Teaching

Why do economies engage in trade and how does it affect the allocation of resources? What determines the real exchange rate and the current account balance? How does international exposure affect a country’s business cycles? This module aims to provide students with a coherent framework in which to address majority of the fundamental problems in international macroeconomics. Students will become fluent in standard international macroeconomic models including standard small-open economy real business cycle model, the MX and MXN open-economy models, and New-Open Economy models with imperfect competition and money demand.

This module focuses on the macro-economic aspects of labour supply, labour demand, unemployment volatility, and matching in the labour market. In this course we will examine the baseline Real-Business Cycle (RBC) model, the baseline New-Keynesian model (NKM) with sticky wages, and the Diamond-Mortenson-Pissarides (DMP) search model. We will discuss the appropriateness of these models’ predictions of observed labour market trends with a specific focus on the role of unemployment benefits, the 2008 recession, and the declining labour income share observed in developed economies.

After the course you should be able to discuss:

1. (a) The stylized facts of the labour market in developed economies; (b) the relative importance of the job finding rate and separation rates in a recession; and (c) differences in these rate between US and EU and what they mean for equilibrium unemployment.

2. The labour market predictions of the Real-Business Cycle and New Keynesian models and theirshortcomings in explaining labour market volatility in developed countries.

3. (a) The basic Diamond-Mortenson-Pissarides (DMP) search model; (b) reservation rates and endogenous job destruction; (c) the DMP model with on the job search; and (d) the impact ofproductivity shocks and shocks to matching technologies on labour market outcomes.

Game theory has become a powerful tool of economic analysis for situations where a small number of economic agents (firms, governments, individuals) behave interdependently (anticipate how their decisions affect others and how these others will then react). This module will analyse simple games, introduce the most standard equilibrium concepts, and focus on applications of these techniques in a variety of economic settings. We will devote attention to applications in industrial organization, political economy, auctions. Some attention will be paid to recent developments in game theory and behavioural economics.
Topics covered will include the following:

5 ECTS (ECU44014):

• Introduction: What is Game Theory?

• Simultaneous Move Games with Perfect Information: Nash Equilibrium

• Simultaneous Move Games with Perfect Information:  Mixed Strategy Equilibrium

• Simultaneous Move Games with Incomplete Information: Bayesian Nash Equilibrium

• Sequential Games with Perfect Information: Subgame Perfect Equilibrium

10 ECTS (ECU44012):

In addition to the topics covered in the 5 ECTS module, the 10 ECTS module will also cover the following topics:

• Sequential Games with Incomplete Information: Perfect Bayesian Equilibrium

• Signalling and cheap talk