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University of Alberta Department of Economics Monetary Economics I (540-A1)
Winter-2021
Instructor: Malik Shukayev Remote office hours:
Mon 15:30-16:30, Fri 14:00–15:00, or by appointment
Email: [email protected] Class Times: M,W, 14:00–15:20 Delivery: combination of videos and synchronous live lectures
Please note that some live lectures for this course will be recorded. Recordings of this course will be used for the purposes of allowing students enrolled in the course to review the material and will be disclosed to other students. Students have the right to not participate in the recording and are advised to turn off their cameras and audio prior to recording; they can still participate through text- based chat. It is recommended that students remove all identifiable and personal belongings from the space in which they will be participating. Recordings will be made available until April 30, 2021 and accessible on eClass. Please direct any questions about this collection to the professor of this course, Malik Shukayev.
Course Objectives
This is a graduate-level course which focuses on the analysis of monetary policy in Dynamic Stochastic General Equilibrium (DSGE) models of the economy. We will start with basic real business cycle (RBC) models in order to introduce some technical issues in the simplest way possible. For these models we will be: deriving the dynamic equation systems; de-trending these equations; discussing various solution methods; calibrating the parameters using macroeconomic data; simulating; and comparing our simulations with the data. I will provide detailed lecture notes for these introductory topics, which will also help you complete your first homework on log-linearized solutions of RBC models. I will also show some data sources and provide Matlab codes for these simulations. After building (or refreshing) these foundations, we will be studying increasingly advanced monetary DSGE models in published articles or working papers. In studying those models our objective will be to replicate to the extent possible some of the simulations in those papers. We will be using Dynare and IRIS software packages to solve and simulate these models. My strategy will be to give you homework assignments based on those papers in advance of my lectures on the same topics. This way I hope to create more stimulating learning experience. You will also be asked to do a team course project in which you will try to code and simulate a DSGE model from a recent paper of your choice. I will expect a brief (but nice and clear) report on your work and working codes from every team. All groups will be asked to present their projects during the last few lectures.
2 Prerequisites
The prerequisites for this course are ECON 481 and ECON 482, which are strictly enforced by the department.
Recommended textbook
Jordi Galí (2015) “Monetary Policy, Inflation, and the Business Cycle: An Introduction to the New Keynesian Framework” Second edition. This is a recommended textbook for this
class available from Princeton University Press http://press.princeton.edu/titles/10495.html. The first edition of this book should also be
fine.
Communication inside and outside the class
• We will use a combination of live Zoom lecture sessions and pre-recorded lecture videos. Live Zoom sessions will take place during our regular class time.
• I will use eClass to post announcements, lecture notes, answer keys, review questions and pre-recoded lecture videos. Detailed lecture notes will not be provided. eClass can be accessed via the https://eclass.srv.ualberta.ca/portal/
• You are welcome to talk or chat to me via ZOOM, in groups or individually, during office hours listed at the top of this page. I am also available at other times by appointment, but would prefer to see you during my office hours, because I might be busy with other classes or responsibilities.
• I will try to respond to your e-mail messages within 24 hours. Typically, I may not be able to respond to your requests immediately.
Course evaluation and important dates
The final grades will be based on: 3 homework assignments (15% each), midterm exam (20%), team course project (15%) and the final exam (20%).
All groups will have a chance to present their team course project (30 min presentation with questions) during the last few lecture meetings. Each team should have 2 or 3 members.
Challenge Weight in the final grade Tentative due date
Assignment 1 15% Wed, January 27
Assignment 2 15% Wed, February 10
Midterm Exam 20% Wed, February 24
Assignment 3 15% Wed, March 10
Course project report 15% Monday, April 12
Final exam 20% To be confirmed
Total 100%
3 Software tools
We will be working extensively with Matlab codes. Some of our Matlab codes will be created using Dynare and IRIS software packages. Both Dynare and IRIS are freely available for download. I encourage you to check http://www.dynare.org/ and https://iris.igpmn.org/ for user guides, manuals and extensive libraries of detailed modeling examples.
