Economics 5322: Macroeconomic Theory for Applications (UTD)

Spring 2025

Instructor: Camilo Granados
Class Time and Location: Monday 7:00-9:45 PM, CB 1.210
Course Office Hours: GR 2.820, Monday 4:00-6:00 PM or by appointment (in person and on Teams)
Email: Camilo.granados@utdallas.edu
Website: https://cagranados.github.io/msmacro.html

Course Description

This course explores modern theories of macroeconomic fluctuations. The goal is to introduce students to the seminal frameworks of contemporary macroeconomics and equip them with relevant analytical and empirical techniques for understanding advanced macroeconomic analyses. The course will cover topics from the monetary theory of business cycles, monopolistic competition, dynamics of price adjustments, financial frictions, consumption theories and, through group projects, provide students opportunities to explore additional topics such as optimal monetary policy, dynamic stochastic general equilibrium (DSGE) analyses, the COVID-19 or “lockdown” recession, and so on.

Syllabus: [pdf]

Outline:

I. OVERVIEW AND INTRODUCTION

• Business Cycle Empirics
• Aggregate Demand, Aggregate Supply
• Rational Expectations and Micro-Foundations

II. THE REAL BUSINESS CYCLES MODEL

• The frictionless model with efficient private outcomes
• A first approximation to a solution of the model and policy simulations

III. MONETARY THEORIES OF THE BUSINESS CYCLE

• Information Friction Models
• Nominal Rigidity Models & Dynamic Modeling of Price Adjustment
• The micro-founded New Keynesian Phillips Curve and the Aggregate Supply

IV. CONSUMPTION AND AGGREGATE DEMAND

• Modern Consumption Models
• Intertemporal consumption decisions, the Euler Equation, and the Aggregate Demand

V. MONETARY POLICY AND THE BASIC NEW KEYNESIAN MODEL

• Monetary policy frameworks: instrument rules vs. target rules
• Rules versus Discretion and Time Consistency of policy
• Formulation of basic New Keynesian Model, features, limitations, and extensions

VI. FINANCIAL FRICTIONS AND THE MACROECONOMY

• The effect of financial markets in the real macroeconomy
• Amplification of monetary policy transmission mechanism and the external finance premium
• Collateral prices, balance sheets effects, and the financial accelerator

VII. APPLICATIONS AND ADDITIONAL TOPICS IN MACROECONOMICS (To be explored as much as time allows)

• Solution methods in macroeconomics
• Computational applications
• Group presentations

Assignments, Exams and Deadlines

Problem set 0: due date 2/3 [Problem Set]
Problem set 1: due date 2/17 [Problem Set] [code_q2] [hpfilter.m]
Problem set 2: due date 3/3 [Problem Set]
Problem set 3: due date 3/31 [Problem Set]
Problem set 4: due date 4/14 [Problem Set] [Calvo handout] [dynare code]
Problem set 5: due date 4/28 [Problem Set] [code Gali Ch2] [code Gali Ch3]

Midterm 1: 3/10
Final exam: Time TBD (5/5 or final examination week)

Lectures and detailed outline:

(this is updated on a regular basis)

Now: Topic 7 - Final Presentations
Next: Final Exam

Topic 1: [Slides]

Topic 2: [Slides] [RBC simple IRFs]

Topic 3: [Slides]

Topic 4: [Slides]

Topic 5: [Slides]

Topic 6: [Slides]

Technical slides: these slides cover technical details about some of the topics above and software instructions (MATLAB and Dynare)

1: Intro to stochastic processes, time series and MATLAB [Slides]

2: Constrained optimization and monopolistic competition [Slides]

3: Intro to local solution methods and Dynare [Slides]