Faculty
Mauricio Prado

Course Coordinator
Mauricio Prado

Students are expected to have a basic understanding of macroeconomics and empirical models. Prerequisites within microeonometrics are highly recommended.

The aim of the course is to provide the students with an understanding of short-run fluctuations in macroeconomic variables, i.e., the year-to-year and quarter-to-quarter ups and downs of employment, unemployment and output. In the field Real-Business Cycle, Keynesian, and New-Keynesian theories are used to analyze business cycles founded on different sets of assumptions. The course will provide both a theoretical and an empirical angle on the topic.

The course has a duration of 15 weeks and has one weekly lecture of 2 hours. In some weeks, the class activities will be extended to include student workshops, student presentations in class, and exercises.

The course consists of three parts:

First, theories of short-run fluctuations are studied. The focus is on different underlying reasons for fluctuations to be generated. The analysis of the first part suggests that the behavior of investment, consumption, and the current account is central to business cycles.

This leads to the second part of the course that focuses on determinants of consumption, investment, and the current account.

Finally, we focus on macroeconomic forecasting by studying the construction and use of an empirically based macroeconomic model. One such model could be ADAM by Statistics Denmark.

Students are required to:

· understand different models of short-run fluctuations in macroeconomics and give an account for different assumptions and predictions of the models.

· understand different models of consumption, investment, and current account and give an account for different assumptions and predictions of the models.

· understand and explain different empirical techniques used to test the different models.

· understand and explain models of forecasting of macroeconomic fluctuations.

Four hour written exam with all exam aids allowed.

Romer, David (2006), Advanced Macroeconomics, McGraw-Hill:

· Chapter 2 – Infinite-Horizon and Overlapping-Generations Models, pp. 48-99

· Chapter 4 – Real-Business-Cycle Theory, pp. 174-221

· Chapter 5 – Traditional Keynesian Theories on Fluctuations, pp. 222-270

· Chapter 6 – Microeconomic Foundations of Incomplete Nominal Adjustments, pp. 271-345

· Chapter 7 – Consumption, pp. 346-385

· Chapter 8 – Investments, pp. 386-436

· Chapter 9 – Unemployment, pp. 437-495

Obstfeld, Maurice, and Kenneth Rogoff (1995), The Intertemporal Approach to the Current Account, in Handbook of International Economics, volume 3, Gene M. Grossman and Kenneth Rogoff (eds), North Holland Publishing, Chapter 34, pp. 1732-1799

Baxter, Marianne (1995), International Trade and Business Cycles, in Handbook of International Economics, volume 3, Gene M. Grossman and Kenneth Rogoff (eds), North Holland Publishing, Chapter 35, pp. 1802-1864

ADAM – a Model of the Danish Economy (1995)