Advanced Macroeconomics

Short Description
With the ultimate aim of understanding the causes and consequences of fluctuations in macroeconomic activity, this course sets out the micro-foundations of modern macroeconomic theory by analyzing the optimizing choices of households, firms and the government in the markets for goods, labour, capital and public bonds. This is achieved in a general equilibrium framework by examining the interaction in all markets simultaneously.

Course Aims
The aims of this course are to:
- Understand the causes and consequences of fluctuations in macroeconomic activity using a micro-founded theory which analyzes the optimizing choices of households, firms and the government in the markets for goods, labour, capital and public bonds.
- Appreciate how each market interacts such that market clearing equilibrium prices and quantities can be solved for simultaneously.
- Learn the mathematical, numerical and graphical tools to undertake the above analysis.
- Apply the theoretical and analytical tools to a variety of real world examples including: productivity policy and growth; moral hazard and unemployment benefits; economic rents and corruption; unemployment benefits as insurance; taxes and employment policy; regulation of airlines, oil and pollution; immigration waves and rural-urban migration; savings rate, permanent income and the debt crisis; capital market regulation; and policies to foster capital market trade.

Intended Learning Outcomes of Course
By the end of this course, students should be able to:
- Specify the behaviour of households, firms and the public sector in the key markets comprising modern general equilibrium macroeconomic models.
- Model both representative and heterogeneous households based on their preferences, constraints and endowments.
- Model the representative firm based on its profit motives and technological constraints.
- Solve a general equilibrium model at the steady-state taking into account the simultaneous interaction of multiple agents in multiple markets.
- Understand the motives, constraints and consequences of government policy.
- Undertake simple and constrained optimization in static framework.
- Conduct dynamic optimization using the Lagrangian and dynamic programming methods.
- Solve systems of equations analytically, graphically and numerically.
- Graph the primitive functions and optimality conditions occupying the various models studied in a spreadsheet or in a math package such as Matlab or Maple.