The module explores the traditional issues of macroeconomics (GDP, employment, interest rates, exchange rates and prices), focusing on the systemic interaction between real and financial aspects in a dynamic perspective. This choice represents an important advance with respect to basic macroeconomics perspective which is usually static and / or implies independence between the real and financial dimension of the economy.
The course method includes both theoretical exploration meant at linking each topic to the underlying macro-economic visions (i.e. different interpretative schools of thought), and technical discussion aimed at clarifying the reasons for the use of particular quantitative tools in macroeconomic modeling.
Course objective: to provide the interpretative basis for the explanation of the systemic role of finance and its relationship with instability, risk and sustainability.
At the end of the course the student should be able to:
1. Explain the assumptions and underlying structure of the most relevant models of macroeconomic frontier
2. Place the various evolutions of modeling in the appropriate historical-institutional context
3. Analyze and manipulate the models examined in the course (advantages, limits and application opportunities)
4. Apply the state-of-the-art macroeconomic models to interpret and analyze a broad range of relevant policy issues (with a peculiar attention to financial stability and inequality)
The student should also acquire critical knowledge useful to the design of a theoretical framework or empirical model for their own research in the systemic field (with specific attention to the issues of stability / instability and sustainability/inclusiveness.
The course is conceived in continuity and complementarity with the disciplines suggested in the study plan.
In continuity with microeconomics and / or in a complementary way to behavioral economics, it addresses:
Thematic area 1: rationality and information in macroeconomics
• role of rationality: what type of rationality to use as a foundation (even if implicit) of macroeconomics; from substantial rationality to procedural rationality and "heuristic" rationality
• macroeconomic impact of asymmetric information, risk and fundamental uncertainty
• the transition from individual information to collective information: common knowledge and the role of conventions (including imitative behaviors, panic and euphoria)
In continuity, with basic macroeconomics and monetary economics, it addresses:
Thematic area 2: role of money and finance, impact on dynamics
• what happens when money and finance are not neutral: monetary economies of production and financial economies
• the transition from independent markets to sequential markets and interdependent markets (coordination and network)
• when time becomes money: the role of time horizons and the meaning of the medium term
• from cycle / growth independence to cycle / growth integration
The module in continuity with the other upstream and downstream courses in other disciplines (not necessarily related to economics) addresses:
Thematic area 3: technical dimension and orientation to the development of implementable models for economic policy
• the role of equilibrium and disequilibrium;
• the role of stability vs. instability;
• modeling macroeconomics in continuous time vs discrete time: what kind of trade-offs
• introduction to models with heterogeneous agents
• introduction to "stock and flow consistent" models
• the transition from an unstable world to a sustainable world in an ethical sense; utopia or ultimate goal of economic policy action?
• introduction to the relationship between macroeconomics and complexity: the role of complex adaptive systems
The course mainly refers to traditional lectures which are meant to provide a logical structure for the topics that make up the course, to emphasize the important concepts and methods of each topic and to provide relevant examples to which the concepts and methods are applied. Discussion will be highly encouraged and reading in advance strongly recommended. Tutorials and homework exercises will be left to students for self-evaluation and autonomous learning. Group presentations maybe also organized upon student’s request. In this case the groups will consist of 4 students at most, and each group will be allocated a paper on which they are to make a 40-minute presentation.
The final evaluation will consist of two parts:
• First part (short) on the day of the exam 1/3 of the final evaluation: short questions preferably in an open form covering all the topics faced in the course (and eventually students' presentations). Purpose of this part of the exam: verification of basic notions and skills related to the course
• Second part (long) “take-home” exam 2/3 of the final grade: each student will extract 4 individual questions and will have to answer two of them writing short essays of 2500-3000 words each. Time for the return of the paper: 10 days from the extraction of the questions. Purpose this part of the exam: evaluate critical processing skills and individual research autonomy.
• Students who give a presentation during the course, will be exempted from part of the final exam. Weight on the final evaluation: ½. Specifically, the reduction will involve half of the first part (residual weight 1/6) and half of the second part (only one question instead of two, residual weight 1/3).