CREI Macroeconomics Summer School

Course Overview

The course will provide an introduction to the New Keynesian model and its implications for monetary policy. The list of topics covered, together with a basic reading list is provided below.

Selected Topics

1. The Basic New Keynesian Model

a. The Dynamic IS equation

b. The New Keynesian Phillips Curve

c. Dynamic Effects of Shocks

2. Monetary Policy Design in the Basic New Keynesian Model

a. The Case of an Efficient Natural Equilibrium

b. The Case of an Inefficient Natural Equilibrium

3. Extensions and Implications

a. Nominal Wage Rigidities

b. Unemployment

About the Instructor

Jordi Galí earned his Ph.D. in Economics at the Massachusetts Institute of Technology (MIT) in 1989. Currently he is Senior Researcher at the Center for Research in International Economics (CREI), Professor at Universitat Pompeu Fabra and Research Professor at the Barcelona GSE. He was the Director of CREI between 2001 and 2017. He has held academic positions at New York University and Columbia University. He has been a Visiting Professor at MIT. He is a Research Fellow at the CEPR, a Research Associate at the NBER, and a Fellow of the Econometric Society. He has served as a co-editor of the Journal of the European Economic Association and co-director of the CEPR International Macroeconomics Programme. In 2012 he served as President of the European Economic Association. Among other awards, Galí has received the National Research Prize from the Government of Catalonia and was co-recipient of the Yrjö Jahnsson Award. He is a regular consultant to the ECB, and the Sveriges Riksbank. His research interests include macroeconomics and monetary theory, and has published articles on these topics in numerous scientific journals.

Selected publications

• Clarida, Richard, Jordi Galí, and Mark Gertler (1999): "The Science of Monetary Policy: A New Keynesian Perspective," Journal of Economic Literature, vol. 37, no. 4, 1661-1707.
• Erceg, Christopher J., Dale W. Henderson, and Andrew T. Levin (2000): "Optimal Monetary Policy with Staggered Wage and Price Contracts," Journal of Monetary Economics vol. 46, no. 2, 281-314.
• Galí, Jordi (2015): Monetary Policy, Inflation and the Business Cycle. An Introduction to the New Keynesian Framework, Second edition, Princeton University Press (Princeton, NJ).
• Galí, Jordi, Mark Gertler, David López-Salido (2001): "European Inflation Dynamics," European Economic Review vol. 45, no. 7, 1237-1270.
• Walsh, Carl E. (2017): Monetary Theory and Policy, Fourth edition, MIT Press (Cambridge, MA)
• Woodford, Michael (2003): Interest and Prices: Foundations of a Theory of Monetary Policy, Princeton University Press (Princeton, NJ).
• Woodford, Michael (2001): "The Taylor Rule and Optimal Monetary Policy," American Economic Review 91(2): 232-237 (2001)

Course Overview

This course will cover state-of-the-art techniques to solve and simulate modern macroeconomic models, with specific applications to models used for fiscal and monetary policy analysis. The applications will be illustrated in details during practice sessions (offered separately, and available only for students registered in the class).

Selected Topics

• Introduction to local and global solution methods
• Solution methods for modern monetary policy models, with zero-lower bound, financial constraints, heterogeneous agents, bubbles, etc.
• Solution of optimal fiscal and monetary policy problems, with and without commitment.
• Solution of sovereign debt and default models.

About the Instructor

Davide Debortoli earned his PhD in Economics at the Universitat Pompeu Fabra (UPF). Currently he is Associate Professor at UPF, Research Associate at CREI, Affiliated Professor at the Barcelona GSE, and a Research Fellow at the CEPR. He has held an academic position at the University of California San Diego and a visiting position at the Norges Bank. His research interests include Macroeconomics, Fiscal Policy and Monetary Policy, and his works has been published in the Quarterly Journal of Economics, the Economic Journal, Journal of Economic Theory, the Journal of the European Economic Association, and the American Economic Journal: Macroeconomics.

Course Overview

This 5 hour practical course is available only for students registered for the course Numerical Methods for Fiscal and Monetary Policy Analysis. Through specific examples of state-of-the-art monetary and fiscal policy models (e.g. models with zero-lower bound constraint, financial frictions, forward-guidance, etc.) the computer lab practicals will give participants the opportunity to familiarize with the different routines described in class, and will demonstrate their advantages and disadvantages in terms of accuracy and efficiency. No previous knowledge of numerical methods is required, but a basic knowledge of MATLAB (or another programming language) would be very helpful.

