28876 - Macroeconomics 2

Course Unit Page


This teaching activity contributes to the achievement of the Sustainable Development Goals of the UN 2030 Agenda.

Decent work and economic growth

Academic Year 2021/2022

Learning outcomes

At the end of the course the student should have acquired a good understanding of macroeconomic models used to study the determinants and evolution of output, unemployment and prices, in the short and medium run, and of issues related to the conduct of monetary and fiscal policy. In particular, he/she knows: - the role played by nominal and real rigidities in the transmission of monetary shocks and the role of rational expectations; - the determinants of unemployment; - the meaning of sustainability and solvency in the public debt dynamics; - models of the political economy of public debt and default.

Course contents

Macroeconomics 2

Contents and purpose of the course

The course is a part module of the first-year macroconomics course, and deals with the microeconomic foundations and the policy implications of market imperfections, particularly in the goods and labour market.

The first part discusses the issue of nominal price rigidity and the implication for the transmission of monetary shocks to the real economy in a rational expectation set-up. It also considers the  role of monetary and fiscal policy in dynamic New Keynesian Models, in particular when interest rate are close to the Zero Lower Bound.  The second part analyzes the modern theories of unemployment: efficiency wages, implicit contracts insider-outsider and search models, which a focus on information, risk and decentralized matching and bargaining. The third part looks ad fiscal policy and the explanation for, and consequences of, budget deficits and public debt. Starting from the Debt Neutrality result, it introduces tax distortions and characterizes the optimal path of taxation over time. This part is concluded by political economy models of debt and defiicits.

Text Book:

Davide Romer (R), Advanced Macroeconomics, McGraw Hill

1.MicroFoundations of Market imperfections R: Ch.6

2. Theories of Unemployment, R Ch 11

3. Optimal Fiscal Policy: Debt Neutrality. Tax Smoothing. Debt default R: Ch11

4. Optimal Monetary Policy in Neo-Keynesian Models (Slides available from the Professor)


Suggested textbooks for this course are:
- David Romer (R), Advanced Macroeconomics, Mc Graw-Hill, 2006 (2nd ed)
- Blanchard, Olivier J. and Stanley Fisher, Lectures on Macroeconomics, MIT press
- Obstfeld, M, K.Rogoff, (OR), “International Macroconomics”, MIT Press
- A. Drazen, (D) Political Economy in Macroeconomics, MIT Press, 2004
- Further material for this course will be available in the personal webpage of the lecturer at this link


Teaching methods

Lectures, Handouts and Classes

Assessment methods

Written exam and home works

Teaching tools

Lectures, handhouts, classes

Links to further information


Office hours

See the website of Paolo Luciano Adalberto Manasse