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The course is intended for master students with orientation in economic modelling. The course will introduce New Keynesian dynamic stochastic general equilibrium (DSGE) models as well as the basic tools needed for their construction and implementation.
The course employs a practical and very intensive approach to model building. Students will build a DSGE model step-by-step: students will solve optimisation routines of households, derive the optimal price setting of firms, or introduce a monetary policy rule in the model among others. On top of that, we will discuss other special topics, such as the optimal setting of monetary policy or the zero lower bound. Students will acquire practical hands-on experience in building DSGE models which will allow them to build and implement their versions of DSGE models using Matlab and Dynare toolbox. The course consists of lectures and seminars. During the lectures, students will be introduced into the theoretical background of modelling and derivation of models. During the seminars, students will get an opportunity to implement acquired knowledge in MATLAB-based practice sessions. Moreover, several guest lectures will demonstrate the practical implementation of DSGE models in policy analysis. Last update: Žáček Jan, Mgr., Ph.D. (05.09.2021)
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By the end of the course, students should acquire knowledge of and hands-on experience in DSGE modelling. More specifically, students should be able to: - understand the basic structure of DSGE models; - formulate and derive the equations of standard DSGE models; - approximate equilibrium conditions of DSGE models using the log-linearisation technique; - understand solution techniques; - calibrate, identify and diagnose DSGE models; - implement DSGE models using Matlab, and Dynare toolbox; - report and interpret the results; - perform sensitivity and robustness analysis; - understand the zero lower bound on nominal interest rates; - understand the Kalman filter; - build a simple gap model and use it for economic interpretation. Last update: Žáček Jan, Mgr., Ph.D. (13.09.2023)
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Course requirements: - three problem sets (50 points in total); - final oral exam (50 points). Grading follows the standard scale: 91-100 points: A 81-90 points: B 71-80 points: C 61-70 points: D 51-60 points: E 0-50 points: F Last update: Žáček Jan, Mgr., Ph.D. (01.09.2021)
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Recommended literature: - Galí, J. (2015). Monetary Policy, Inflation, and the Business Cycle: An Introduction to the New Keynesian Framework and Its Applications. Princeton University Press, Edition 2 - DeJong, D. N., & Dave, C. (2011). Structural macroeconometrics. Princeton University Press, Edition 2. - McCandless, G. (2008). The ABCs of RBCs: An Introduction to Dynamic Macroeconomic Models. Harvard University Press. - Pfeifer, J. (2018). A Guide to Specifying Observation Equations for the Estimation of DSGE Models. Unpublished manuscript, 1-81. - Wickens, M. (2012). Macroeconomic theory: A Dynamic General Equilibrium Approach. Princeton University Press. Last update: Žáček Jan, Mgr., Ph.D. (13.09.2023)
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Course requirements: - three problem sets (50 points in total); - final oral exam (50 points). Grading follows the standard scale: 91-100 points: A 81-90 points: B 71-80 points: C 61-70 points: D 51-60 points: E 0-50 points: F Last update: Žáček Jan, Mgr., Ph.D. (01.09.2021)
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1. Introduction and motivation 2. Approximation and solution techniques 3. The basic New Keynesian model 4. Optimal monetary policy 5. Zero lower bound on nominal interest rates
A more detailed description of the course content can be found in the file "syllabus". Last update: Žáček Jan, Mgr., Ph.D. (05.09.2021)
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There is no required prior knowledge of DSGE models. There are no formal binding requirements regarding prerequisites. Nevertheless, passing the courses JEM216 Advanced Macroeconomics and JEM183 Mathematical Methods in Macroeconomics before signing up for this course would be appreciated. Last update: Žáček Jan, Mgr., Ph.D. (11.09.2022)
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