CIMS Summer School

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The Centre for International Macroeconomic Studies (CIMS) in the School of Economics, University of Surrey held a 5-day summer course in September 2020.

The foundations course (days 1 to 4) aimed at early researchers with some knowledge of Real Business Cycle (RBC) or Dynamic Stochastic General Equilibrium (DSGE) macroeconomic models, but little or no experience of Dynare. This course assumes a basic knowledge of Matlab and will begin with the basics of Dynare and proceed to the construction, in stages, of a closed economy New Keynesian (NK) DSGE model. It will then progress to the estimation of the model by Bayesian methods and finish by showing how the model can be used to study optimal monetary policy.

Day 5 is a stand-alone course with focus on financial frictions

Each day consists of lecture sessions and exercise sessions. Slides and codes are provided below. At the end you find the full course notes. These are more detailed than the slides and have sort of a “textbook character”.

Day 1: Dynare Basics and the RBC Model

Day 2: The New Keynesian Model, Stability and Global Sensitivity Analysis

  • The New Keynesian (NK) Model (Slides)
  • Stability-Indeterminacy (Slides)
  • Introduction to the Global Sensitivity Analysis toolbox in Dynare (Slides)
  • Exercises (Codes)

Day 3: Bayesian Estimation of the NK Model (Slides)

  • Preparing the Data including use of various filters
  • An Introduction to Bayesian Methodology
  • Identification and Pre-estimation Checks
  • Direct Linear Estimation of the Non-Linear NK Model
  • Exercises (Codes)

Day 4: More on Estimation and Optimal Monetary Policy

  • Model Comparisons by Likelihood Races (Slides)
  • Comparison of Second Moments of Model with Data
  • Optimal Monetary Policy for Linear-Quadratic Problems (Slides)
  • Exercises (Codes)

Day 5: Financial Frictions in DSGE Models

  • Modeling Approaches to Financial Frictions in DSGE Models:
    • The NK Model (Slides)
    • The Gertler-Kiyotaki (GK) Model (Slides)
    • The BGG Financial Accelerator Model (Slides)
  • Bayesian Estimation and Comparison of Models (Slides)
  • Conventional and Unconventional Monetary Policy (Slides)
  • Implications of Financial Frictions for Optimal Policy
  • Exercises (Codes)

Full lecture notes: Day 1-4 (Notes) Day 5 (Notes)