Course Catalogue

Prerequisites
Solid courses in macroeconomics at the Master level, such as Advanced Macroeconomics 1 and 2.
Learning objectives
The objective of this course is to guide students to the frontier of research in macroeconomics that is concerned with inequality and growth, distributions and heterogeneous effects of economic policy.
In the first part of the course, students will get a deep understanding of the empirical facts and the model frameworks underlying the current discussions concerning firm heterogeneity and distribution and growth.
In the second part of the course, students will study macroeconomic research that analyzes how heterogeneity matters for macroeconomic outcomes. They will understand sources of inequality and understand the heterogeneous effects of fiscal or monetary policy. Students will learn the methods to perform policy analysis within this research field in their own research projects.
The goal in this part of the course is to provide an introduction to the macroeconomic literature on heterogeneity across consumers and firms and incomplete markets. At the end of this course, students will understand (i) the methods to build models with heterogeneity and (ii) the methods to test them. Finally, they will be able to solve a dynamic program and to apply the methods to a problem of their interest. The main learning outcomes are that students understand the macroeconomic workhorse models with heterogeneity and incomplete markets, that students can start to write code to solve that model, that students are able to interpret the numerical output and that students are able to evaluate economic policies within that model.
Content
The course covers two important topics in macroeconomics. The first topic is inequality and growth. The second topic is the analysis of heterogeneity and inequality applying dynamic stochastic equilibrium models with incomplete markets. The first part of the lecture focuses on two main questions. First, how does the distribution of income and wealth evolve in a market economy? Under which conditions does the gap between rich and poor people tend to increase or decrease over time? In that context, we review central propositions of Piketty's influential book, "Capital in the 21st century".
Second, we study the impact of heterogeneity (through income inequality or different types of firms) on central economic phenomena: International Trade, economic growth, and structural change. These strands of literature have gained in importance as firm-level datasets have become available. Their results shed new light how much countries gain quantitatively from opening up to trade.
The second part of the lecture introduces students to dynamic stochastic equilibrium models with incomplete markets which have become workhorse models for the analysis of monetary and fiscal policy that account for inequality. Unless one is willing to make very restrictive assumptions about the underlying environment, equilibria in these models need to be approximated numerically by dynamic programming. Students will thus learn some numerical methods required for dynamic programming. We then apply these methods within the macroeconomic workhorse model with incomplete markets.
General information
Please see this website for information on how to participate in the course. Please write to [email protected] and request the form that is needed to register for an individual course participation at the doctoral level.