MACROECONOMICS 1

Why are some countries rich and others poor? What types of countries grow more rapidly? Why do certain societies fail to improve their technologies? Why do economies undergo significant short-run variations in output and employment? This course will introduce students to these major questions and to the theoretical, mathematical, and conceptual tools necessary for answering them. The presentation of the theories will be supplemented with examples of relevant empirical works and policy implications.

Students will get a graduate-level introduction to economic theories, models, and empirical evidence on modern macroeconomics. By the end of the course, students will be able to outline and manipulate several workhorse models, derive and analyze the relevant policy conclusions implied by them, and refer to the available evidence. Moreover, students will be familiar with the conceptual and mathematical foundations of modern macroeconomics analysis.

The technical prerequisite is the knowledge of the mathematical tools presented in an undergraduate course in Mathematics (i.e. multiple-variable functions, derivatives, static optimization, integrals, matrix algebra – see for example Angel de la Fuente’s “Mathematical Methods and Models for Economists” by Cambridge University Press) and Probability (i.e. expected values, variances, independent and identically distributed random variables). Students may find it useful to be familiar with any undergraduate-level book in macroeconomics (e.g. Mankiw’s “Macroeconomics” by Worth or Blanchard’s “Macroeconomics” by Pearson).

We will try to cover the following topics:

1. Growth Facts – we will start with a quick look at some basic facts about economic growth and evidences on cross-country income differences
2. The Solow-Swan Model – we will develop a framework to think about causes and mechanics of the process of economic growth and cross-country income differences
3. Neoclassical Growth Model – we will analyse the Ramsey model, while introducing the mathematical and conceptual foundations of modern macroeconomic analysis (e.g. preferences, transversality conditions, optimal control);
4. Endogenous Growth Models – we will talk about the role of human capital in fostering growth and start considering models of endogenous growth, like the AK model and Romer’s model of expanding variety
5. Overlapping Generations Models – we will depart from the representative household assumption and introduce a model where different agents arrive over time; we will use this framework to think about e.g. the role of money and social security
6. Equilibrium Growth Under Uncertainty – we will turn our attention to the short-run and focus on economic fluctuations, through the Brock-Mirnan and the Real Business Cycle models
7. International Macroeconomics - analysis of international capital flows and exchange rate fluctuations in modern open economy frameworks

If time allows, we will also cover Equilibrium Unemployment Theory and Neoclassical Growth Models with natural resources.

Main reference books are:
• Barro, R. J., and Sala-i-Martin, X. Economic Growth, MIT Press.
• Acemoglu, D. Introduction to Modern Economic Growth, Princeton University Press.
• Romer, P. Advanced Macroeconomics, McGraw Hill.

During the classes, additional research academic publications and book chapters will be suggested and provided in Moodle.

In the course of the academic year, there will be four exam sessions. The first session, which takes place during the first semester, is articulated in a midterm written exam (worth 50% of the final mark) on the contents covered in the first part of the course and a final written examination (worth 50%) on the contents covered in the second part of the course; the final mark will be the weighted average of the two exams. PhD students and QEM-JD students must take the exam in the first session in mid December; the first session is also open to everyone else. The remaining sessions (Jan – Sep) consist of a single written examination on the full contents covered in the course. All exams have the same structure: 2 questions, each worth 50%, to be answered in 90 minutes; in the Jan – Sep sessions, the first question will be on the first part of the course and the second question will be on the second part of the course. In case of doubt of cheating during the exam, you may be asked to perform an additional oral examination.

written

The lecturer has a duty to ensure that the rules regarding the authenticity and originality of exam tests and papers are respected. Therefore, if there is suspicion of irregular conduct, an additional assessment may be conducted, which could differ from the original exam description.

Each question is worth 15 points. A maximum grade of 30/30 is achieved by answering both questions correctly, including all sub-points. Each sub-point carries a specific score, and the final grade will be calculated as the sum of the points earned for correct answers. Honors will be awarded for exceptional answers. Every student has the chance to earn two extra points by submitting homeworks (2 for the first part, 2 for the second part, each homework is worth 0 or 0.25 or 0.5 points). These extra points will be added only to the midterm and final exams of the first session.

There will be three two-academic-hour classes per week for ten weeks, for a total of 60 academic hours. Classes will usually consist of frontal lectures, discussions, and practical sessions based on take-home tutorials.

The course will be divided into two modules, each lasting 5 weeks. The first module will be taught by Prof. Enrica De Cian. The second module will be taught by Prof. Francesco Pappadà.
The first module will cover the following topics: exogenous growth, endogenous growth, models with natural resources;
The second module will cover the following topics: overlapping generations models, the theory of unemployment equilibrium, international macroeconomics.

This subject deals with topics related to the macro-area "Poverty and inequalities" and contributes to the achievement of one or more goals of U. N. Agenda for Sustainable Development