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Professor Lawrence Christiano will teach the course.
Primarily aimed at participants in the Euro Area Business Cycle Network, but applications will also be considered from doctoral students and post-doctoral researchers and economists working for commercial organisations (for which a fee will be charged).
The course will consist of five days of lectures (approximately 6 hours per day). The objective is to discuss the construction and use of dynamic stochastic general equilibrium (DSGE) models in the analysis of monetary policy. We will begin with the estimation of DSGE models, with a special focus on the role that estimated VARs can play. We will discuss various features that appear in modern DSGE models: sticky prices, sticky wages, adjustment costs in investment, a banking sector, multiple monetary aggregates, financial frictions, search and matching models of unemployment and open economy considerations. We will then discuss the application of estimated DSGE models to the analysis of several policy questions: Does a low nominal interest rate expose the economy to special risks? What is the appropriate response of monetary policy in the aftermath of a financial crisis? How should monetary policy respond to the stock market?
The course is targeted at a range of people. A set of assignments has been prepared to give students hands-on experience estimating VARs, as well as solving, simulating and analyzing DSGE models. Assignments will use MATLAB and Scientific Workplace but familiarity with these programmes will not be assumed.
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