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Advanced Macroeconomic Analysis II

Alexander Kriwoluzky

Additional information / Pre-requisites

Introduction (Week 1) Lecture 1:

A small sample of macro-history • Required reading: Nakamura and Steinsson (2018)

• Further readings: Friedman and Schwartz (1963); Goodfriend and King (2005); Mussa (1986); Antol´ in-D´ iaz and Rubio-Ram´ irez (2018)

Exercise 1: Introduction to MATLAB Monetary policy (Week 2 and 3)

Lecture 2: Definition and effects of monetary policy shocks • Narrative monetary policy shocks: Romer and Romer (2004); Coibion (2012); Ettmeier and Kriwoluzky (2019) • High-frequency shocks: Gertler and Karadi (2015); Altavilla et al. (2019); Swanson (2021) • Central bank information shocks: Jaroci´ nski and Karadi (2020); Miranda Agrippino and Ricco (2020); Bauer and Swanson (2023)

Exercise 2: Monetary policy shocks and local projections • Narrative monetary shocks in local projections: Ramey (2016); Jord`a (2005)

Lecture 3: Transmission channels of monetary policy • Interest-rate channel in New-Keynesian models: Walsh (2010); Gal´ i (2015) • Bank-lending channel: Gertler and Karadi (2011); Altavilla et al. (2020) • Redistribution channel: McKay and Wolf (2023); Amberg et al. (2022); Kaplan et al. (2018); Coibion et al. (2017); Cardoso et al. (2022); Pallotti (2022) • Energy-price channel: Ider et al. (2023)

Exercise 3: Proxy-SVAR model with monetary policy and energy price shocks • Proxy-SVAR models: Mertens and Ravn (2013) • Energy price shocks: K¨anzig (2021) 2 Fiscal policy (Week 4 and 5)

Lecture 4: Fiscal policy shocks and its multiplier • Timing restrictions on fiscal policy shocks: Blanchard and Perotti (2002); Auerbach and Gorodnichenko (2012) • Pre-announcement and Non-invertibility of a VAR model: Ramey (2011); Kriwoluzky (2012) • Narrative fiscal shocks on proxy VAR models:Ramey (2011); Born et al. (2020) • State-dependent fiscal multiplier: Auerbach and Gorodnichenko (2012, 2014); Ramey and Zubairy (2018); Barnichon et al. (2022) • Regional Multiplier: Nakamura and Steinsson (2014); Chodorow-Reich (2019)

Exercise 4: comparison of Proxy-VAR and local projections • Comparison of both methods: Li et al. (2021); Plagborg-Møller and Wolf (2021)

Lecture 5: Transmission channels of fiscal policy • Transmission channels of fiscal policy: King and Baxter (1993); Gal´ i et al. (2007); Auclert et al. (2018) • Fiscal policy and energy crisis: Bayer et al. (2023) Exercise 5: Introduction to Dynare • Find out more by clicking here Interaction of monetary and fiscal policy (Week 6 and 7)

Lecture 6 (and 7): Fiscal theory of the price level (FTPL) • Introduction of FTPL: Leeper (1991, 2011); Leeper and Leith (2016) • Empirical evidence: Kliem et al. (2016); Ettmeier and Kriwoluzky (2020); Bianchi and Ilut (2017)

Exercise 6: New Keynesian model with monetary-fiscal interaction in Dynare

Comments

Advanced Macroeconomic Analysis II

Summer 2025

Time and venue First part: Wednesdays, 8-12 am

Second part: June 16- June 26

Evaluation Grading in each part will be based on class participation (50%) and a term paper on an original idea based on the methods we have studied in class (50%). A student must pass each part of the class, i.e. achieve a min imum of 50% of the points.

The term paper can be written on topics from either part of the course, but the distribution of topics must be balanced.

Part 1: Monetary & fiscal policy (Alexander Kriwoluzky)

Overview In recent years, monetary and fiscal policy have been at the centre of most political debates. The 2019 pandemic prompted central banks to cut their interest rates quickly, drawing on the lessons of the Great Financial Crisis. At the same time, many governments launched huge stimulus pack ages, leaving many economies with high levels of public debt. In times of low interest rates, high public debt is of little concern to (fiscal) policymakers. The invasion of Ukraine led to a surge in energy prices and thus inflation. Central banks responded by raising interest rates again to fight inflation. This action could have consequences for fiscal policy- and, as the course will show, for monetary policy as well. In this course, we begin by discussing the reasons why monetary and f iscal policymakers have reacted as they have in recent years. To this end, we will identify monetary and fiscal policy shocks and discuss their effects and transmission in the economy. Finally, we will show how they are linked and how they interact

Part 2: Education, Labor Markets and Inequality (Alexander Monge-Naranjo)

Description This course is divided into two parts. First, we cover a number of papers related to education choices, especially but not exclusively related to college decisions. Here, we explore additional aspects such as geographic differ ences, family background and pre-college family decisions, and demographic changes. We overview recent work on cross- and within-country differences in intergenerational mobility in education. Second, we cover a number of quantitative papers on how labor markets and the assignment and formation of workers’ human capital shape inequality. We review some mathematical tools (extreme value distributions) that allow for clean analytical solutions for individual decisions and their aggregation. Then, we analyze a number of papers that use Roy static models to quantitatively explore inequality and the contribution of human capital to aggregate income. Next, we explore a number of more recent–and still ongoing—research that extends those models to dynamic settings and explore the life-cycle dynamics of workers.

Overview 1. Education: Choices, Geography and Outcomes

2. Models of Human Capital Assignment & Inequality