Business cycles and monetary
stabilization policies:
"Old Breaking News"
Department of Economics
Københavns Universitet
A collection of old news from the course web page
January 12: Updated plan for our last session:
Monday, January 17: Exercises/Lectures:
a) Conclusion of Exercise 5.2 (if one of you find the coefficient on ut for the xt policy, all gets candy; if no-one does it, we'll see what happens to the candy)
b) Conclusion of slides on Chapter 6 on Sticky Prices (from "Welfare-relevant objective..." and onwards)
c) Some talk about the exam
As a consequence, the material on the Open-Economy Model (Galí, Chapter 7) will be cursory material.
January 10: For the lectures, Monday January 10, I couldn't bring physical copies of the slides as promised (sorry!), so I have posted them with my notes (but also in a "clean" version with typos corrected). Note still the recently posted note on complete markets and consumption risk sharing that will aid understanding of some of the Chapter 6 and 7 material.
Tuesday, January 11: Exercises:
∙ Exercise 5,2 in Galí (2008)
∙ Exercise 6.2 in Galí (2008) [Hint: Remember that firms maximize profits P_{t}*A_{t}*N_{t}
- W_{t}*N_{t} taking prices as given; you must use the log-version of the
associated "labor demand" expression]
Monday, January 17: Lecture:
Conclusion of slides on Chapter 6 on Sticky Prices (from
"Welfare-relevant objective..." and onwards)
An Open-Economy Model (Galí, Chapter 7)
Some talk about the exam
January 7: For the lectures, Monday January 10, I bring physical copies of the slides. I have posted a note on complete markets and consumption risk sharing (consumption equality among individuals in chapter 6), to aid understanding of some of the Chapter 6 (and 7) material.
Monday, January 10: Lecture: Sticky Prices and Wages (Galí, Chapter 6)
Tuesday, January 11: Exercises, TBA
HAPPY NEW YEAR!
January 3: Tomorrow's (Tuesday) lecture is unfortunately cancelled. We will have extra classes Monday, January 17 (in the usual location); see the updated schedule.
Monday, January 10: Lecture: Sticky Prices and Wages (Galí,
Chapter 6)
Tuesday, January 11: Exercises, TBA
December 14: One typo has been corrected in the typo document to lectures slides (this can be found at, yes you guessed right, "Lecture slides, ....")
December 13: The schedule for the course (which is found on this web page under "Schedule and contact information") has silently and sneakingly been updated on November 30.
Tuesday, December 14: Lecture: Monetary policy trade-offs, optimal policy and
credibility issues (Galí, Chapter 5)
* Speaking of credibility: As nobody won the
Grand Prize from proving Lemma 2, I promised to divide the prize into
smaller parts, which will be distributed in class at around 15.15.
Monday, December 20 - Tuesday, December 21 - Monday, December 27 - Tuesday, December 28: You study hard to keep the flow of the "Blok II" going and so as to be ready for 2011 and:
December 7: A list of typos in slides are posted under "Notes". There a no really big ones, but check it out in any case,
Monday, December 13: Exercises:
∙ Prove Lemma 2 on page 89 (this will yield a prize (TBA)!)
∙ Exercise 4.1 in Galí (2008)
∙ Exercise 4.2 in Galí (2008)
Tuesday, December 14 Lecture: Monetary policy trade-offs, optimal policy and credibility issues (Galí, Chapter 5)
November 30: I have posted a note on how to solve for
inflation in the classical model with the method of undetermined coefficients.
Next classes:
Tuesday, November 30: Lecture: The Basic New Keynesian Model (Galí, Chapter 3)
Monday, December 6: Exercises:
∙ Derive the dynamics of the New-Keynesian model on matrix form (or, state-space
form), (26)
∙ Derive the condition for determinacy, (27) in Galí, Chapter 3. Hint: A 2×2
matrix has two stable roots, when the coefficients in the characteristic
polynomial τ² + a₁τ + a₀ satisfy |a₀|<1 and |a₁|<1+a₀
∙ Derive the explicit solutions for the output gap, inflation, and the nominal
interest rate and output in New-Keynesian model of Galí, Chapter 3 (page 51)
under an interest-rate rule (and in the absence of technology shocks).
- Interpret the solutions economically
Monday, November 29: Exercises:
Derive the solutions for inflation, the nominal interest rate, and output in the model with money-in-the utility function on page 31 in Galí, Chapter. Interpret economically the effects of a_{t} and υ_{t} (this requires deriving the model from the beginning!).
Derive the demand function for individual goods under monopolistic competition (Appendix 3.1)
Derive aggregate price dynamics under sticky prices (Appendix 3.2)
Derive aggregate price dispersion under sticky prices
(Appendix 3.3)
Note that the three last exercises can be done without having read Chapter
3, but the results are useful background results for the lecture on the
Basic New-Keynesian model
Tuesday, November 30: Lecture: The Basic New Keynesian Model (Galí, Chapter 3)
November 16
Monday, November 22: Exercises (note that the fourth of the assignments had the wrong page number on the slides):
Derive equation (9) in Galí, Chapter 2
Derive equations (17), (18), (19) and (20) and interpret economically how the variables are affected by a_{t}.
Derive (23) and (24) and interpret the role of φ_{π} for uniqueness of equilibrium
Derive the solutions for inflation, the nominal interest rate, and output in the model with money-in-the utility function on page 31 in Galí, Chapter. Interpret economically the effects of a_{t} and υ_{t} (this requires deriving the model from the beginning!).
Tuesday, November 23: Lecture: The Basic New Keynesian Model (Galí, Chapter 3)
November 14
We'll start Monday, November 15, 9.15 in Aud 8. This will be a lecture, which
together with lectures on Tuesday will be based on Chapters 1 and 2 in Jordi
Galí's book. So it is a good idea to read these chapters at least before
Tuesday's lectures. I will announce which exercises we'll do the following
Monday on Tuesday (this should set a precedence for the course: Monday's
exercises are announced the preceding Tuesday).
Tuesday, November 16 is a lecture based on Chapter 2 in Jordi Galí's book.