Introduction to Modern Macro I, Winter 2019
This is the first course in the macroeconomics sequence of the master program. Main goal of this course is to introduce dynamic general equilibrium models developed during last 50 years in order to better understand behavior of aggregate economies. Models in this course are based on strong microeconomic foundations, which is in contrast to traditional Keynesians approach. We first introduce centralized economy of Robinson Crusoe, living in an island in planet Mars. This basic model is the workhorse of most modern macroeconomic models. We will then use this base model to study economies in long term, which is known as the realm of economic growth.
Then we show how introduction of markets and prices can deduce the same pareto optimal allocation, the fact that is known as the fundamental welfare theorems. We add government and international trade to our baseline model. Then we introduce money and effects of monetary policy. In order to better understand how monetary policy works (or does not work) we briefly introduce financial intermediation and asset pricing. We also dedicate two sessions to labor markets and theories of equilibrium unemployment. Using the basic insights of our model we will explain the well-known Mundell-Fleming model of monetary policy in an open macro model and the policy trilemma.
Lecture 1: Introduction | Lecture 2: Centralized Economy | Lecture 3: Economic Growth | Lecture 4: The Decentralized Economy | Lecture 5: Government: Expenditures and Public Finances | Lecture 6: Fiscal Policy | Lecture 7: Equilibrium Unemployment Theory | Lecture 7.1: Equilibrium Models of Labor Market | Lecture 7.2: Efficiency | Lecture 7.3: Unemployment Fluctuations | Lecture 7.4: Mismatch | Lecture 8: Open Economy |
“Economics is judged ultimately by how well it helps to understand the world and how well we can help improve it.” – Gary Becker