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2020/2021

Economics II

Code: 40096 ECTS Credits: 15
Degree Type Year Semester
4313805 Economic Analysis OB 1 2
The proposed teaching and assessment methodology that appear in the guide may be subject to changes as a result of the restrictions to face-to-face class attendance imposed by the health authorities.

Contact

Name:
Francisco Obiols Homs
Email:
Francesc.Obiols@uab.cat

Use of Languages

Principal working language:
english (eng)

Teachers

Francisco Obiols Homs

External teachers

Alexander Ludwig
Ramón Caminal

Prerequisites

No specific prerequisits.

Objectives and Contextualisation

This  module  covers  the  second  part  of  the  core  in  modern  microeconomics  and  macroeconomics.  The  topics  seen   in  this  module  are  the  foundation  to  the  models  that  are  used  in  advanced   microeconomics and  macroeconomics.  The  section  on  microeconomics  formally  demonstrates,  through  advanced  mathematical  techniques,  the  existence  of  a  general  equilibrium  and  its  properties,  discussing  the  fundamental theorems  of  welfare  economics.  This  section  also  discusses  cases  where  classical  assumptions  fail  and  its  consequences.  The  section  on  macroeconomics  studies  mathematical  models  of  general  equilibrium  under uncertainty  and  their  implications  for  asset  evaluation.  This  section  also  provides  the  student  with  dynamic  programming  techniques;  these  techniques  are  the  necessary  tools  for  solving  dynamic  models. 

Competences

  • Capacity to articulate basic economic theory, analytically deriving them from mathematical reasoning
  • Conceptually analyse a specific economic problem using advanced analytical tools
  • Express recommendations about economic policy at macro and micro levels
  • Make independent judgements and defend them dialectically
  • Possess and understand knowledge that provides a basis or opportunity for originality in the development and/or application of ideas, often in a research context
  • Student should possess the learning skills that enable them to continue studying in a way that is largely student led or independent
  • Students should know how to communicate their conclusions, knowledge and final reasoning that they hold in front of specialist and non-specialist audiences clearly and unambiguously
  • Use new technology for the collection and organisation of information to solve problems in professional activities

Learning Outcomes

  1. Distinguish between general and partial equilibrium models
  2. Frame an economic question in a general equilibrium mathematical model and know how to derive and understand the conclusions deriving from it
  3. Know the neoclassical assumptions and describe their implications for the behaviour of an aggregate market and for the behaviour of economic aggregates
  4. Make independent judgements and defend them dialectically
  5. Make recommendations based on genera equilibrium models
  6. Possess and understand knowledge that provides a basis or opportunity for originality in the development and/or application of ideas, often in a research context
  7. Student should possess the learning skills that enable them to continue studying in a way that is largely student led or independent
  8. Students should know how to communicate their conclusions, knowledge and final reasoning that they hold in front of specialist and non-specialist audiences clearly and unambiguously
  9. Use new technology for the collection and organisation of information to solve problems in professional activities

Content

Microeconomics  II  

FIRST PART: COMPETITIVE GENERAL EQUILIBRIUM THEORY

1.  Introduction                                                                                               


2.  Welfare Properties of Competitive Equilibrium                                             


3.  The Positive Theory of Equilibrium: Existence, Uniqueness and Stability                                                                                                      


4.  The Core                                                                         


 

SECOND PART: MARKET FAILURES

5. Market Power: Monopoly, Oligopoly, Monopolistic Competition, Product Differentiation, Collusion            


6.   Hidden information: Adverse Selection, Signaling and Screening

7.  Hidden Action: The Principal-Agent Model

 

Macroeconomics  II 

1. Asset pricing (L-S 2004 chapter 13).
2. OLG with money (B-F 4.1-4.2)
3. Sidrauski model
        a. A canonical MIU model (W 2.1-2.3)
        b. Dynamics and solution of the model (W 2.5,2.7 -- B-F 5.Appendix)
        c. Bubbles and hyperinflations (BF 5.1-5.3)
4. Cash-in-Advance model (W 3.3)
5. Kiyotaki-Wright search theory (W 3.4.2)
6. Imperfect information: Lucas’ Islands model
7. New-Keynesian monetary model (W 5 -- B-F 8)
8. Monetary and fiscal policy (BF 11 -- LS 24.2.2-24.6)

 

Macroeconomics III

1. Introduction to the course. The NMG with heterogeneous agents: the case of efficient economies and perfect aggregation. Efficient allocations and the Negishi approach.

2. A motivation for the interest in the IM model. A theoretical decision problem with idiosyncratic uncertainty and IM. The recursive formulation and properties of decision rules. A notion of constrained efficiency.

3. Transition functions and associated operators. The general equilibrium of the IM model. The case of endogenous labor: labor income risk becomes endogenous.

4. Constrained efficiency under IM a la DHKRR. Optimal income taxation with commitment (Chamley/Judd).

5. The primal approach to optimal policy. Revisiting optimal income taxation in IM economies.

6. The indivisible labor model. Models of the labor market: basic search and matching. Aiyagari and Huggett meet Mortensen and Pissarides.

7. Heterogeneous firms: the Lucas model of the “span of control”. An application to assess the effects of size dependent policies.

 

 

 

 

 

Methodology

• Theory  classes    

• Practice  classes    

• Learning  based  on  problem  solving    

• Tutorials  

• Personal  study  

• Study  groups    

• Textbook  reading    

• Paper  reading   

Activities

Title Hours ECTS Learning Outcomes
Type: Directed      
Theory classes 112.5 4.5 5, 3, 1, 4, 2, 8, 7, 6, 9
Type: Supervised      
Problems sets, tutorials 75 3 5, 3, 1, 4, 2, 8, 7, 6, 9
Type: Autonomous      
Personal study, study groups, textbook readings, article readings 187.5 7.5 5, 3, 1, 4, 2, 8, 7, 6, 9

Assessment

Final  Exams    

50%  

Class  attendance    and    active    participation    

20%  

Problem  sets    and    assignments    

30%  

A module consists of different courses which are evaluated through final exams, problem sets and assignments and other class activities such as class attendance, presentations, etc.

 
   
   

    

   

Assessment Activities

Title Weighting Hours ECTS Learning Outcomes
Class Attendance and Problem sets and assignments 50% 0 0 5, 3, 1, 4, 2, 8, 7, 6, 9
Final Exams 50% 0 0 5, 3, 1, 4, 2, 8, 7, 6, 9

Bibliography

Ljungqvist, L., and T. Sargent (2018): Recursive Macroeconomic Theory, MIT press.

Stokey, N. L., and R. E. Lucas (1989): Recursive Methods in Economic Dynamics, Harvard University Press.

Recursive Macroeconomic Theory by Lars Ljungqvist and Thomas Sargent (LS), MIT Press (2004).

Monetary Theory and Policy by Carl Walsh (W), MIT Press (2003).

Lectures on Macroeconomics by Olivier Blanchard and Stanley Fischer (B-F)

Mas-Colell, A, M. Whinston and J. Green "Microeconomic Theory", Oxford University Press, 1995