About the Instructor

Davide Debortoli earned his PhD in Economics at the Universitat Pompeu Fabra (UPF). Currently he is Associate Professor at UPF, Research Associate at CREI, Affiliated Professor at the Barcelona GSE, and a Research Fellow at the CEPR. He has held an academic position at the University of California San Diego and a visiting position at the Norges Bank. His research interests include Macroeconomics, Fiscal Policy and Monetary Policy, and his works has been published in the Quarterly Journal of Economics, the Economic Journal, Journal of Economic Theory, the Journal of the European Economic Association, and the American Economic Journal: Macroeconomics.

Selected Publications

• Designing a Simple Loss Function for the Fed: Does the Dual Mandate Make Sense?, (with J. Kim, J. Lindé and R. Nunes), Economic Journal, 2018, forthcoming.
• Optimal Time-Consistent Government Debt Maturity, (with R. Nunes and P. Yared), Quarterly Journal of Economics, 132 (1), 2017, 55-102.
• How Credible is the Federal Reserve: A Structural Estimation of Policy Re-optimizations, (with A. Lakdawala), American Economic Journal: Macroeconomics, 8 (3), 2016, 42-76.
• Monetary Regime-Switches and Central Bank Preferences, (with R. Nunes), Journal of Money, Credit and Banking, 46 (8), 2014, 1591-1626.
• Lack of Commitment and the Level of Debt, (with R. Nunes), Journal of the European Economic Association, 11(5), 2013, 1053-1078.

Selected Topics

1. Spatial equilibrium in a city: transportation, residential location and the monocentric city model
2. Spatial equilibrium in a system of cities: hedonics and the measurement of amenities and productivity
3. Agglomeration economies: pooling, matching and knowledge spillovers
4. Cities and public policy: local public goods and sorting, place-based policies

About the Instructor

Giacomo Ponzetto is a researcher at CREI, an associate researcher at IPEG and an affiliated professor at Universitat Pompeu Fabra and the Barcelona GSE. He received his PhD from Harvard University and has been a Research Affiliate of CEPR since 2011. His research lies at the intersection of Political Economy and International and Regional Economics. He has written on political and legal institutions, on federalism and political centralization, on trade policy, on the political economy of infrastructure investment, and on entrepreneurship and the spatial distribution of economic activity. His research has been published in the Quarterly Journal of Economics, Journal of Economic Growth, Journal of Public Economics, Journal of Urban Economics, and Journal of Law, Economics, and Organization.

Selected publications

1. Glaeser, Edward L., and Giacomo A. M. Ponzetto. 2018. The Political Economy of Transportation Investment. Economics of Transportation, 13: 4–26
2. Ashraf, Nava,  Edward L. Glaeser and Giacomo A. M. Ponzetto. 2016. Infrastructure, Incentives, and Institutions. American Economic Review: Papers & Proceedings, 106 (5): 77–82
3. Boffa, Federico, Amedeo Piolatto and Giacomo A. M. Ponzetto. 2016. Political Centralization and Government Accountability.  Quarterly Journal of Economics, 131 (1): 381–422
4. Glaeser, Edward L., Giacomo A. M. Ponzetto and Yimei Zou. 2016. Urban Networks: Connecting Markets, People and Ideas. Papers in Regional Science, 95 (1): 17–59
5. Glaeser, Edward L., William R. Kerr and Giacomo A. M. Ponzetto. Clusters of Entrepreneurship. Journal of Urban Economics, 67 (1): 150–168 3 bis. Brief

Course overview

The world income distribution, both between and within countries, depends on the interaction between local technologies and global markets. This course will focus on how technology is created by firms, it diffuses across countries and responds to market opportunities. Special attention will be devoted to two major phenomena: automation and the rise of China. Each topic will be studied combining theoretical models with macro and micro data.

