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Macroeconomics I

Home/ Macroeconomics I
Course TypeCourse CodeNo. Of Credits
Discipline CoreSLS2EC1024

Semester and Year Offered:

Course Coordinator and Team: Jyotirmoy Bhattacharya

Email of course coordinator: jyotirmoy@jyotirmoy.net

Pre-requisites: Knowledge of intermediate macroeconomics and mathematical methods at the B.A.(Hons.) level.

Aim: This course will focus on the basic building blocks of dynamic macroeconomics. It will look at the consumption-savings behavior of households an the investment behavior of firms. It will also look at credit and labour market imperfections. Discussion of necessary mathematical methods from dynamic optimization and probability theory will be interwoven with the discussion of macroeconomic issues.

Course Outcomes:

  1. To help students appreciate the logic of how macroeconomics has evolved as a discipline since the mid-twentieth century and to understand why macroeconomics must be studied using dynamic stochastic models.
  2. To enable students to apply the methods of dynamic stochastic optimization to standard problems of macroeconomics.
  3. To enable student to understand the optimal growth paradigm for studying the consumption-saving-investment problem and its empirical performance.

Brief description of modules/ Main modules:

  1. The state of macroeconomics. A review of the development of macroeconomics since the mid-twentieth century.
  2. The Solow model. A study of the Solow model as a simple example of a neoclassical model with capital accumulation.
  3. Differential equations and phase diagrams. Introducing the qualittative study of planar differential equation systems by using phase diagrams to understand the asymptotic behaviour of trajectories.
  4. The Ramsey-Cass-Koopmans model in continuous time. Introduction to neoclassical optimal growth models using phase diagrams. The link between optimal growth and market economies.
  5. The Ramsey-Cass-Koopmans model in discrete time. Neoclassical optimal growth in discrete time. Rigorous proofs of monotonicity and convergence of paths. The Euler equations and transversality condition. Dynamic programming formulation of the problem.
  6. Competitive equilibrium with time and uncertainity. Formulating stochastic dynamic general equilibrium models. Link between optimality and competitivive equilibrium. Analysis and comparison of Arrow-Debreu, sequence and recursive equilibria.

Assessment Details with weights:

Component

Weight

Class test: best two of three

In-class examinations with problems, proofs and reflective questions covering modules 2-3, 4 and 5 respectively.

25% each

End-semester exam

In-class examinations with problems, proofs and reflective questions covering the entire course.

30%

Term paper

A paper of around 3,000 words on either economic history or mathematical/statistical methods relevant to macroeconomics. The paper would have to be based on graduate-level texts, monographs and journal articles but should show the students’ ability to select material and synthesize and apply information from different sources.

25%

 

Reading List:

  • Acemoglu, D. (2009) Introduction to Modern Economic Growth, Princeton University Press.
  • Barro, R.J. and Sala-i-Martin, (2004) Economic Growth, 2nd ed., Prentice Hall India
  • Ljungqvist, L. and Sargent, T.J. (2018) Recursive Macroeconomic Theory, 4rd ed, MIT Press

ADDITIONAL REFERENCE:

  • Woodford, “Revolution and Evolution in Twentieth Century Macroeconomics”, http://www.columbia.edu/~mw2230/macro20C.pdf
  • Blanchard, Olivier. "What do we know about macroeconomics that Fisher and Wicksell did not?." The Quarterly Journal of Economics 115.4 (2000): 1375-1409.
  • Caballero, Ricardo J. "Macroeconomics after the crisis: time to deal with the pretense-of-knowledge syndrome." The Journal of Economic Perspectives 24.4 (2010): 85-102.