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