This module is an introduction to macroeconomic theory. Students will study the key intertemporal decisions of households, firms, and banks, and their basic implications for long run economic growth, business cycle fluctuations and asset prices (including the boom-bust in the housing market), and the role of monetary policy. We also develop basic numerical techniques to solve dynamic optimisation problems and apply them to study a broad range of economic models.
The overriding goal of the module is to begin providing methodological tools for advanced research in macroeconomics. The emphasis is on theory, although data guides the theoretical explorations. The module will mostly build on models with microfoundations, i.e. models where behaviour is derived from basic assumptions on consumers' preferences, production technologies, information, and so on. Behaviour is mostly assumed to be rational: given the restrictions imposed by the primitives, all actors in the economic models are assumed to maximise their objectives.
The module will also introduce recent advances in macroeconomic theory. In particular, the module will go over models with financial intermediaries, housing and mortgage markets, and heterogeneity.