Time and Venue
Wednesday, 8 am - 12 am, Venue tba

Grading
The grade in the class consists to 30 % of presentation of homework in the
class and to 20 % of class participation. In the end, every student is asked
to write a term paper. The term paper should address a research question
with one of the methods we have covered in the class. It does not have to
be very innovative, e.g. it could be to redo an existing paper with another
dataset or an updated data set. The term paper will count for 50 %.

Advanced Macroeconomic Analysis II
Part 1 - Prof. Dr. Alexander Kriwoluzky - Monetary and Fiscal Policy
Aim
The analysis how monetary and fiscal policy affect the economy is a core area
of economics. The policy response during the pandemic is a point in case:
while the Federal Reserve has cut its target rate drastically, the ECB has
adopted the Pandemic Emergency Purchase Programme. At the same time
did the EU countries agreed on a 750 billion Euro recovery fund. Recently,
the U.S. government has even passed a 1.9 trillion Dollar stimulus package.
What will be (and have been) the consequences of these policy measures?
This course aims at enabling students to analyze the effects of monetary
and fiscal policy. Therefore, a focus of the class will be the hands-on part.
In these parts, students will implement the tools themselves in Matlab and
Stata.

Overview
Lecture 1
Monetary policy and narratives (Nakamura and Steinsson (2018b))
Narrative evidence on non-neutrality of monetary policy (Friedman and
Schwartz (1963); Goodfriend and King (2005); Mussa (1986))
Narrative identi cation of monetary policy shocks (Romer and Romer
(2004); Coibion (2012); Ettmeier and Kriwoluzky (2019))
Narrative monetary shocks in local projections (Ramey (2016); Jord a
(2005))
Further readings:
Eichengreen (1992); Eggertsson (2008); Antol n-D az and Rubio-Ram rez
(2018); Kilian (2009); Schreft (1990)
Taylor (1993); Christiano et al. (1999); Uhlig (2005); Arias et al. (2019)
Plagborg-M ller and Wolf (2021)
 

Lecture 2
Monetary policy and high-frequency identi cation
High-frequency shocks - conventional and unconventional monetary
policy (Gertler and Karadi (2015); Altavilla et al. (2019); Swanson
(2021))
Information shocks (Jaroci nski and Karadi (2020); Miranda-Agrippino
and Ricco (2020))
State-dependence of monetary policy (Tenreyro and Thwaites (2016))
Further readings:
Kliem and Kriwoluzky (2013)
Gurkaynak et al. (2005); Barakchian and Crowe (2013)
Nakamura and Steinsson (2018a); Bauer and Swanson (2020)

Lecture 3
Channels of monetary policy
Interest-rate channel in New-Keynesian models (Walsh (2010))
Bank-lending channel (Gertler and Karadi (2011); Altavilla et al. (2020))
Redistribution channel (Auclert (2019); Kaplan et al. (2018); Coibion
et al. (2017); Bartscher et al. (2021))
Further readings:
Smets and Wouters (2003, 2007)
Andersen et al. (2020); Kuhn et al. (2020)
Fagereng et al. (2020)
 

Lecture 4
Fiscal policy, narratives, and transmission channels
Timing restrictions on scal policy shocks (Blanchard and Perotti (2002);
Auerbach and Gorodnichenko (2012))
Pre-announcement and Non-invertibility of a VAR model (Ramey (2011);
Kriwoluzky (2012))
Narrative scal shocks on proxy VAR models (Ramey (2011))
State-dependent scal multiplier (Auerbach and Gorodnichenko (2012,
2014); Ramey and Zubairy (2018); Barnichon et al. (2017))
Transmission channels of scal policy (King and Baxter (1993); Gal
et al. (2007); Auclert et al. (2018); Hagedorn et al. (2019))
Regional Multiplier (Nakamura and Steinsson (2014); Chodorow-Reich
(2019))
Further readings:
Leeper et al. (2013)
Mertens and Ravn (2013); Gechert et al. (2021)
Born et al. (2019); Bernardini et al. (2020); Gabriel et al. (2021); Barnichon
et al. (2017)
Christiano et al. (2011)
 

Lecture 5
Fiscal theory of the price level
Introduction of FTPL: Leeper (1991, 2011); Leeper and Leith (2016)
Empirical evidence: Kliem et al. (2016); Ettmeier and Kriwoluzky
(2020)
Further readings:
Bianchi and Ilut (2017); Bianchi et al. (2020)

