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The Macroeconomic Analysis and Policy program is made of courses dealing with topics at the frontier of policy‐relevant research: monetary and fiscal policy; heterogeneous households, inequality and redistribution (“HANK” models); financial crises; bubbles; labor markets and unemployment; and international linkages. The courses are taught by leading research and teaching figures in their respective fields. Emphasis is put on introducing tools and developing intuition. All courses review core, standard models useful for understanding crises and recessions, and the role of policy therein. Each course contains at least one part that deals with recent research at the frontier.


  • Heterogeneous-Agents Models - Tobias Broer
  • Macroeconomics of Public Finance - Axelle Ferrière
  • Macroeconomic Dynamics in Continuous Time - Riccardo Cioffi
  • Unemployment and Macroeconomics - Jean-Olivier Hairault
  • Bubbles and Real Activity - Gilles Saint-Paul

Heterogeneous-Agents Models - Tobias Broer

This course will introduce students to the analysis of income and wealth heterogeneity in macroeconomic models, highlighting their role for the levels and dynamics of asset prices, aggregate demand, and the effects of policies. The focus will be on simple, tractable models.

1. Introduction: Heterogeneity in macroeconomics, and in data

  • Why macroeconomics?
  • Why ’heterogeneity’?
  • Key facts about inequality

2. A first look at heterogeneity in a two-period framework

  • Aggregation with complete markets
  • Incomplete markets and precautionary savings
  • Towards general equilibrium

3. From two periods to infinite horizon

  • Aggregation
  • The permanent-income hypothesis
  • Precautionary savings
  • Concavity of the consumption function

4. Equilibria with idiosyncratic risk and incomplete markets

  • Stationary equilibrium with idiosyncratic risk and incomplete markets
  • Key properties
  • Applications: Precautionary savings, optimal redistribution, and the optimal quantity of public debt
  • The complications with aggregate risk

5. Heterogeneous-agent New Keynesian models

Macroeconomics of Public Finance - Axelle Ferrière

Rising inequality has become a major concern in the policy debate. Incomes at the top have grown substantially in the U.S. over the past forty years, whereas below-median incomes have stagnated. Wealth has also become more concentrated. In this context, how should a government design a tax-and-transfer system to reduce inequality while promoting growth? A large literature in macroeconomics has thought about optimal taxes in the context of Ramsey plans, where governments choose optimal tax systems within a narrow class of fiscal tools. We will first revisit the standard theoretical results on optimal taxes in macro models. Then, we will discuss the recent quantitative literature which uses realistically calibrated heterogeneous-agent general-equilibrium models to quantify optimal fiscal policy.


  • Part 1: Optimal Capital Taxes
  • Part 2: Optimal Tax Progressivity

Selected key references

  • Chamley, Christophe (1986). “Optimal taxation of capital income in general equilibrium with infinite lives”, Econometrica.
  • Conesa, Juan Carlos, Sagiri Kitao and Dirk Krueger (2009). “Taxing capital? Not a bad idea after all!” The American Economic Review.
  • Heathcote, Jonathan, Kjetil Storesletten and Giovanni L. Violante (2017). “Optimal Tax Progressivity: An Analytical Framework”, The Quarterly Journal of Economics.
  • Fagereng, Andreas, Luigi Guiso, Davide Malacrino and Luigi Pistaferri (2020). “Heterogeneity and Persistence in Returns to Wealth”, Econometrica.
  • Guvenen, Fatih, Gueorgui Kambourov, Burhan Kuruscu, Sergio Ocampo-Diaz and Daphne Chen (2023). “Use It or Lose It: Efficiency Gains from Wealth Taxation”, The Quarterly Journal of Economics.
  • Ferriere, Axelle, Philipp Gruebener, Gaston Navarro and Oliko Vardishvili (2023). “On the optimal design of transfers and income-tax progressivity”, JPE: Macro.
  • Guner, Nezih, Remzi Kaygusuz, and Gustavo Ventura (2023). “Rethinking the Welfare State,” Econometrica.

Macroeconomic Dynamics in Continuous Time - Riccardo Cioffi

This is a class on heterogeneous-agents macroeconomics in continuous time. The lectures will feature a mix of tools and applications. In terms of tools, we will cover continuous-time methods that are particularly useful for macroeconomists, especially to analyze models where the relevant state variable is a distribution. Such tools include Hamiltonians, Stochastic Calculus, Hamilton-Jacobi-Bellman equations, and Kolmogorov Forward Equations. However, rather than presenting an in-depth technical derivation of the methods, I will aim to provide a hands-on approach for you to use these methods in your own research.

