Makěk3, Fall 2012 (Blok 2)

Business cycles and monetary stabilization policies:
"Old Breaking News"

Henrik Jensen
Department of Economics
K°benhavns Universitet

A collection of old news from the course web page



January 15:

The list of typos in slides has been updated with one entry. (And the promised solutions are there now :-) )

January 11:

I have added some clarifying comments to the solutions from the January 8 exercises.

January 8:

Next exercises:

Tuesday, January 15:

Exercise 5.2 in GalÝ (2008) - as for part "b)" you should also be able to compute to discretionary policy

Wednesday, January 16:

Exercise 5.1 in GalÝ (2008)
+ Talk and tips about the exam

January 2:

Replacement exercises will be held on Wednesday, January 16, 13.15-15.00 in Aud 4.



January 8:

Solutions to today's exercises have been posted under "Exercises and exam sets".

January 8:

Next lectures:

Monday, January 14:
We conclude "Sticky Prices and Sticky Wages in the New-Keynesian model"  (Chapter 6, GalÝ, 2008).



January 7:

Exam sets and the associated suggested answers for two prior exams I have done on this material have been posted under exercises. Until today, I thought it was material you could access elsewhere (my material is available on my teaching webpage; sorry if that has not been clear).

January 6:

An updated schedule has been uploaded.


January 2:


Next lectures:

Monday, January 7:
    - We conclude "Monetary Policy Tradeoffs" with "The Case of Small Distortions" (Chapter 5, GalÝ, 2008).
    - We start "Sticky Prices and Sticky Wages in the New-Keynesian model"
       (Chapter 6, GalÝ, 2008, pp. 119-131).
      (slides for the entire Chapter 6 are now available, as well as an expository note on
      the concept of complete financial markets and "risk-sharing")

Next exercises:

Tuesday, January 8:

1. Exercise 4.1 in GalÝ (2008)
2. Exercise 4.2 in GalÝ (2008)



December 18:



December 18:

Exercises today are cancelled! Replacement session hopefully under way.



December 12:

Next lectures:

Monday, December 17: "Monetary Policy Tradeoffs: Discretion versus Commitment" (Chapter 5, GalÝ, 2008).

Next exercises:

Tuesday, December 18:

1. Exercise 4.1 in GalÝ (2008)
2. Exercise 4.2 in GalÝ (2008)



December 6:

Exercises for Tuesday, December 11:

1. Derive the dynamics of the New-Keynesian model on matrix form (or, state-space form), (26)

2. Derive the condition for determinacy, (27) in GalÝ, Chapter 3. Hint: A 2Î2 matrix has two stable roots, when the coefficients in the characteristic polynomial τ▓+a₁τ+a₀ satisfy |a₀|<1 and |a₁|<1+a₀ . (If this hint is not readable here, you can get it in pdf.)

3. Derive the explicit solutions for the output gap, inflation, and the nominal interest rate and output in New-Keynesian model of GalÝ, Chapter 3 (page 51) under an interest-rate rule (and in the absence of technology shocks). Use the method of undetermined coefficients, and interpret the solutions economically


December 4:

Three notes have been uploaded to the Notes section. One is on the dynamics of the basic NK model including my drawings from the lectures. Another is the full derivation of the classical model with money in the utility function from the exercises today. The last is a proof of a lemma used in Chapter 4 (but where proof is made by reference to another source). Enjoy!

December 4:

Next lectures:

Monday, December 10: We continue with "Monetary Policy Design in the Basic New Keynesian Model" (Chapter 4, GalÝ, 2008). In the Notes section, I have posted a note that proves Lemma 2 used in the derivation of the welfare measure.


November 29:

Next lectures:

Monday, December 3: We continue with "The Basic New Keynesian Model (Chapter 3, GalÝ, 2008), and will start on "Monetary Policy Design in the Basic New Keynesian Model" (Chapter 4, GalÝ, 2008; read until page 74, Section 4.3).

The slides I post, however, contains material for the entire chapter, as it is more convenient (for you when reading for the exam) to have the slides/chapters "synchronized".

Exercises for Tuesday, December 4:

November 27:

Exercises today are unfortunately cancelled. We will do them next time (December 4). Stay tuned


November 22:

Next lectures:
Monday, November 26: The Basic New Keynesian Model (Read Chapter 3 in GalÝ (2008)) (slides will be up tomorrow).

Exercises for Tuesday, November 27:


November 19: Note that tomorrow we start with the part from November 19 slides on the Lucas critique before beginning on Chapter 2.

November 13:

Homepage is up, and a working schedule for the course is now available. See you on Monday!

November 13:

Our first three meetings will be lectures (after that, we shift between lectures and exercises):

November 19
Introductory lecture (Read Chapter 1 in GalÝ (2008))

November 20
A Classical Monetary Model  (Read Chapter 2 in GalÝ (2008))

November 26
The Basic New Keynesian Model (Read Chapter 3 in GalÝ (2008))