Altavilla, C., Brugnolini, L., Gurkaynak, R. S., Motto, R., and Ragusa,
G. (2019). Measuring euro area monetary policy. Journal of Monetary
Economics.
Altavilla, C., Canova, F., and Ciccarelli, M. (2020). Mending the broken
link: Heterogeneous bank lending rates and monetary policy pass-through.
Journal of Monetary Economics, 110.
Andersen, A. L., Johannesen, N., J rgensen, M., and Peydr o, J. L. (2020).
Monetary Policy and Inequality.
Antol n-D az, J. and Rubio-Ram rez, J. F. (2018). Narrative sign restrictions
for SVARs. American Economic Review.
Arias, J. E., Caldara, D., and Rubio-Ram rez, J. F. (2019). The systematic
component of monetary policy in SVARs: An agnostic identi cation
procedure. Journal of Monetary Economics, 101.
4
Auclert, A. (2019). Monetary policy and the redistribution channel. Ameri-
can Economic Review.
Auclert, A., Rognlie, M., and Straub, L. (2018). The Intertemporal Keynesian
Cross. National Bureau of Economic Research.
Auerbach, A. J. and Gorodnichenko, Y. (2012). Measuring the output responses
to scal policy. American Economic Journal: Economic Policy.
Auerbach, A. J. and Gorodnichenko, Y. (2014). Fiscal Multipliers in Recession
and Expansion. In Fiscal Policy after the Financial Crisis.
Barakchian, S. M. and Crowe, C. (2013). Monetary policy matters: Evidence
from new shocks data. Journal of Monetary Economics, 60(8):950{966.
Barnichon, R., Debertoli, D., and Matthes, C. (2017). Understanding the
Size of the Government Spending Multiplier: It's in the Sign. Federal
Reserve Bank of Richmond Working Papers, 17(15):1{53.
Bartscher, A. K., Kuhn, M., Schularick, M., and Wachtel, P. (2021). Monetary
Policy and Racial Inequality. SSRN Electronic Journal.
Bauer, M. and Swanson, E. T. (2020). The Fed's Response to Economic
News Explains the `Fed Information E ect'. SSRN Electronic Journal.
Bernardini, M., De Schryder, S., and Peersman, G. (2020). Heterogeneous
government spending multipliers in the era surrounding the great recession.
Review of Economics and Statistics, 102(2).
Bianchi, F., Faccini, R., and Melosi, L. (2020). Monetary and Fiscal Policies
in Times of Large Debt: Unity is Strength. SSRN Electronic Journal.
Bianchi, F. and Ilut, C. (2017). Monetary/Fiscal policy mix and agents'
beliefs. Review of Economic Dynamics, 26.
Blanchard, O. and Perotti, R. (2002). An empirical characterization of the
dynamic e ects of changes in government spending and taxes on output.
Quarterly Journal of Economics, 117(4).
Born, B., Muller, G. J., and Pfeifer, J. (2019). Does Austerity Pay O ? The
Review of Economics and Statistics.
5
Chodorow-Reich, G. (2019). Geographic cross-sectional scal spending multipliers:
What have we learned. American Economic Journal: Microeco-
nomics, 11(2):1{34.
Christiano, L., Eichenbaum, M., and Rebelo, S. (2011). When is the government
spending multiplier large? Journal of Political Economy.
Christiano, L. J., Eichenbaum, M., and Evans, C. L. (1999). Chapter 2
Monetary policy shocks: What have we learned and to what end?
Coibion, O. (2012). Are the e ects of monetary policy shocks big or small?
American Economic Journal: Macroeconomics, 4(2):1{32.
Coibion, O., Gorodnichenko, Y., Kueng, L., and Silvia, J. (2017). Innocent
Bystanders? Monetary policy and inequality.
Eggertsson, G. B. (2008). Great expectations and the end of the depression.
American Economic Review, 98(4).
Eichengreen, B. (1992). Golden Fetters: The Gold Standard and the Great
Depression, 1919-1939. Oxford University Press.
Ettmeier, S. and Kriwoluzky, A. (2019). Same, but di erent? Testing monetary
policy shock measures. Economics Letters, 184.
Ettmeier, S. and Kriwoluzky, A. (2020). Active, or Passive? Revisiting the
Role of Fiscal Policy in the Great In
ation. Technical report.
Fagereng, A., Holm, M. B., and Natvik, G. J. J. (2020). MPC Heterogeneity
and Household Balance Sheets. SSRN Electronic Journal.
Friedman, M. and Schwartz, A. J. (1963). A monetary history of the United
States, 1867-1960.
Gabriel, R. D., Klein, M., and Pessoa, A. S. (2021). The E ects of Government
Spending in the Eurozone. SSRN Electronic Journal.
Gal , J., L opez-Salido, J. D., and Vall es, J. (2007). Understanding the effects
of government spending on consumption. Journal of the European
Economic Association, 5(1).
6
Gechert, S., Paetz, C., and Villanueva, P. (2021). The macroeconomic effects
of social security contributions and bene ts. Journal of Monetary
Economics, 117.
Gertler, M. and Karadi, P. (2011). A model of unconventional monetary
policy. Journal of Monetary Economics, 58(1):17{34.
Gertler, M. and Karadi, P. (2015). Monetary policy surprises, credit costs,
and economic activity. American Economic Journal: Macroeconomics,
