NDAB21001U Macroeconomics B (MakØkB)

Volume 2021/2022
Education

BSc Programme in Computer Science and Economics

Content

The course deals with macroeconomic theory and empirics for the short run.

It integrates the computer mainly through numerical solution techniques.

First, the course reintroduces the theoretical distinction between macroeconomics for the long run and macroeconomics for the short run. The stylized facts for the short run are presented.

Next, the course presents the rationale for nominal price and wage rigidities informally.

It then presents theories and empirics for aggregate investment, aggregate consumption and monetary policy leading to the aggregate demand (AD) curve. After that, the course presents a theory for aggregate supply and the Phillips curve leading to the aggregate supply (AS) curve, at this stage without involving expected future inflation.

Next, the course presents basic AS-AD models with output and inflation as the endogenous variables and within this framework presents the theory of stabilization policy for closed as well as open economies.

Some of the models are analyzed by stochastic simulation on the computer.

After that, the theory of nominal and real price rigidities is presented more formally including so-called Calvo price setting, which leads to the AS-curve involving expected future inflation (the New Keynesian Phillips Curve).

This leads naturally further on to the canonical, modern new Keynesian model, which is an example of a Dynamic Stochastic General Equilibrium-model. This model is analyzed by numerical solution methods on the computer.

Learning Outcome

Knowledge of

  • The stylized empirical facts about business cycles;
  • The rationale for nominal rigidities of prices and wages; 
  • The short run macroeconomic fluctuations around the long run trend;
  • The most important macroeconomic theories about private consumption and investment;
  • The most important macroeconomic theories about monetary policy, aggregate demand, the inflation process, Phillips curves and aggregate supply;
  • The equilibrium mechanisms of the theoretical macroeconomic models for closed and open economies covered by the course;
  • The dynamic mechanisms that pull the economy towards its long-run growth trend;
  • The impulses that initiate business cycles and the economic propagation mechanisms that give business cycles their systematic properties.
     

Skills in

  • Reflecting about the most important criticisms of the key assumptions underlying the models presented and how these affect the modelsʼ predictions;
  • Selecting and applying dynamic macroeconomic models, deterministic or stochastic, of the types covered by the course;
  • Conducting an analysis of a specific macroeconomic stabilization problem within modelling frameworks as known from the course;
  • Applying the most important macroeconomic theories for private consumption, private investment and the inflation process;
  • Assessing the key mechanisms for the determination of exports and imports in a small open economy and the role of the exchange rate in this;
  • Assessing pros and cons of a fixed vs. a floating exchange rate;
  • Assessing the social costs of business cycles and the gains and costs of macroeconomic stabilization policy. 

 

Competences in

  • Conducting an independent macroeconomic analysis of a relevant problem with outset in theoretical models as known from the course;
  • Confronting theoretical macro models with empirical facts and on ths background be able to assess the models' applicability in various connections;
  • Working systematically and consistently with dynamic macroeconomic models;
  • Deducing specific implications and results and assessing and discussing these in specific macroeconomic problems based on relevant theoretical macroeconomic analysis.

See Absalon when the course is set up.

The curriculum might contain:

Peter Birch Sørensen and Hans Jørgen Whitta-Jacobsen, Introducing Advanced Macroeconomics: Growth and Business Cycles, McGraw-Hill or OUP, latest edition.
David Romer, Advanced Macroeconomics, McGraw-Hill, latest edition.
Jordi Gali, Monetary Policy, Inflation and the Business Cycle: An Introduction to the New Keynesian Framework, Princeton University Press, latest edition.

Prerequisites equivalent to the courses: Introduktion til Økonomi, Matematisk Analyse, Mikroøkonomi A, Makroøkonomi A, Grundlæggende Statistik og Sandsynlighedsregning, Numerisk Analyse samt Økonometri A and B.
3x2 hours of lectures and 2x2 timers of classes each week for 7 weeks.
  • Category
  • Hours
  • Lectures
  • 42
  • Preparation
  • 112
  • Theory exercises
  • 28
  • Exam Preparation
  • 20
  • Exam
  • 4
  • Total
  • 206
Oral
Collective
Continuous feedback during the course of the semester
Credit
7,5 ECTS
Type of assessment
Written examination, 4 hours under invigilation
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Aid
Without aids
Marking scale
7-point grading scale
Censorship form
No external censorship
Several internal examiner
Re-exam

Same as the ordinary exam. 

If less than 10 students register for the re-exam, the re-exam will be a 30 minutes oral exam (including grading without preparation) with written aids only (no electronic aids).

Criteria for exam assesment

See Learning Outcome.