Duration
30h Th, 15h Pr
Number of credits
| Master in economics : general (120 ECTS) | 5 crédits |
Lecturer
Language(s) of instruction
English language
Organisation and examination
Teaching in the first semester, review in January
Schedule
Units courses prerequisite and corequisite
Prerequisite or corequisite units are presented within each program
Learning unit contents
The course provides students with an introduction to the dynamic stochastic general equilibrium models (DSGE) of the New Keynesian approach. That approach has emerged as the mainstream framework for the analysis of interactions between monetary policy, inflation and the business cycle. The lectures start with a discussion on the emergence of DSGE models, their advantages and shortcomings, and their use in central banks for forecasting and policy simulation. Empirical stylized facts on the effects on monetary policy are illustrated with the help of Vector Autoregressive models (VAR). Next theoretical foundations are set up and a classical monetary model (similar to the RBC model) is sketched. The theoretical and empirical shortcomings of this model provide a motivation for the introduction of New Keynesian features (monopolistic competition and nominal rigidities) and the development of a basic New Keynesian model. Non-neutrality and optimality of monetary policy are discussed inside this framework. Realistic features such as, among others, habits formation, variable utilization rate of capital and investment adjustment costs, are then added to the basic model in order to characterize the Smets \& Wouters (2003, 2007) model. This model constitutes the backbone of DSGE models used at the IMF, the European Central Bank, the Federal Reserve and many central banks including the National Bank of Belgium. Extensions to financial frictions and zero lower bound issues are covered at the end of the course.
Learning outcomes of the learning unit
The objective of the course is to help students in understanding empirical models (VAR) and the intuition of theoretical models (DSGE) used as tools for macroeconomic and monetary policy design. The course equips students with important tools for solving and estimating models, and analysing their output (e.g. Blanchard-Kahn solution method, impulse-responses functions, historical decomposition,...). Furthermore, practical training sessions will familiarize students with the matlab/octave software and the dynare toolbox, widely used in the academic and central banking communities for handling macroeconomic models.
Prerequisite knowledge and skills
Introductory course in macroeconomics. Basic notions in time series econometrics.
Planned learning activities and teaching methods
Lectures, given primarily through slides, will be complemented by practical training sessions. These training sessions aims at guiding students in completing their home assignments. The home assignments have two objectives: providing students with experience on the practical use of models and monitoring the students' progress in the course.
Mode of delivery (face-to-face ; distance-learning)
face-to-face
Recommended or required readings
(Required) The primary reference book for the course is ``Monetary Policy, Inflation, and the Business Cycle" (Princeton, 2nd edition) by Jordi Gali.
(Recommended) It is complemented by two other references, ``Monetary Theory and Policy" by C. Walsh, and ``Interest and Prices: Foundations of a Theory of Monetary Policy" by M. Woodford.
Assessment methods and criteria
Assignments
Written exam
Work placement(s)
Organizational remarks
Contacts
Tutor: Thomas Lejeune, Thomas.Lejeune@uliege.be
Adaptation of teaching commitments following the COVID-19 pandemic for the May-June 2020 session
Teaching methods implemented : distance-learning
Assessment subjects
Assessment methods
Contacts
Adaptation of teaching commitments following the COVID-19 pandemic for the Aug-Sept 2020 session
Assessment subjects
Material: Same as for the first session in January, that is:
- Lecture 1 to 5: all the slides (available on Lol@)
- Jordi Gali's book (2008 or 2012 version): parts of Chapters "Introduction", "Classical Monetary Model", "The Basic New Keynesian Model", "MP Design in the Basic New Keynesian Model" and "MP Tradeoffs: Discretion vs Commitment" seen in class
- Lecture 6 is not part of the material for the exam
- Documents uploaded on Lol@ for each lecture are support notes, aming at helping the student in the comprehension of the material.
Assessment methods
Oral exam (about 30 minutes per student) via the Collaborate plateform. A link to the Collaborate exam session will be available on the course webpage of Lol@ (http://lola.hec.uliege.be/course/view.php?id=47) before the exam date.
Contacts
Thomas Lejeune <Thomas.Lejeune@uliege.be>