Selected Topics

1. The economics of ideas: innovation, creative destruction and firm dynamics
2. Biased innovation, technology diffusion and inequality
3. Explaining economic performance: productivity, misallocation and superstar firms
4. Automation: effects on employment, wages and the labor share
5. Offshoring and the rise of China: effects on employment, wages and innovation

About the Instructor

Gino Gancia earned his PhD in Economics at the Institute for International Economic Studies (Stockholm University) in 2003. Currently, he is Professor of Economics at Queen Mary University of London, Senior Researcher at the Center for Research in International Economics (CREI), and Research Fellow at the CEPR. He is Associate Editor of the Review of Economic Dynamics. He has been a Visiting Scholar at MIT during 2001-2003 and has been awarded the 2009 Excellence Award in Global Economic Affairs (Kiel Institute for the World Economy) the 2004 EEA Young Economist Award and a European Research Council Starting Grant in 2009. His research interests span International Trade Theory, Economic Growth and Macroeconomics.

Selected publications

1. “Trade, Finance and Endogenous Firm Heterogeneity,” (with A. Bonfiglioli and R. Crino’), Journal of the European Economic Association, forthcoming.
2. "Offshoring and Directed Technical Change,” (with D. Acemoglu and F. Zilibotti), American Economic Journal: Macroeconomics, 7 (3), 84-112, 2015.
3. “Competing Engines of Growth: Innovation and Standardization”, (with D. Acemoglu and F. Zilibotti), Journal of Economic Theory, 147, 570-601, 2012.
4. “Openness, Government Size and the Terms of Trade”, (with P. Epifani), Review of Economic Studies, 76, 629-668, 2009.
5. “Horizontal Innovation in the Theory of Growth and development” (with F. Zilibotti) in Handbook of Economic Growth (P. Aghion and S. Durauf eds.) 2005.

Course Overview

We will cover recent research exploring the relation between firm-level frictions, reallocation of resources, and their aggregate implications. Although a substantial part of the course is devoted to analysing financial factors, we will study a general framework applicable to study also the effects of other frictions.

Selected Topics

i) Stylised facts on firm dynamics;
ii) Dispersion in productivity and misallocation of resources: measurement, theory, and aggregate implications.
iii) Financial frictions and firm dynamics.
iv) Innovation, reallocation, and growth
v) Financial factors, and the misallocation of skilled labour and intangible capital.
vi) Finance, firm dynamics and the business cycle: empirical evidence and theory.

About the Instructor

Andrea Caggese earned his PhD in Economics at London School of Economics and Political Science in 2002. Currently he is an Associate Professor at Universitat Pompeu Fabra (UPF), an Affiliated Professor at Barcelona GSE, and a Research Associate at the Center for Research in International Economics (CREI). He is also the Director of the Master of Research in Economics, Finance and Management at the Department of Economics and Business at Universitat Pompeu Fabra (UPF).  He was Awarded a Resercaixa Grant in 2014, and he has been a Visiting researcher at Boston University in 2015-2016. His work has appeared in the Americal Economic Journals: Macroeconomics, Journal of Financial Economics, the Journal of Monetary Economics, the Economic Journal and the Review of Economic Dynamics, among others. His research interests include finance, investment theory and macroeconomics.

Selected Publications

1. "Financing Constraints, Radical versus Incremental Innovation, and Aggregate productivity", 2018, Forthcoming, American Economic Journal: Macroeconomics.
2. “Firing the Wrong Workers: Financing Constraints and Labor Misallocation”, (with Vicente Cunat and Daniel Metzger) Forthcoming, Journal of Financial Economics, 2018.
3. “Financing Constraints, Firm Dynamics, Export Decisions, and Aggregate Productivity”, (with V. Cuñat) Review of Economic Dynamics, 16(1), 177-193, 2013.
4. “Entrepreneurial Risk, Investment and Innovation”, Journal of Financial Economics, 106(2), 287-307, 2012.
5. “Financing Constraints and Fixed Term Employment Contracts”, (with V. Cuñat), Economic Journal, 118 (533), 2013-2046, 2008.

Course Overview

This course provides an overview of the key conceptual and practical questions regarding macro-prudential policy. We first review the theoretical foundations for macro-prudential policy, and develop a macroeconomic workhorse model to think about its costs and benefits. We then turn to the empirical evidence, analyzing both the types of macro-prudential measures used in practice and their effectiveness. We conclude by using our workhorse model to shed light on three key debates regarding macro-prudential policy: (i) What are the trade-offs between the ex ante adoption of prudential policies and ex post interventions during crises?; (ii) Should macro-prudential and monetary policies be conducted in a coordinated fashion?, and; (iii) How should macro-prudential policy react to asset bubbles?

