Macroeconomics II
Co-taught with Prof. Marcelo Villena, PhD
Macroeconomics II is an intermediate course on dynamic models with rational expectations for the study of economic fluctuations, monetary and fiscal policy, and open-economy macroeconomics. It covers the main contemporary frameworks: the Real Business Cycle (RBC) model and linearized New Keynesian models — dynamic IS, the New Keynesian Phillips curve, and the Taylor rule — plus a basic overlapping-generations (OLG) model, uncovered interest parity, and exchange rate pass-through. Applied topics include macroeconomic crises, the limits of monetary and fiscal policy, and search-and-matching models of unemployment.
What does the course cover?
- Unit I — Microfoundations: Consumption, Saving, and Investment (Fisher model, permanent income, Ricardian equivalence, Tobin's q, current account)
- Unit II — Consumption under Uncertainty and Asset Pricing (stochastic Euler equation, stochastic discount factor, CCAPM, equity premium puzzle)
- Unit III — The Neoclassical Growth Model (Fisher-Solow synthesis, central planner problem, Ramsey-Cass-Koopmans intuition, Diamond OLG)
- Unit IV — The Real Business Cycle (RBC) Model (dynamic equilibrium, technology shocks, propagation, bridge to NK-DSGE)
- Unit V — Dynamics of Economic Policy (time inconsistency, inflation bias, rules vs. discretion, central bank independence and inflation targeting)
Course material
- Course syllabus (PDF)
- Lecture notes (PDF)
- Slides — 12 lectures (PDF)
- Ch. 7 — Conceptual notes (PDF)
- Problem set 1 — Slides (PPTX)
- Problem set 1 — Slides (PDF)
- Ch. 8 of the book (Ch. 2 of the course) — Conceptual notes (PDF, not covered in Quiz 1)
Interactive figures
Self-contained interactive charts, one per chapter — open in the browser, no installation needed.
- Ch. 1 — Trend and cycle
- Ch. 2 — IS-LM
- Ch. 3 — Mundell-Fleming
- Ch. 4 — Solow model
- Ch. 5 — WS-PS
- Ch. 6 — Three-equation model
- Ch. 7 — Public debt
- Ch. 7 — Interactive figure 7.1
- Ch. 8 — CCAPM
- Ch. 9 — Optimal saving
- Ch. 10 — RBC model
- Ch. 11 — Barro-Gordon
- Ch. 12 — Course map
Problem sets
- Ch. 7 — Analytical problems (PDF)
- Ch. 7 — Analytical problems (HTML)
- Ch. 7 — Numerical problems (HTML)
Worked solutions
- Ch. 7 — Numerical solutions (Jupyter notebook)
- Ch. 7 — Numerical solutions (Excel)
- Guided exercise, slide 18 (Jupyter notebook)
- Guided exercise, slide 18 (Excel)
How is the course graded?
Two midterm exams and five quizzes. Final grade: NF = 0.35·C1 + 0.40·C2 + 0.25·quizzes.
Bibliography
Course text: Villena, M. (2025), «Análisis Macroeconómico Intermedio», USM.
- Blanchard, O. & Johnson, D. Macroeconomía. Pearson.
- Romer, D. Advanced Macroeconomics. McGraw-Hill (capítulos seleccionados).
- Williamson, S. Macroeconomics. Pearson.
- Galí, J. Monetary Policy, Inflation, and the Business Cycle. Princeton (cap. 1-4).
- Obstfeld, M. & Rogoff, K. Foundations of International Macroeconomics (cap. intro).