Advanced Economic Policy

Course objective

The course is a primer on optimal macroeconomic policies and stabilization. Moving from basic theories and evidence on business cycle, it discusses the costs and benefits of stabilization according to different economic theories. The main policy prescriptions of these theories are explored revising some keynote contributions and models in the Real Business Cycle and New Keynesian traditions. Final considerations address the actual role of both fiscal and monetary stabilization policies in Europe. Methodologically, most of the analysis will make use of dynamic general equilibrium models (DSGE). The course content and methodology are thought to provide students with those basic knowledge and skills that are currently required both by public and private institutions involved in the analysis and prediction of macro dynamics (e.g. central banks, fiscal and financial authorities, financial supervisory agencies, environmental agencies, commercial banks, etc.).

Summary of the course content

  1. Introduction to the debate on macro stabilization policies.
  2. Foundations of business cycle theories and (DSGE) modeling: Real Business Cycle and New Keynesian contributions.
  3. Traditional macro stabilization policies and optimal policy rules: discretion versus rules.
  4. Optimal fiscal and monetary rules.
  5. Basic toolkits for solving dynamic models, analyzing their dynamics and simulating policy interventions.
  6. Business cycle stabilization at work: recent experiences and policy debate in the EU and abroad.
  • Detailed course program

    • Textbooks & mandatory readings

  • Lecture notes (below) are also considered mandatory material.
    • Other reference material, including computer codes, will be distributed during the course and are mostly contained in the Detailed course program above.

    Readings

    Course organization

    Recitations

    Lecture notes

  • Foundations of Neoclassical Macroeconomics (part 1- OK) (Slides)
  • Foundations of Neoclassical Macroeconomics (part 2- OK)
  • Foundations of Neoclassical Macroeconomics (part 3- OK)
  • Foundations of Neoclassical Macroeconomics (part 4- OK )
  • Foundations of Neoclassical Macroeconomics (part 5- OK )
  • A toolkit on linear difference equations
  • Slides on Italian fiscal policy
  • On fiscal sustainability (lecture notes in Italian)
  • A simple, New Keynesian model for monetary policy (lecture notes in Italian)

    • More course material

  • Errata corrige Wickens' textbook (careful lot's of other typos!)
  • Business cycle and growth figures (USA old data from King & Rebello (1999))
  • Business cycle and growth figures (Italy 1991-2011)
  • OCSE Confidence Leading Indicators (Business Cycle)
  • Hodrick-Prescott filter (HP) (Excell add-in)
  • How to install HP filter add-in in Excell 2007 or later vers.

    • Problem set

  • Problem 1 (text)
  • Problem 2 (text)
  • Problem 3 (text)
  • Problem 4 (text)

    • Present economic policy debate

  • CEPR - Center for Economic Policy Research
  • VOX Europe
  • Lavoce.info

    • Some useful data sources

  • Eurostat
  • OCSE web page (macro data etc.)
  • ISTAT - Italian data
  • ISTAT - Italian (long) time series
  • AMECO annual macroec. database of the European Commission
  • More facts and data on business cycle (USA)
  • Economagic - US macroec. data

    • Practice exam

  • Text
  • Solutions


    • A mid-term exam for students regularly attending classes is scheduled on April 12, 2012.
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