NYU Stern School of Business

Undergraduate College

ECON-UB.0234.001 (C30.0234): Advanced Topics in Modern Macroeconomics

Fall 2012

Instructor Details

Ferriere, Axelle


to be updated

KMC 7-176


Course Meetings

MW, 11:00am to 12:15pm

KMC 5-140

Final Exam:

Schedule exceptions
    Class will not meet on:
    Class will meet on:


Course Description and Learning Goals

This course aims to teach both mathematical tools and economic workhorse models which comprise the base of modern macroeconomics. Below is a brief description of the topics that we will cover during this class.

This course has been prepared with Professor Thomas Sargent. He will teach some classes during the semester.

I expect this course to be demanding. In particular, we will learn and use advanced mathematical tools. Prior knowledge of and comfort with calculus and linear algebra will be helpful. The Stern course "The Economics of Global Business" (or its equivalent) is a prerequisite for this course.


Course Pre-Requisites

Prior knowledge of and comfort with calculus and linear algebra will be helpful. The Stern course "The Economics of Global Business" (or its equivalent) is a prerequisite for this course.


Course Outline

1. Math tools (a non-exhaustive list)

 - Laplace transformation

- z-transforms

- State-space representation of linear difference equation

- Stochastic linear difference equation

- Forecasting a geometric sum of future random variables

- "Solving stable roots backwards and instable roots forward"

- (or) Effects of foresight and transient decay

- Kuhn-Tucker and the min-max theorem

- Markov chains and joint distributions over histories that they induce

- Population least squares projection


2. "A little knowledge of geometric series goes a long way"

- A linear asset pricing formula

- "Dynamic Programing Solution" of asset pricing formula

- Bubbles

- Friedman’s permanent income model with rational expectations

- Borrowing limits

- Consumption growth as forecast of income

- Theory of interest rates - term structure


3. Complete Markets

- The event tree and the joint distribution

- Arrow-Debreu complete markets

- Generalization of Lucas model - asset pricing in an endowment economy


4. Financial Crises and Deposit Insurance

- The Diamond-Dybvig model

- The Kareken-Wallace model

- Problems with "Too big to fail"


5. Growth Theory

- A Malthusian Model

- The Solow Model

- The Cass-Koopmans optimal growth model


6. Fiscal Policy in the Growth Model

- Lump-sum and distorting taxes on capital labor and consumption

- The government budget constraint

- The shooting model

- Foreseen and unforeseen policy changes

- Linear approximation

- Feedback and feedforward contributions


7. Incomplete Markets

8. Asset Pricing in Incomplete Markets

- Stochastic discount factors

- Implications of Etmt+1Rt+1 = 1

- The Hansen-Jagannathan bounds

- Equity premium and risk-free rate puzzles

- Tallarini’s model

- Affine models of the term structure of interest rates


Assessment Components



Group Projects

Guidelines for Group Projects

Business activities involve group effort. Consequently, learning how to work effectively in a group is a critical part of your business education.

Every member is expected to carry an equal share of the group’s workload. As such, it is in your interest to be involved in all aspects of the project. Even if you divide the work rather than work on each piece together, you are still responsible for each part. The group project will be graded as a whole:   its different components will not be graded separately. Your exams may contain questions that are based on aspects of your group projects.

It is recommended that each group establish ground rules early in the process to facilitate your joint work including a problem-solving process for handling conflicts. In the infrequent case where you believe that a group member is not carrying out his or her fair share of work, you are urged not to permit problems to develop to a point where they become serious. If you cannot resolve conflicts internally after your best efforts, they should be brought to my attention and I will work with you to find a resolution.

You will be asked to complete a peer evaluation form to evaluate the contribution of each of your group members (including your own contribution) at the conclusion of each project. If there is consensus that a group member did not contribute a fair share of work to the project, I will consider this feedback during grading.



Problem Sets, Exams



The process of assigning grades is intended to be one of unbiased evaluation. Students are encouraged to respect the integrity and authority of the professor’s grading system and are discouraged from pursuing arbitrary challenges to it.

If you believe an inadvertent error has been made in the grading of an individual assignment or in assessing an overall course grade, a request to have the grade re-evaluated may be submitted. You must submit such requests in writing to me within 7 days of receiving the grade, including a brief written statement of why you believe that an error in grading has been made.


Professional Responsibilities For This Course




In-class contribution is a significant part of your grade and an important part of our shared learning experience. Your active participation helps me to evaluate your overall performance.
You can excel in this area if you come to class on time and contribute to the course by:




Classroom Norms


Stern Policies

General Behavior
The School expects that students will conduct themselves with respect and professionalism toward faculty, students, and others present in class and will follow the rules laid down by the instructor for classroom behavior.  Students who fail to do so may be asked to leave the classroom. 


Collaboration on Graded Assignments
Students may not work together on graded assignment unless the instructor gives express permission. 


Course Evaluations
Course evaluations are important to us and to students who come after you.  Please complete them thoughtfully.


Academic Integrity

Integrity is critical to the learning process and to all that we do here at NYU Stern. As members of our community, all students agree to abide by the NYU Stern Student Code of Conduct, which includes a commitment to:

The entire Stern Student Code of Conduct applies to all students enrolled in Stern courses and can be found here:

Undergraduate College: http://www.stern.nyu.edu/uc/codeofconduct
Graduate Programs: http://w4.stern.nyu.edu/studentactivities/involved.cfm?doc_id=102505

To help ensure the integrity of our learning community, prose assignments you submit to Blackboard will be submitted to Turnitin.  Turnitin will compare your submission to a database of prior submissions to Turnitin, current and archived Web pages, periodicals, journals, and publications.  Additionally, your document will become part of the Turnitin database.


Recording of Classes

Your class may be recorded for educational purposes


Students with Disabilities

If you have a qualified disability and will require academic accommodation of any kind during this course, you must notify me at the beginning of the course and provide a letter from the Moses Center for Students with Disabilities (CSD, 998-4980, www.nyu.edu/csd) verifying your registration and outlining the accommodations they recommend.  If you will need to take an exam at the CSD, you must submit a completed Exam Accommodations Form to them at least one week prior to the scheduled exam time to be guaranteed accommodation.


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