This module is for post-graduate research students in the Department of Economics. In the first half of the course, we will study normative and positive aspects of dynamic fiscal policy with a particular focus on government debt. After a short introduction to quantitative macroeconomics using the software Matlab, we look at fiscal policy chosen by governments that (i) face political economy distortions, i.e., cannot commit beyond the current tax, expenditure, and debt policies; (ii) are subject to limited commitment, i.e., may strategically choose not to honour the outstanding debt obligations. Specifically, we will look at some or all of the following topics (depending on the progress through the term):
1. Standard solution methods for dynamic economic problems: value function iteration, time iteration, function approximation.
2. The political economy of government debt accumulation.
3. Sovereign debt and default.
In the second half of the course, we will analyse the implications of search frictions for the labour market. In particular, we will analyse the existence of unemployment and of wage dispersion across similar workers. We will develop the main tools of the search and matching approach, and we discuss both theoretical and empirical literature. We will look at some or all of the following topics (depending on progress through the term):
1. On-the-job Search and Wage Posting
2. Sequential Auctions and Individual Bargaining
3. Sorting in the Labour Market