ECM603-Advanced Macroeconomic Analysis

Module Provider: School of Politics, Economics and International Relations
Number of credits: 20 [10 ECTS credits]
Terms in which taught: Autumn term module
Non-modular pre-requisites: A knowledge of intermediate macroeconomics.
Co-requisites: ECM602 Advanced Microeconomic Analysis
Modules excluded:
Current from: 2020/1

Module Convenor: Dr Alexander Mihailov


Type of module:

Summary module description:

This module introduces students to a set of modern analytical and computational topics and methods in macroeconomic theory and policy and the corresponding programming techniques and software, namely Dynare and MATLAB.


To deliver a “hands-on” introduction to the solution, analysis, estimation, simulation and forecasting of modern benchmark micro-founded closed- and open-economy macro-models via programming in the software packages Dynare and MATLAB.

Assessable learning outcomes:

At the end of the module students should be able to:

  1. Programme and assess the simulation or estimation of various widely used dynamic-stochastic general equilibrium (DSGE) models and macroeconomic policies in Dynare and MATLAB;

    1. Apply such skills in their own research or to explore results in journal articles of interest;

    2. Employ the studied concepts and methods to analyse and interpret real-world phenomena.

  2. Relate how various shocks and monetary and fiscal policy at the national and international level affect the dynamics of output, consumption, investment, exports and imports, inflation, employment, unemployment and other key macroeconomic variables.

Discuss real world macroeconomic phenomena in the context of core macroeconomic theory, empirics and simulation/forecasting.

Additional outcomes:

Problem sets, programme codes, data and journal articles for discussion and replication will be circulated. These will provide an opportunity for students to develop their analytical and programming skills, as well as their ability to apply theoretical and computing knowledge in interpreting real-world macroeconomic phenomena and policies.

Outline content:

  1. Simulation and analysis of the deterministic Neoclassical Growth model.

  2. Simulation and analysis of the stochastic Real Business Cycle model.

  3. Closing open-economy Real Business Cycle models.

  4. Simulation and analysis of the basic New Keynesian model under a Taylor rule.

  5. Simulation and analysis of the basic New Keynesian model under optimal monetary policy.

  6. Simulation and analysis of the basic small open economy New Keynesian model under a Taylor rule.

  7. Bayesian estimation and analysis of the Smets-Wouters (2007) medium-scale New Keynesian benchmark on US quarterly data and of its extension to financial frictions.

  8. Bayesian estimation and analysis of the Gali-Smets-Wouters (2012) extension with indivisible labour and unemployment; simulating the macroeconomic effects of the COVID-19 lockdown as an adverse rare labour supply shock.

  9. Bayesian estimation and analysis of medium-scale open-economy model versions under complete and incomplete international assets markets and optimal policy.

  10. Heterogeneous agents in medium-scale New Keynesian models: limited asset market participation and optimal monetary-fiscal policy.

Global context:

The context of much of the module concerns understanding the differences in the macroeconomic situation and trajectories of different countries, as well as differences in how they manage macroeconomic policy.

Brief description of teaching and learning methods:

Detailed guidance on the topics covered will be provided in the weekly lectures and in computer classes, together with examples, exercises and solutions to facilitate understanding of key concepts. Students will be expected to supplement the lectures with the recommended reading of articles and book chapters and to do some research using the library, internet or other resources. Office hours are available for students to consult the lecturer on an individual basis.

Contact hours:
  Autumn Spring Summer
Lectures 10 2
Practicals classes and workshops 10
Guided independent study:      
    Other 148 30
Total hours by term 168 2 30
Total hours for module 200

Summative Assessment Methods:
Method Percentage
Written exam 60
Project output other than dissertation 20
Set exercise 20

Summative assessment- Examinations:

One 2-hour unseen written paper, which will cover all of the module material.

Postgraduate examinations are held in the summer term

Summative assessment- Coursework and in-class tests:

Coursework will count for 40% of the overall mark and comprise of two set exercises, one of which will involve a simulation or estimation project based on computer code and data.

Formative assessment methods:

Penalties for late submission:
Penalties for late submission on this module are in accordance with the University policy. Please refer to page 5 of the Postgraduate Guide to Assessment for further information:

Assessment requirements for a pass:

A minimum weighted average mark of coursework and examination of 50%.

Reassessment arrangements:

Re-examination for all modules takes place in August/September of the same year.

Re-assessment is by examination only; coursework is not included at the second attempt.

Additional Costs (specified where applicable):

1) Required and recommended textbooks:

  1. DeJong, David and Chetan Dave (2011, 2nd ed.), Structural Macroeconometrics, Princeton, NJ, and Oxford, England: Princeton University Press.

  2. Galí, Jordi (2015, 2nd ed.), Monetary Policy, Inflation and the Business Cycle: An Introduction to the New Keynesian Framework and Its Applications, Princeton, NJ, and Oxford, England: Princeton University Press.

  3. Herbst, Edward P., and Frank Schorfheide (2016), Bayesian Estimation of DSGE Models, Princeton, NJ, and Oxford: Princeton University Press.

  4. Koop, Gary (2006, reprinted with corrections / 2003, 1st ed.), Bayesian Econometrics, Chichester, England: John Wiley and Sons.

  5. Miao, Jianjun (2014), Economic Dynamics in Discrete Time, Cambridge, MA, and London, England: MIT Press.

2) Specialist equipment or materials:

  1. MATLAB software (University campus licence)

  2. Dynare software (free in the public domain), runs within MATLAB

3) Specialist clothing, footwear or headgear:

4) Printing and binding:

5) Computers and devices with a particular specification:

6) Travel, accommodation and subsistence:

Last updated: 4 September 2020


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