How do macroeconomists explain short run macroeconomic fluctuations? And how does this inform macroeconomic policy? This course will provide an in-depth introduction to modern macroeconomic models of business cycles. We begin with a study of the canonical Real Business Cycle model – its assumptions, formulation, and solution methods. We cover the extensions needed to deal with the shortcomings of the canonical model with respect to labour markets and real dynamics. These extensions will cover various leading macroeconomic theories of labour markets, investment and consumption. Finally, we will study the extensions of the canonical model needed to account for the dynamics of nominal variables. The policy implications of these models will be studied throughout.
