AØKA08207U Summerschool Theoretical and Empirical Foundations of DSGE Modeling (F)

Volume 2014/2015
Education

MSc in Economics
The course is part of the Financial line symbolized by "F".

Content

We will focus on the construction, solution and empirical validation of dynamic stochastic general equilibrium (DSGE) macroeconomic models.

The first week of the course will be centered around the formulation and solution of DSGE models.

We will first review the baseline structure of the Real Business Cycle model and the New Keynesian model.

We will next consider some recent extensions to these baseline settings. In particular, we will study examples of DSGE models with financial frictions, where households and/or firms have limited access to credit markets, so that fluctuations in the price of their collateral, e.g. their house, affects their borrowing capacity.

There will be afternoon classes designed to acquaint participants with the numerical analysis of DSGE models. During the second week there will be lectures and classes aimed at reviewing various methods employed to validate DSGE models. Finally, a guest lecture will be provided by Jesper Pedersen (Danmarks Nationalbank), on the structure and estimation of the DSGE model of the Danish economy.

Learning Outcome

After the course the student should:

- Have knowledge of the key building blocks of dynamic stochastic general equilibrium (DSGE) models.

- Be able to formulate, solve and analyze small-scale DSGE models.

- Be able to interpret formal results obtained from the analytical and numerical analysis of DSGE models, reporting them in economic and intuitive terms.

- Be able to perform monetary policy analysis in the baseline New Keynesian model.

- Have knowledge of the main empirical methodologies used to validate DSGE models.

- Have a basic understanding of how DSGE models are implemented for both business cycle and normative analyses at modern monetary institutions.

Syllabus:

The course will cover topics taken from the following two textbooks: 1. Jordi Galí (2008): Monetary Policy, Inflation, and the Business Cycle. Princeton University Press. 2. Carl. E. Walsh (2010): Monetary Theory and Policy. Third Edition, The MIT Press. In addition, some recent research articles will be studied. Slides and these articles will be made available at the course webpage.

Familiarity with intertemporal optimization, the analysis of static and dynamic systems under rational expectations and basic multivariate econometrics.
Formal Requirements: no formal requirements.
3 hours of lectures 9.00-12.00 and 2 hours of classes 14.00-16.00 every workday.
  • Category
  • Hours
  • Class Exercises
  • 20
  • Exam
  • 24
  • Lectures
  • 30
  • Preparation
  • 132
  • Total
  • 206
Credit
7,5 ECTS
Type of assessment
Written assignment, 7 days
The exam is a 7 days take-home assignment.
Aid
All aids allowed
Marking scale
7-point grading scale
Censorship form
External censorship
100 % censurship
Exam period

11.th of July from 10 AM to 18.th of July 2015 10 AM (not the 17.th as announced before)

Re-exam

Same as ordinary. But if only a few students have registered for the re-exam, the exam might change to an oral exams with a synopsis to be handed in. This means that the examination date also will change.

Criteria for exam assesment

The student must in a satisfactory way demonstrate that he/she has mastered the learning outcome of the course.