7(1).
Goodfriend, M. and King, R. G. (2005). The incredible Volcker disin
ation.
Journal of Monetary Economics.
Gurkaynak, R. S., Sack, B. P., and Swanson, E. T. (2005). Do actions speak
louder than words? The response of asset prices to monetary policy actions
and statements. International Journal of Central Banking, 1(1):55{93.
Hagedorn, M., Manovskii, I., and Mitman, K. (2019). The Fiscal Multiplier.
National Bureau of Economic Research.
Jaroci nski, M. and Karadi, P. (2020). Deconstructing monetary policy
surprises-The role of information shocks. American Economic Journal:
Macroeconomics, 12(2).
Jord a, O. (2005). Estimation and inference of impulse responses by local
projections. American Economic Review, 95(1).
Kaplan, G., Moll, B., and Violante, G. L. (2018). Monetary policy according
to HANK.
Kilian, L. (2009). Not all oil price shocks are alike: Disentangling demand
and supply shocks in the crude oil market. American Economic Review,
99(3).
King, R. and Baxter, M. (1993). Fiscal policy in general equilibrium. Amer-
ican economic review, 83(3).
Kliem, M. and Kriwoluzky, A. (2013). Reconciling narrative monetary policy
disturbances with structural VAR model shocks? Economics Letters,
121(2):247{251.
7
Kliem, M., Kriwoluzky, A., and Sarferaz, S. (2016). Monetary- scal policy
interaction and scal in
ation: A tale of three countries. European
Economic Review.
Kriwoluzky, A. (2012). Pre-announcement and timing: The e ects of a government
expenditure shock. European Economic Review, 56(3):373{388.
Kuhn, M., Schularick, M., and Steins, U. I. (2020). Income and wealth
inequality in america, 1949{2016. Journal of Political Economy, 128(9).
Leeper, E. M. (1991). Equilibria under 'active' and 'passive' monetary and
scal policies. Journal of Monetary Economics, 27(1).
Leeper, E. M. (2011). Anchors Away: How Fiscal Policy Can Undermine
'Good' Monetary Policy. SSRN Electronic Journal.
Leeper, E. M. and Leith, C. (2016). Understanding In
ation as a Joint
Monetary{Fiscal Phenomenon. In Handbook of Macroeconomics, volume 2.
Leeper, E. M., Walker, T. B., and Yang, S.-C. S. Y. (2013). Fiscal Foresight
and Information Flows. Econometrica, 81(3):1115{1145.
Mertens, K. and Ravn, M. O. (2013). The dynamic e ects of personal and
corporate income tax changes in the United States.
Miranda-Agrippino, S. and Ricco, G. (2020). The Transmission of Monetary
Policy Shocks. American Economic Journal: Macroeconomics.
Mussa, M. (1986). Nominal exchange rate regimes and the behavior of real
exchange rates: Evidence and implications. Carnegie-Rochester Confer.
Series on Public Policy, 25(C).
Nakamura, E. and Steinsson, J. (2014). Fiscal stimulus in a monetary union:
Evidence from US regions. American Economic Review.
Nakamura, E. and Steinsson, J. (2018a). High-frequency identi cation of
monetary non-neutrality: The information e ect. Quarterly Journal of
Economics.
Nakamura, E. and Steinsson, J. (2018b). Identi cation in Macroeconomics.
Journal of Economic Perspectives.
8
Plagborg-M ller, M. and Wolf, C. K. (2021). Local Projections and VARs
Estimate the Same Impulse Responses. Econometrica, 89(2):955{980.
Ramey, V. A. (2011). Identifying government spending shocks: It's all in the
timing. Quarterly Journal of Economics.
Ramey, V. A. (2016). Macroeconomic Shocks and Their Propagation. NBER
Working Paper, (1):1{5.
Ramey, V. A. and Zubairy, S. (2018). Government spending multipliers in
good times and in bad: Evidence from US historical data. Journal of
Political Economy.
Romer, C. D. and Romer, D. H. (2004). A New Measure of Monetary Shocks:
Derivation and Implications. American Economic Review, 94(4):1055{
1084.
Schreft, S. L. (1990). Credit controls: 1980. Economic Review, 76(Nov):25{
55.
Smets, F. and Wouters, R. (2003). An estimated dynamic stochastic general
equilibrium model of the euro area. Journal of the European Economic
Association, 1(5).
Smets, F. andWouters, R. (2007). Shocks and frictions in US business cycles:
A Bayesian DSGE approach. American Economic Review, 97(3):586{606.
Swanson, E. T. (2021). Measuring the e ects of federal reserve forward
guidance and asset purchases on nancial markets. Journal of Monetary
Economics, 118.
Taylor, J. B. (1993). Discretion versus policy rules in practice. Carnegie-
Rochester Confer. Series on Public Policy, 39(C).
Tenreyro, S. and Thwaites, G. (2016). Pushing on a string: Us monetary
policy is less powerful in recessions. American Economic Journal: Macroe-
conomics, 8(4).
Uhlig, H. (2005). What are the e ects of monetary policy on output? Results
from an agnostic identi cation procedure. Journal of Monetary Economics,
52(2).
Walsh, C. (2010). Monetary Theory and Policy. The MIT Press, 3rd edition.
9