Monetary and Fiscal Policy Through a Dsge Lens

In Monetary and Fiscal Policy Through a DSGE Lens, Harold L. Cole develops and extends versions of a classic quantitative model of economic growth to take on a wide range of topics in monetary and fiscal policy. Bridging the gap between current undergraduate and graduate texts in the field, this comprehensive book covers the basic elements of advanced macroeconomics and equips readers to understand the debate on key policy questions.

By using the simple DSGE, or dynamic stochastic general equilibrium, framework to build a series of quantitative models, the book combines a gradual introduction to advanced analytic methods with computer programming and quantitative policy analysis. In a clear discussion of the sophisticated interaction between theory and data, Cole explains how to gauge how well a model captures key elements in the data and how to reverse engineer a model to data. The book covers costs of inflation, optimal monetary policy, the impact of labor and capital taxes, and optimal fiscal policy. It systematically discusses technical material including the new Keynesian liquidity shock models, standard analytic methods, such as Lagrangian methods, and computational methods using Matlab and Python. With a strong computational emphasis, the volume teaches how to program up and solve systems of non-linear equations and develop models to study the macroeconomy.

Knowing how to deeply understand and analyze models and develop computational code to evaluate the implications of those models is essential for students of macroeconomics. This book connects the standard undergraduate material to the elaborate models of advanced graduate courses with systematic and logical coverage of the basics of advanced modern macroeconomics.

Harold L. Cole is Professor of Economics at the University of Pennsylvania and Editor of the International Economic Review. He is a Fellow of the Econometric Society and the Society for the Advancement of Theory. He is a research associate of the NBER.

Chapter 1. Introduction

Part 1. Money in a DSGE Model

Chapter 2. The Cash-in-Advance Model - First Step
Chapter 3. The Cash-in-Advance Model - Second Step
Chapter 4. Some Interesting Extensions
Chapter 5. The Cash-In-Advance Model - Third Step
Chapter 6. The Statistical Model
Chapter 7. Some History
Chapter 8. Measurement Error and Our Data
Chapter 9. Money Supply Rules and Interest Rate Rules
Chapter 10. Price-Setting and Information Frictions
Chapter 11. Ination, Output, and the Phillips Curve
Chapter 12. The Great Depression Through the Lens of Our Model
Chapter 13. Liquidity Effects and Interest Rates


Part 2. Capital and Fiscal Policy

Chapter 14. A Model of Money and Capital
Chapter 15. Taxes
Chapter 16. Taxes in Our Model: Take 1
Chapter 17. Taxes in Our Model: Take 2
Chapter 18. Modeling Government Expenditures

Part 3. Dynamic Models with Capital

Chapter 19. Dynamic Adjustment with Capital
Chapter 20. A Business Cycle Model with Capital
Chapter 21. Optimal Monetary and Fiscal Policy

Part 4. Reviews

Chapter 22. Math Reviews
Chapter 23. Python and Dynare Code