In terms of applications, the first models we cover you will likely already be familiar with (such as the neoclassical growth model or the standard incomplete-markets models).
These will serve both as a backbone and motivation for the above-mentioned tools, and to show how continuous-time methods also allow us to gain further intuition about the models’ behavior.

Then, we will also use the tools we developed to explore more in detail the implications of heterogeneity for macroeconomic dynamics and macroeconomic policy.

Unemployment and Macroeconomics - Jean-Olivier Hairault

This class purports to review recent developments in labor macroeconomics. This course reviews the core intuition and mechanisms of the standard search and matching model. It uses this framework to study the unemployment volatility issue. It starts with an empirical investigation of the relative contribution of separations and hirings to the unemployment volatility and presents different extensions dealing with the Shimer’s puzzle (the inability of the standard model to explain the observed unemployment volatility). It reviews the standard explanations given to the observed high unemployment volatility, ie. wage rigidity, search complementarities, aggregate demand and unemployment inteactions.


  • Basic concepts and Facts
  • Unemployment fluctuations in the canonical matching model : solving the Shimer’s Puzzle
  • Beyond the canonical matching model
  • Aggregate demand and unemployment interactions

Selected key references

  • Blanchard, O. & Diamond, P. (1990). The cyclical behovior of the gross flows of u.s. workers. Brookings Papers on Economic Activity, 21(2), 85–156.
  • Fujita, S. & Ramey, G. (2009). The cyclicality of separation and job finding rates. International Economic Review, 50(2), 415–430.
  • Hairault, J. O., Le Barbanchon, T., & Sopraseuth, T. (2015). The cyclicality of the separation and job finding rates in France. European Economic Review.
  • Gomme, P. & Lkhagvasuren, D. (2015), ’Worker search effort as an amplification mechanism’, Journal of Monetary Economics 75.
  • Hagendorn, M. & Manovskii, I. (2008), ‘The cyclical behavior of equilibrium unemployment and vacancies revisited’, American Economic Review 98(4), 1692–1706.
  • Pissarides, C. (2000). Equilibrium Unemployment Theory. MIT Press.
  • Shimer, R. (2005b). The Cyclical Behavior of Equilibrium and Vacancies Unemployment. American Economic Review, 90(3), 482–498.
  • Andolfatto, D. (1996), ‘Business cycles and labor-market search’, The American Economic Review (1), 112–132.
  • Krusell, P. and Smith, A.A. (1998), Income and wealth heterogeneity in the macroeconomy, Journal of Political Economy, vol. 106(5), pp. 867-89.
  • Ravn, M. and Sterk, V. (2013), “Job uncertainty and deep recessions.” London. Report, University College.

Bubbles and Real Activity - Gilles Saint-Paul

A bubble is a deviation of an asset price from its fundamental value. We want to understand the conditions under which bubbles arise as well as their allocative consequences. The course will start with the analysis of rational bubbles in partial equilibrium. It will then examine the possibility of bubbles in general equilibrium models with overlapping generations, where they are similar to a Ponzi game; we show that their sustainability depends on whether or not the autarkic economy is dynamically inefficient, i.e. is such that there is capital overaccumulation. We will then move on to a more recent literature, studying the consequences of bubbles for long‐term growth, their role in models of financial accelerators, and the conditions for bubbles to arise in models with boundedly rational agents. We will conclude with recent papers on the effects of monetary policy on bubbles, if time permits.


  1. Rational bubbles in partial equilibrium
  2. Bubbles in Overlapping Generations models and dynamic inefficiency
  3. Bubbles in endogenous growth models
  4. Bubbles as collateral: financial accelerator
  5. Learning bubbles by boundedly rational agents
  6. Bubbles and monetary policy

Selected key references

  • Blanchard, O. J., and M. W. Watson (1982): Bubbles, Rational Expectations, and Financial Markets, in Crisis in the Economic and Financial Structure, ed. by P. Wachtel, pp. 295-315. Lexington, Lexington, MA.
  • Froot, Kenneth and Maurice Obstfeld (1991): “Intrinsic bubbles: the case of stock prices” American Economic Review 81(5) 1189-1124.
  • Tirole, Jean, 1985 “Asset bubbles and overlapping generations”, Econometrica
  • Olivier, Jacques, “Growth-enhancing bubbles”, International Economic Review, 41, 1, 133-151.
  • Galí , Jordi, “Monetary policy and rational asset price bubbles” NBER Working Paper 18806
  • Allen Franklin and Douglas Gale (2001), “Asset Price Bubbles and Monetary Policy”, Wharton WP.
  • Martin, A. and J. Ventura (2012), “Economic growth with bubbles”, American Economic Review, 102 (6), 2012, 3033-3058.
  • Adam, Marcet and Nicolini, “Stock Market Volatility and Learning”, 2008.

Contents – Macroeconomics