FDPE Macroeconomics 4: Monetary policy and business cycles, MA41617

This is the website of the fourth module of FDPE macroeconomics sequence. Hence, this contains information of the part of the lectures that are given by Antti Ripatti. The course has the formal website. The module 4 syllabus (subject to changes).



Exam is scheduled to April 24, 10-14, sh 3-4. Retake on May 31, 10-14, sh 3-4. (I had wrong day 1.6.!!!!!)

Lecture notes

Try to get the Galí's book. It is more complete than my slides. I will rely on the following lecture notes. I will update these frequently and place the version date on the first page of the slides. Please, check for the latest version even at the day of a lecture. Most probably there will be changes even just prior to the lecture. The lecture notes are released as a single package:


Exercise classes are given by Lauro Carnicelli (firstname.surname@helsinki.fi). As usual, you may submit your answer sheets at start of the class or by email to Lauro. 

You may encounter many practical problems in doing the exercises (computation in particular). It is, however, necessary that you will try hard. See the computing hints below! 

Problem set 1 (latex file)

Problem set 2 (latex file)  

Problem set 3 (latex file)  Updated

Computing hints (some of the links are old)

A list of log-linearisation rules. These will help you in log-linearisation. Note, that the notation differs from Gali.

Many of the exercises contains computational exercises. Hence you need a computer, dynare and Matlab or Octave (Octave is free). To install Octave follow the Dynare  instructions to install Octave and Dynare website to install Dynare. I have tested Windows, Mac OS X  and Ubuntu (check the dynare wiki and forum for Ubuntu instructions) versions of Octave/Dynare and both of them do the job. Ubuntu Octave is more user-friendly.

BTW, the usage of Octave could be more user-friendly with a front-end!

In exercises, I will ask you to log-linearise some equations. For computational purposes with dynare this is not necessary. Note, however, that the model has to be in stationary form in dynare, so get rid of the price level (ie write the model in terms of inflation and real variables, eg real money balances $m_t-p_t$). Dynare will then linearize the system automatically (command stoch_simul(order=1,irf=20);)  and analytically. (This is different than log-linearisation, so your results may deviate from log-linear version.) This helps you to get some results. 

The idea in the Dynare is that you need to code the decision rules, the budget constraints, and the equilibrium conditions. Then dynare use this information to form the state-space representation of the model. After this, it solves the model and computes policy functions (ie the system of solved equation) and standard descriptive statistics of the model. All of this means that provides you the solution of the linearised model.

Oops, you need an editor to edit your model file. If you do not have your favourite editor, type edit filename.mod in Octave or Matlab.