Computer Equipment, Audio Visual Devices, and Wi-Fi System Requirements
This course will be delivered entirely online. You will be asked to do online Exams via eClass.
So you need a reliable access to eClass, which would not drop your connection during exams.
You also need a good webcam which would allow me seeing you well during presentations and exams. So a good upload speed and a microphone will be needed. See also the following System requirements link for more details https://www.ualberta.ca/information-services-and- technology/services/software-hardware-vendors/technology-requirements.html
In case you are having difficulties accessing the UofA email account, there is an alternative access. According to IST, it should work from abroad. Details are available here:
https://www.ualberta.ca/information-services-and-technology/services/email-calendaring/index.html Tentative Outline and Reading list
1. Intro to RBC models: de-trending and calibrating the Solow growth model.
Lecture notes and Matlab codes will be provided. We will also have a MATLAB tutorial via Zoom.
2. Intro to RBC models: Ramsey growth model. Lecture notes and Matlab codes will be provided.
3. Log-linearized solution of RBC model. Based on Lau and Ng (2004) and on my extended answer key to Homework Assignment 1.
4. VAR evidence on the effects of monetary policy shocks. Based on Chapter 1 of Galí (2015). IRIS codes to be provided. We will also have an IRIS tutorial in a computer lab.
5. Money in the Utility model (MIU). Based on Chapter 2 of Jordi Galí (2015).
6. Basic New-Keynesian model. Based on Peter N. Ireland (2004) and on my answer key to Homework Assignment 2. Additional material: Bauer, Haltom, Rubio-Ramirez, (2003).
7. New-Keynesian model with Calvo-type nominal rigidities and trend inflation.
Based on chapter 3 of Galí (2015) and on Drago Bergholt (2012) derivation notes.
8. Monetary Policy analysis in the New-Keynesian model. Based on Clarida, Galí, and Gertler (1999) and on Chapter 4 of Galí (2015).
9. Real-financial linkages and monetary policy. Based on Christensen & Dib (2008) and on my extended answer key to Homework Assignment 3.
10. Small open economy models. Based on Schmitt-Grohe & Uribe (2003).
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11. Exchange rates in small open economies. Based on Burstein, Eichenbaum &
Rebelo (2007).
Please note:
• The assignments will be distributed about a week before they are due and must be submitted to me electronically by 10:00 AM on the due date. No late
assignments will be accepted. If you send your assignment by email, I must have a complete version by 10:00 AM as well.
• You may work on your assignments and the course project in groups and submit only one report per group. Please write all of your group members on your
assignment's first page so that it's easier to grade them.
• In your assignments make sure to clearly answer the questions posed. I need to see answers to my questions before I can give you any credit.
• Class attendance will not count toward your grade, but I encourage you to attend my live lectures because I may discuss solutions to the assigned problem sets or stress important topics during classes.
• You will not have make-up exams, or extra credit essays. In case you miss the midterm exam for health, or other exceptional reasons, its weight will be
transferred to the final exam. The exceptional reasons for missing the midterm exam must be substantiated with a "Request for Deferral of Term Work" form (here on the Arts Intranet). For students who miss a midterm exam, the final exam might be different than that written by the rest of the class.
University policy statements
• “Policy about course outlines can be found in the Evaluation Procedures and Grading System section of the University Calendar.”
• “The University of Alberta is committed to the highest standards of academic integrity and honesty. Students are expected to be familiar with these standards regarding academic honesty and to uphold the policies of the University in this respect. Students are particularly urged to familiarize themselves with the provisions of the Code of Student Behaviour (online at
www.governance.ualberta.ca) and avoid any behaviour which could potentially result in suspicions of cheating, plagiarism, misrepresentation of facts and/or participation in an offence. Academic dishonesty is a serious offence and can result in suspension or expulsion from the University.”
http://www.ualberta.ca/current-students/academic-resources/academic-integrity
