Homepage for Econ 502
Masters-Level Macroeconomic Theory

Last Updated: 18 February 2024

Econ 502 Homepage Site:

Last Course Offering: Fall 2017

Course Instructor:
Professor Leigh Tesfatsion
Department of Economics
Iowa State University
Ames, Iowa 50011-1070
tesfatsi AT iastate.edu

502 Syllabus (Topics&Assignments)
General Macro/Financial Resources

Course Meeting Time and Place:
Tuesdays/Thursdays 11-1pm, 272 Heady Hall
Fridays 12:10-1pm, 272 Heady Hall

Instructor's Office and Office Hours:
Office: 375 Heady Hall, (515-294-0138)
Office Hours: F 10-12, and by appointment

Teaching Assistant (TA):
Mr. Tianyang Zhang
tianyang AT iastate.edu

TA's Office and Office Hours:
Office: Heady 275 (515-708-1123)
Office Hours: M 3:05-5:05, and by appointment

Homepage Contents:

Course Objectives

Macroeconomists study the structure of national economies, the performance of these economies over time, and the role played by governments in the determination of this performance. The 2007-2009 economic crisis was the greatest challenge faced by macroeconomists since the Great Depression. Most failed to see the crisis coming. A key issue is why, and what this portends for the future of macroeconomics.

From Keynes' General Theory (1936) through the early 1970s, macroeconomic models primarily consisted of highly aggregated relationships for consumption, investment, and other key economic activities using some version of the AD/AS framework. Since the early 1970s, however, macroeconomists have developed a variety of models based more explicitly on microeconomic foundations, rational individual choice under uncertainty, and intertemporal optimization. The micro-based models currently being used by macroeconomic theorists can roughly be divided into three basic types: (1) N-period-lived overlapping generations models; (2) Dynamic Stochastic General Equilibrium (DSGE) models; and (3) agent-based macroeconomic models.

In this course we will undertake a broad but careful survey of macroeconomic theorizing and model-building, with a particular stress on recent developments. We will begin with a rigorous review of dynamic AD/AS models and simple forms of descriptive and optimal growth models as a bridge from undergraduate to graduate macroeconomic theory. The micro-based macroeconomic modeling approaches (1)-(3) will then be illustrated and critically compared in terms of logical coherence, tractability, empirical relevance, and policy implications. Particular attention will be focused on the following important modeling features in relationship to recent economic events: (a) microfoundations modeling of economic growth; (b) expectations modeling; and (c) the modeling of market coordination mechanisms.

Course Topics

  1. Introduction
  2. Aggregate AD/AS Macroeconomic Modeling: A Microfoundations Critique
  3. Economic Growth: A Microfoundations Approach
  4. Treatment of Expectations in Macroeconomic Models
  5. Dynamic Stochastic General Equilibrium Models and Taylor Rules
  6. Macroeconomic Modeling of Endogenous Coordination

Credits and Required Course Materials

Grading Policy

Grades for the course will be based on assigned take-home exercises (approximately one per week, each worth between 10-30 points), one midterm exam (70 points), and a final comprehensive exam (100 points). Depending on class enrollment, one or more graded in-class student-moderated discussions and/or debates might also be held. Every point, however earned, will count as one point in the accumulated total point score for the course. General contributions to class discussion will count for extra credit in case of a borderline grade.

In-Class Discussion Policy

Since required materials for Econ 502 will all be available to students in advance, as either on-line readings, course packet notes, or hand-outs, class discussion will be stressed in place of traditional lectures. Students will be expected to study required materials prior to attending the class in which these materials have been assigned for discussion. Key discussion questions will be identified in advance for each class meeting, and students should come to class prepared to participate in a discussion of these questions.

Take-Home Exercise Policy

As indicated at the top of each assigned take-home exercise sheet, these exercises must be received by me by the beginning of class on each due date in order to be counted as part of a student's cumulative course points. Late assignments will not be accepted for formal grading -- no exceptions. The reason for this policy is that exercise answers will be discussed in class on each due date. The passing out of an exercise answer key and/or the beginning of the discussion of the answers (whichever comes first) will be the effective dividing line between on-time and late assignments. The bag of collected exercises will be sealed at this time.

If you must miss class on a due date, you can still ensure your exercise is in on time by one of the following means: (a) have someone else carry the exercise to class for handing in; (b) hand in (or have someone else hand in) the exercise directly to the TA or to the instructor prior to the start of class on the due date (e.g., during office hours); or (c) put (or have someone else put) the exercise under the Heady 375 office door of the instructor no later than ten minutes prior to the start of class on the due date. Please note that putting exercises in the department mail box of the instructor or TA, or emailing answers to the instructor or TA, are not among these listed options because there is no set time that mailboxes and/or email will be checked.

The intent of this policy is to help ensure that student grading is fair and accurate. Your cooperation is appreciated.

Midterm and Final Exam: General Policy

The midterm exam for Econ 502 (Fall 2017) will be held on Thursday, October 5, at the regular class time in the regular class meeting room.

The final exam for Econ 502 (Fall 2017) will be held on Monday, December 11, 9:45-1145am, in the regular class meeting room, in accordance with the registrar's final exam schedule posted at Fall Final Exams.

Each exam will be a closed-book exam covering all required materials assigned prior to the date of the exam. These required materials will include:
  1. all in-class lectures/discussions led by the instructor;
  2. all take-home exercise assignments;
  3. all required (**-marked) readings listed on the Econ 502 syllabus;
  4. all supplementary required readings handed out in class;
  5. all in-class student-moderated discussion and/or debate assignments (if any);
  6. all required (**-marked) readings for in-class student-moderated discussion and/or debate assignments (if any).
Each exam will consist of a selection of problems designed to test your ability to think through macroeconomic issues using basic economic tools and concepts covered in the required course materials assigned prior to the date of the exam.

Test packets will be provided at each exam, so students do not need to bring paper or blue books to the exams. No use of calculators or other electronic devices will be permitted during the exam.

Absence from either the midterm or final exam will result in a grade of zero unless the instructor agrees there are verified extenuating circumstances such as a major medical emergency. In the latter case, the course grade will be determined on the basis of other work completed; no make-up exams will be scheduled. Any student missing both the midterm exam and the final exam will be asked to withdraw from the course.

To get a more concrete idea of what to expect on the midterm and final exams, please refer to the Econ 502 Syllabus Section on Midterm and Final Exam Review Materials.

Disability Statement

Iowa State University is committed to assuring that all educational activities are free from discrimination and harassment based on disability status. All students requesting accommodations are required to meet with staff in Student Disability Resources (SDR) to establish eligibility. A Student Academic Accommodation Request (SAAR) form will be provided to eligible students. The provision of reasonable accommodations in this course will be arranged after timely delivery of the SAAR form to the instructor. Students are encouraged to deliver completed SAAR forms as early in the semester as possible. SDR, a unit in the Dean of Students Office, is located in room 1076, Student Services Building or online at www.dso.iastate.edu/dr/. Contact SDR by e-mail at disabilityresources@iastate.edu or by phone at 515-294-7220 for additional information.

Copyright © Leigh Tesfatsion. All Rights Reserved.