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The Macroeconomic Analysis and Policy module 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 deep understanding. All courses review core, standard models useful for understanding crises and recessions, and the role of policy therein. We then introduce recent research at the frontier.


  • Macro Policies in Simple Heterogeneous-Agent New Keynesian Models, Florin Bilbiie
  • International Macroeconomics, Jean Imbs
  • Bubbles, Gilles Saint-Paul
  • Unemployment, Labor Markets, and Policies, Jean-Olivier Hairault
  • Financial Crises: A Post-2008 Perspective, Romain Rancière

Macro Policies in Simple Heterogeneous-Agent New Keynesian Models - Florin Bilbiie

What can we learn (if anything) that is useful for policy in crisis times from current state-of-the-art macroeconomic models of the “New Keynesian” (NK) type (dynamic forward-looking general-equilibrium models with nominal and real rigidities) and their recent heterogeneous-agent extensions?

This course reviews the core intuition and mechanisms of the standard NK model (the two textbooks by Woodford and Gali are good references in order to refresh or introduce students to this framework). The course uses this framework to revisit issues such as liquidity traps and zero lower bound, forward guidance and quantitative easing, and the role of fiscal stimulus in recessions (distinguishing spending, taxes, and debt); we conclude by introducing a simple “HANK” (heterogeneous-agent NK) model and studying its implications for monetary and fiscal policies, and for inequality and redistribution.

Course structure

  • Quick review of a plain vanilla NK model
  • Liquidity traps and zero lower bound: Forward guidance and quantitative easing
  • Fiscal policy to fight a recession: Spending, taxes and public debt
  • Simple HANK Models: Inequality and Policy (“HANK”: Heterogeneous-Agent New Keynesian)

- Woodford, M., (2003). “Interest and Prices: Foundations of a Theory of Monetary Policy”. Princeton University Press
- Kaplan, G., Moll, B., and Violante, G. (2017) “Monetary Policy According to HANK”, American Economic Review
- Eggertsson, G.B. and Woodford, M. (2003) “The Zero Bound On Interest Rates And Optimal Monetary Policy,” Brookings Papers on Economic Activity 34, 2003‐1 (2003): 139‐235
- Bilbiie, F. (2011): “Non‐Separable Preferences, Frisch Labor Supply and the Consumption Multiplier of Government Spending: One Solution to a Fiscal Policy Puzzle”, Journal of Money, Credit and Banking.

Unemployment, Labor Markets, and Policies - Jean-Olivier Hairault

This class reviews recent developments in macro-labor economics. This course reviews the core intuition and mechanisms of the standard search and matching model with and without capital accumulation. It uses this framework to study unemployment volatility. The first part introduces empirical investigation of the relative contribution of separations and hirings to unemployment volatility and presents different extensions dealing with the Shimer’s puzzle (the inability of the standard model to explain the observed unemployment volatility). In the second part the course introduces equilibrium unemployment in DSGE models. In particular, it will present the different ways to deal with the heterogeneity issue raised by the co-existence of employed and unemployed households. In conclusion, optimal monetary policy will be reinvestigating in presence of unemployment.

Course structure

  • Relative contributions of separations and findings to unemployment volatility
  • Unemployment fluctuations in the matching model : solving the Shimer’s Puzzle
  • Unemployment in DSGE : Heterogeneity issues
  • Optimal monetary policy with unemployment

- Barnichon, R. (2010b). Productivity and unemployment over the business cycle. Journal of Monetary Economics, 57(8), 1013 – 1025.
- Fujita, S. & Ramey, G. (2012), ‘Exogenous versus endogenous separation’, American Economic Journal : Macroeconomics 4(4), 68–93.
- Shimer, R. (2005b). The Cyclical Behavior of Equilibrium and Vacancies Unemployment. American Economic Review, 90(3), 482–498.
- Ravn, M. and Sterk, V. (2013), “Job uncertainty and deep recessions.” London. Report, University College.

International Macroeconomics - Jean Imbs

This class reviews recent developments in international macroeconomics. The range of topics we cover corresponds to recent advances in the field, and is meant to give students a flavor of the current state of the art in international macro: global imbalances, exchange rates, contagion, and capital flows.

Course structure

  • Global Imbalances
  • Exchange Rates
  • Contagion and capital flows

- Obstfeld, M., and Rogoff K. (2005). “The Unsustainable US Current Account Position Revisited”, Brookings Papers on Economic Activity , issue 1, 67‐123.
- Obstfeld M. and Rogoff, K. (2000) “The Six Major Puzzles in International Macroeconomics: Is There a Common Cause?”, NBER Macro Annual 2000, also NBER working paper 7777.
- Lewis, K. (1996), “What can explain the apparent lack of consumption risk sharing?” Journal of Political Economy 104 (April): 267‐97.

Bubbles - Gilles Saint-Paul

This course introduces the literature on asset bubbles. 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 and their sustainability depends on whether or not the autarkic economy is dynamically inefficient, i.e. involves excess savings. 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.

Course structure

  • Rational bubbles in partial equilibrium
  • Bubbles in overlapping Generations models and dynamic inefficiency
  • Bubbles in endogenous growth models
  • Bubbles as collateral: Financial accelerator
  • Learning bubbles by boundedly rational agents
  • Bubbles and monetary policy

- Barlevy, Gadi (2007), “Economic theory and asset bubbles”, Journal of Economic Perspectives
- Olivier, Jacques, “Growth-enhancing bubbles”, International Economic Review, 41, 1, 133-151
- Martin, A. and J. Ventura (2012), “Economic growth with bubbles”, American Economic Review, 102 (6), 2012, 3033-3058
- Adam, Marcet and Nicolini (2016), “Stock Market Volatility and Learning” Journal of Finance, Volume71, Issue1, Pages 33-82

Financial Crises: A Post-2008 Perspective - Romain Rancière

The purpose of this course is to provide a post-2008 perspective on the key facts on financial crises and the mechanisms underlying them. The course will mix empirics with theory. The empirical facts will provide a long run perspective on the recurrence of different types of financial crises and recap on how the 2008 crisis is (or is not) different. The theory will be introduced through simple canonical models, putting the emphasis on deep understanding and insight. The course will be concluded by a special focus on Inequality and Crises.

Course structure

  • Financial Crises throughout history :How often do we see crises of each type? What are their costs in the short and in the long run?
  • Key Crisis Models : How much are crisis driven by fundamentals and/or by panic behavior?
  • Micro / Macro-Prudential Regulation and Policy Interventions during Crises : How can we best prevent crises and how shall we react to their incidence?
  • Inequality and Crises : Does Inequality cause Crises?

- Reinhart, C. and Rogoff, K. (2009) “This Time is Different: Eight Centuries of Financial Folly”. Princeton U. Press
- Douglas, G. and Franklin, A. (1998) “Optimal Financial Crises,” Journal of Finance, American Finance Association, vol. 53(4), pages 1245‐1284, 08
- Stein, J. (2012) Monetary Policy as Financial‐Stability Regulation. Quarterly Journal of Economics 127, no. 1: 57‐95
- Kumhof, M.; Rancière, R. and Winant, P. (2015) “Inequality, Leverage and Crises,” American Economic Review

Contents - Macroeconomics