function as well as policy function. Finally we will introduce neoclassical growth model.

Second part of the course focuses on the economics of money, banking and financial markets. It is very important to understand how financial markets work and how they may affect real economy.

The last part of this course is devoted to monetary policy. We will introduce quantity theory of money and will argue that almost always inflation is the result of rapid growth of the money supply. If time permits, we will also introduce transmission mechanisms of monetary policy.


Problem Sets

Problem set 1, due on Sep 28th

Problem set 2: Sufficiency of EE and TC and the “principle of optimality“, due on Oct 5th

Problem set 3: The Bellman operator satisfies the Blackwell‘s sufficient conditions, due on Oct 12th

Problem set 4: Mc-Call Search Model: Theory, due on Oct 20th

Problem set 5: Mc-Call Search Model: Quantitative Analysis. For the quantitative part of this homework, Sargent’s quantecon.org is the required reading, either Python or Julia, due on Oct 26th.

Problem set 6: Continious Search Model and many applications such as Brudett and Mortensen (1980), Hey (1979) and Fallick (1993), due on Nov 2nd.

Problem set 7: Neo-classical growth model and investment with adjustment cost, due on Nov 9th.

Midterm Project: Simulation of NGM with adjustment cost and comparative statics, due on midterm day.

Problem set 8: Collateralized Debt Obligations, Securitization and Tehran Houses, due on Dec 2nd.

Problem set 9: Finance and Economic Development, due on Dec 14th.

Problem set 10: Read and summarize Sargent (1982) The Ends of Four Big Inflations.

Problem set 11: Money and the Economy, due on Jan 8th.



Lecture 1: Dynamic Optimization

Lecture 2:

Lecture 3:

Lecture 4: Applications of Contraction Mapping Theorem in Dynamic Problems

Lecture 5: Discrete-Time Search Models

Lecture 6: Continuous-Time Search Models

Lecture 7: Neo-Classical Growth Model

Lecture 8: Money and the Economy


Interesting Macro Classes

Thomas Winberry, Chicago Booth

Ben Moll, Princeton

Robert Townsend, MIT


What Money Can’t Buy?

Very intresting book and series of videos by Micheal Sandel of Harvard.

What Money Can’t Buy: The Moral Limits of Markets



How The Economic Machine Works?

by Ray Dalio



Interesting Readings

I recommend the following paper to my math enthusiast friends!
Partial differential equation models in macroeconomics by Ben Moll et. al.
Ben Moll has a very nice lecture about inequality and macro.