MATLAB

Econ 483 Project – Summer 2016

Summary: You will conduct independent research on a policy-relevant question. The purpose of the project is to

develop your understanding of an area in macroeconomics and to apply computational methods you have

developed in this course to that question.

In the first half of this course, we will review empirical research on a variety of macroeconomic topics:

 Inflation expectations of households and professional forecasters

 Central bank communication

 Commitment to central bank projections

 The long term scarring effects of unemployment

 Poverty and economic decision making

 Generational differences in risk-taking behaviour

 Saving behaviour

For this project, you will select one of the above mentioned areas for further exploration and complete the

following tasks:

Part 1: Due on Thursday June 30 via Canvas. [Feel free to submit earlier!!]

1) Find a dynamic model that would complement the topic above. For example, if you were interested in

studying inflation expectations or central bank communication, you would typically focus on the New

Keynesian model. If you were interested in the duration spells of unemployment, there are many

models of unemployment to choose from. Likewise there are many models of consumption and saving

behaviour.

Importantly, the dynamic model should involve decision making over numerous periods. That is, the

agent(s) making decisions in the model should be solving an inter-temporal optimization problem.

You should look in a variety of sources for possible models to work with: textbooks, articles on Google

Scholar and reputable journals, etc. Contact me if you are having trouble finding a model to work with.

Cite the source of your dynamic model.

2) Write out the model’s equations. Then explain the model in your own words. Explain how monetary

policy or fiscal policy would be theorized to influence the decisions of agents in your model.

3) Propose 5 different policy-relevant questions that you could possibly answer or experiments you could

conduct using the model.1 For each question, explain why answering this question would be interesting

to macroeconomists.

After receiving Part 1, I will advise you on the selection of your model, and give you some indication as

to which of the questions you proposed would be interesting to study computationally. If necessary, we

will set up a meeting to discuss how you should proceed with the project.

1 If you should choose the New Keynesian model to study, please come up with distinctly different questions from what you studied in class or completed in your homework assignments.

Part 2: Due on Monday August 8 via Canvas.

You will submit a 10-12 page paper (not including the Appendix) focusing on 1-2 questions posed in Part 1 of this

project. Your project should consist of the following sections:

1) Introduction

a. Explain what your over-arching topic is and the questions that will be addressed through your

simulations. You may wish to provide a quick summary of your results.

2) Research questions

a. Explain what the research questions are and why they are important. Have other researchers

addressed these questions? If so, briefly discuss their findings.

3) Description of model being simulated

a. Clearly describe the model being used and the assumptions you make about agents’ behaviour.

b. Provide relevant equations for the model. Please use an equation editor in Word or a similar

writing package to ensure that the model is well formatted.

c. Specify the parameterization of your model and motivation for using such a parameterization.

d. Explain what variations you will conduct in your simulation to answer your research questions.

4) Simulation Results

a. For each research question, create a subsection where you present your simulation results.

i. As you conduct different computational exercises, explain clearly what you are doing.

ii. Explain quantitatively and qualitatively what effect your experimentation has on the

outcome.

5) Conclusion

a. In 1-2 paragraphs, briefly summarize what your research question was, what you did to answer

your questions, and your results.

b. Discuss the policy implications associated with your findings.

c. If relevant, discuss any interesting avenues for possible research.

6) References Cited

a. Provide APA citations for all references used in your paper.

7) Tables and Figures

a. Properly number all tables and figures.

b. Consider reducing the number of figures by plotting two results simultaneously. For example, if

you were comparing the effects of two different policy rules, plot the simulations of a particular

variable for each rule in the same figure. The Dynare manual and forum give advice on how to

do this.

8) Appendix

a. Provide all of your Dynare code.

b. If relevant, include any additional materials or findings worth noting. Please make sure it is

obvious why this material is included in the Appendix.

Grading:

Part 1: 25%; Part 2: 75%

Each part will be evaluated for

Content / Clarity of Written English / Originality / Economic Intuition / Professionalism of submission