APPLIES TO ACADEMIC YEAR 2013/2014

GRA 6639 Business Cycles

Responsible for the course
Hilde C Bjørnland

Department
Department of Economics

Term
According to study plan

ECTS Credits
6

Language of instruction
English

Introduction
This course is a graduate level course in macroeconomics, allowing theory to meet data. A special focus is on economic fluctuations and policies. To that end, the approach adopted emphasizes the dynamic dimension of interesting macroeconomic problems.

Learning outcome
The aim of this course is to expose the students to current macroeconomic theories and their implications for understanding key macroeconomic issues. This course is organized in a sequence of topics, where we address each topic in detail using both theory and econometric methods. The empirical relevance of the different theories will be critically assessed. The course focuses on economic fluctuations in open economies, covering topics such as (i) the stylized facts of business cycles and the role of different shocks in the cycle, (ii) advanced theories of the business cycles (quantitative macroeconomics) (iii) the role of financial variables, monetary policy and the business cycle, (iv) savings and the intertemporal approach to the current account, and (v) the role of fiscal policy to stabilize the business cycles.

Prerequisites
GRA 6634 Introduction to Advanced Macroeconomics (or a similar graduate introduction to macroeconomics.)

Compulsory reading
Books:
Galí, Jordi and Pau Rabanal. 2004. Technology shocks and aggregate fluctuations : how well does the RBC model fit postwar U.S. data?. National Bureau of Economic Research. NBER working paper 10636
Krueger, Dirk. 2007. Quantitative macroeconomics : an introduction. (Lecture notes) chpt. 1-11.. Gratis tilgjengelig: http://www.e-booksdirectory.com/details.php?ebook=2831
Obstfeld, Maurice. Kenneth Rogoff. 1996. Foundations of international macroeconomics. MIT Press. chapter 1.1-1.3 and chapter 2.1-2.3. Will be included in a compendium

Articles:
A number of articles relevant for the topics will be distributed
Bjørnland, Hilde C. 2000. "Detrending Methods and Stylized Facts of Business Cycles in Norway - An international comparison".. Empirical Economics. 25. 369-392
Bjørnland, H.C. and K. Leitemo. 2009. "Identifying the Interdependence between US Monetary Policy and the Stock Market". Journal of Monetary Economics. 56. 275–282
Case, Karl E., Quigley, John M. and Robert Shiller. 2005. Comparing Wealth Effects: The Stock Market versus the Housing Marke. Advances in Macroeconomics. 5 (1). s. 1235-1235
Christiano, Lawrence, Martin Eichenbaum, and Sergio Rebelo. 2011. When is the Government Spending Multiplier Large?. Journal of Political Economy. 119 (1)
Galí, Jordi, David López-Salido and Javier Vallés. 2007. Understanding the Effects of Government Spending on Consumption”. Journal of the European Economic Association. 5 (1). s. 227-270
King, R.G. and S.T. Rebelo. 2000. “Resuscitating Real Business Cycles”. NBER Working Paper. No. w7534

Other:
During the course there may be hand-outs and other material on additional topics relevant for the course and the examination.


Recommended reading
Books:
Romer, David H. 2012. Advanced macroeconomics. 4th ed. McGraw-Hill/Irwin. chpt. 5

Articles:
Kydland, F. E. and E. C. Prescott. 1990. Business cycles : Real facts and a monetary myth. Quarterly review Federal Reserve Bank of Minneapolis. Spring. p. 3-18

Journals:
Plosser, C. (1989):,. ”Understanding Real Business Cycles”. Journal of Economic Perspectives. vol 3(3). pp. 51-77.
Romer, C.R. (1999):. ”Changes in Business Cycles: Evidence and Explanations. Journal of Economic Perspectives. 13. 23-44.

Course outline
1. Stylized facts of business cycles
• Measuring business cycles (trend - cycles)
• The role of leading indicators
• Sources of business cycles, a story of different shocks

2. Advanced theories of business cycles (quantitative macroeconomics)
• Real Business Cycle models – or can economic fluctuations be explained by technology shocks?
• Theories of nominal price rigidity – or are rigidities sufficient to explain economic fluctuations?

3. Financial markets, monetary policy and the business cycle
• Financial markets, wealth effect and consumption
• Financial crisis - a story of boom-bust cycles (Case: The great depression versus the recent financial crisis)
• Interaction between monetary policy and asset prices. Empirical investigations

4. Savings and the current account
• The intertemporal approach to the current account
• The global saving glut and the US current account deficit

5.The role of fiscal policy to stabilize the business cycle
• Government spending and fiscal multipliers

Computer-based tools
It's learning

Learning process and workload
A course of 6 ECTS credits corresponds to a workload of 160-180 hours.

Please note that while attendance is not compulsory in all courses, it is the student’s own responsibility to obtain any information provided in class that is not included on the course homepage/It's learning or text book.


Examination
A group project/presentation (graded pass/fail) with 4-6 students in each group and written final exam (3 hours )

Both parts of the evaluation need to be passed in order to get a grade in the course.

Specific information regarding student evaluation beyond the information given in the course description will be provided in class. This information may be relevant for requirements for termpapers or other hand-ins, and/or where class participation can be one of several elements of the overall evaluation.

This is a course with continuous assessment (several exam elements) and one final exam code.

Examination code(s)
GRA 66394 accounts for 100 % of the final grade in the course GRA 6639.

Examination support materials
A bilingual dictionary and BI-approved exam calculator.
Exam aids at written examiniations are explained under exam information in the student portal @bi. Please note use of calculator and dictionary in the section on examaids

Re-sit examination
It is only possible to retake an examination when the course is next taught.
The assessment in some courses is based on more than one exam code.
Where this is the case, you may retake only the assessed components of one of these exam codes.
Where this is not the case, all of the assessed components of the course must be retaken.
All retaken examinations will incur an additional fee.

Additional information
Honor Code
Academic honesty and trust are important to all of us as individuals, and represent values that are encouraged and promoted by the honor code system. This is a most significant university tradition. Students are responsible for familiarizing themselves with the ideals of the honor code system, to which the faculty are also deeply committed.

Any violation of the honor code will be dealt with in accordance with BI’s procedures for cheating. These issues are a serious matter to everyone associated with the programs at BI and are at the heart of the honor code and academic integrity. If you have any questions about your responsibilities under the honor code, please ask.