10173008

SoSe 22: Frictional Labor Markets and the Macroeconomy (V)

Monika Merz

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Frictional Labor Markets and the Macroeconomy

May 11 – 24, 2022 (compact course)

Content & learning objectives

This course is aimed at advanced master level students and beginning doctoral students. It covers the foundations of general equilibrium models that are commonly used in modern macroeconomics. The course presents the basics of dynamic programming, selected timeseries methods and alternative numerical techniques commonly used to solve recursive stochastic models in discrete time. All techniques are illustrated with the help of the neoclassical growth model, and subsequently used for studying dynamic models with frictional labor markets. The goal is to equip students with the tools needed to do independent research in macro and related fields.

This course is taught in a highly interactive fashion and with lots of hands-on practice and ingroup exchange.

Outline

The Lucas‘ critique and ist implications for modern macroeconomics

Primary reading:
Lucas, R.E. 1975. „Econometric Policy Evaluation: A Critique,“ in K. Brunner, A. Meltzer, eds., The Phillils Curve and Labor Markets, North Holland.
V.V. Chari 1998. “Nobel Laureate Robert E. Lucas, Jr.: Architect of Modern Macroeconomics,” Journal of Economic Perspectives, 12:171-186.

(Recursive) competitive equilibria with complete markets - applications

Primary reading: LS ch. 8 and 12.

The Neoclassical Growth Model

Social Planner’s Version
The Neoclassical Growth Model – Competitive Equilibrium Version
The Neoclassical Growth Model – Alternative Representations

An introduction to dynamic programming plus applications

Primary reading: LS ch. 3 and 4
Bellman principle of optimality
Contraction mapping
Benveniste-Scheinkman

More tools for studying dynamic stochastic general equilibrium models

Primary reading: MF ch. 6.2
Tauchen, G. 1986. "Finite-state Markov-chain approximations to univariate and vector autoregressions," Economics Letters 20:177-181.
Markov chains with applications
Chebychev polynomial approximations

Frictional labor markets in macroeconomics

Primary reading: LS ch. 6
McCall’s search model
Diamond-Mortensen-Pissarides with business cycles
Fernandez-Villaverde, F. et al., JME 2021

Lecturer: Prof. Monika Gehring-Merz (Universität Wien)

Eligibility: Master Economics, Master Public Economics (6LP)

Registration: Campus Management

Exam: The course grade is based on a final exam (100%). Students can collect extra credit by solving and submitting the practice problems (20%). Fifty percent of all possible points are required for passing.

Course language: English

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Literaturhinweise

Ljungqvist, L., T. Sargent 2018. Recursive Macroeconomic Theory, 4th edition, Boston (MIT-Press). Abbreviated as LS
Miranda, M., P.L. Fackler 2002. Applied Computational Economics and Finance, Boston (MIT-Press). Abbreviated as MF
Additional journal articles.

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