Macroeconomics III

Catalog description

Macroeconomics III builds on the real macroeconomic phenomena studied in Macroeconomics II, and extends the analysis to monetary and financial considerations, with an emphasis on short-term business cycle fluctuations. Students are introduced to a variety of macroeconomic models used to study the role of money and monetary policy, financial intermediation and high frequency macroeconomic fluctuations. We start with the introduction of macro economic models with money, such as the classical models of money in the utility function and cash in advance. We also study search based models of liquidity, which are the core of the macroeconomic study of financial securities. High frequency fluctuations are analyzed in the context of the real business cycle model and the New Keynesian model, the workhorse model for the analysis of demand-driven recessions and of fiscal and monetary counter-cyclical policies. To understand the role of financial intermediation and its impact on the macroeconomy, we study models of financial frictions and the canonical banking model of Diamond-Dybvig.