This course introduces core models of New Keynesian macroeconomics, with particular emphasis on its analytic structure. In the introductionary part, a particular focus will lie on deriving and understanding the parallels with undergraduate macroeconomic models and on understanding the effects of macroeconomic policy. It then introduces the baseline New Keynesian model as a first fundamental dynamic macro model to understand business cycle fluctuations. Selected other topics (depending on what time allows) covers an overview of Macro Models with Financial Frictions, Macro Labor (Search and Matching), Open Economy Applications. An introduction into using and applying 'packages' to solve Dynamic Stochastic General Equilibrium models (in Dynare/Matlab) will also be given.

Upon completion of this course students have a basic understanding of macroeconomic analysis in a dynamic New Keynesian setting. The course will cover the following topics: 

- Intro, review of undergraduate macroeconomic frameworks (IS-LM-AS-AD, IS-LM-PC), monetary (non-)neutrality: ~ 1 lecture

- Stylized facts in monetary economics and motivation for a New Keynesian perspective: Galí (1999, AER), micro-evidence on nominal rigidities: ~1 lecture

- The baseline New Keynesian model (simplified version of Galí book chapter 3 model): Households, Firms under flexible prices, Firms under sticky prices, Equilibrium: ~ 2 lectures

- The baseline New Keynesian model: the Central Bank and the Taylor rule; Taylor principle; IR to monetary shock, IR to productivity shock; optimal monetary policy (strict inflation targeting): ~1-2 lectures

- Policy discussion using the lens of the baseline New Keynesian model: ~1 lecture

- extensions to the baseline New Keynesian model: zero lower bound and unconventional monetary policy: 1 lecture

- extensions to the baseline New Keynesian model: fiscal policy; fiscal multipliers; the role of financing of public expenditure and Ricardian equivalence: 1 lecture

- overview (and/or selective discussion) of extensions to the baseline New Keynesian model: adding capital/ investment; adding labor market frictions (search and matching); adding financial frictions (Kiyotaki and Moore (1997)/ Bernanke, Gertler and Gilchrist (1999); Smets-Wouters style medium-scale macro models; 1-2 lectures

Attendance is compulsory. A maximum of 4 course hours (2 absences) are allowed to be missed.

The course is mainly lecture-based. Regular homework assignment and exercises (in groups) will be used to deepen the understanding of the materials discussed.

Grading is based on:

· Over the course, 2 assignments in groups, 22.5 points each (45 points in total)

· Active course participation (5 points)

· Final exam (50 points), you need to score at least 50% of the points

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A solid knowledge of undergraduate macroeonomics (IS-LM-AS-AD) is a prerequisite.

A review of some mathematical methods (derivatives, static optimization w.r.t. equality constraints, Taylor series expansions,...) is strongly advised.

no regular office hours, please make an appointment

email: katrin.rabitsch@wu.ac.at