Selected Topics

• Why is macro-prudential policy necessary? A workhorse model
• Macro-prudential policy in practice: measures and outcomes
• Policy trade-offs: prudential policy ex ante vs. cleaning up after the crash
• To what extent should macro-prudential regulation and monetary policy be coordinated?
• Asset bubbles: causes and implications for macro-prudential policy.

About the Instructor

Alberto Martin earned his PhD in Economics at Columbia University in 2005. Currently, he is a Senior Research Advisor at the European Central Bank, a Senior Researcher at the Center for Research in International Economics (CREI), an Adjunct Professor at Universitat Pompeu Fabra, a Research Professor at the Barcelona GSE and a Research Fellow at the CEPR (London). He has been a Research Fellow and a Senior Economist the International Monetary Fund, a consultant for the United Nations Development Programme, and an economist in Argentina’s Ministry of Economics. He was awarded a Fulbright Fellowship (2000), a Lamfalussy Fellowship from the European Central Bank (2011), and a Consolidator Research Grant from the European Research Council (2014). His work has appeared in the American Economic Review, the Journal of Finance, the Journal of the European Economic Association and the Journal of International Economics, among others. His research interests include macroeconomics, finance and international economics.

Selected Publications

• ‘Banks, Government Bonds, and Default: What do the Data Say?’ (with N. Gennaioli and S. Rossi), forthcoming, Journal of Monetary Economics.
• ‘The Macroeconomics of Rational Bubbles: a User's Guide’ (with Jaume Ventura), September 2017, forthcoming, Annual Review of Economics.
• ‘Managing Credit Bubbles’ (with J. Ventura), Journal of the European Economic Association, 14 (3), 2016, 753-789.
• ‘Sovereign Debt Markets in Turbulent Times: Creditor Discrimination and Crowding-out Effects’ (with F. Broner, A. Erce and J. Ventura), Journal of Monetary Economics, 61, 2014, 114-142.
• ‘Sovereign Default, Domestic Banks and Financial Institutions’ (with N. Gennaioli and S. Rossi), Journal of Finance, 69, 2014, 819-866.

Course Overview

This course provides an overview of sovereign debt crises from theoretical, empirical and policy points of view. It covers both traditional and new theories that emphasize the interplay between international and domestic financial markets, and the relevant empirical evidence. It discusses the distinction between liquidity and solvency crises and the appropriate policy responses. The last part of the course is devoted to an analysis of the European crisis.

Selected Topics

1. What are the costs of sovereign default? Reputation and sanctions
2. Market structure and defaults: Secondary markets and collateral damage
3. Rollover crises: Lender of last resort and moral hazard
4. Solvency crises: Debt overhang, buybacks and restructuring
5. Lessons from Europe

About the Instructor

Fernando Broner is a Senior Researcher at CREI and a Barcelona GSE Research Professor. He is Co-Director of the Master in International Trade, Finance and Development at the Barcelona GSE and teaches in the PhD program at UPF. He is a Research Fellow at the CEPR and a Co-Editor at the Journal of International Economics. He received his PhD in Economics at MIT in 2000.

He has been Visiting Professor at MIT, Assistant Professor at the University of Maryland, Advisor at the Bank of Spain’s Division of International Economics, and Visiting Scholar at the IMF and World Bank. He was awarded a European Research Council Starting Grant in 2010 for the project “International Capital Flows and Emerging Markets.” His research interests include International Economics, Finance, and Macroeconomics.

Selected Publications

• “Rethinking the Effects of Financial Globalization,” (with J. Ventura), Quarterly Journal of Economics, 131(3), 1497-542, 2016
• “Sovereign Debt Markets in Turbulent Times: Creditor Discrimination and Crowding-Out Effects,” (with A. Erce, A. Martin, and J. Ventura), Journal of Monetary Economics, 61, 114-142, 2014.
• “Gross Capital Flows: Dynamics and Crises,” (with T. Didier, A. Erce and S. Schmukler), Journal of Monetary Economics, 60, 113-133, 2013.
• “Why do Emerging Economies Borrow Short Term?” (with G. Lorenzoni and S. Schmukler), Journal of the European Economic Association, 11(S1), 67-100, 2013.
• “Globalization and Risk Sharing,” (with J. Ventura), Review of Economic Studies, 78(1), 49-82, 2011.
• “Sovereign Risk and Secondary Markets,” (with J. Ventura and A. Martin), American Economic Review, 100(4), 1523-1555, 2010.