Course

Mandatory

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When registering for courses, please be aware of the potential conflicts and overlaps between course and exam time and dates. The planning of course activities at Roskilde University is based on the recommended study programmes, which should not overlap. However, if you choose optional courses and/or study plans that goes beyond the recommended study programmes, an overlap of lectures or exam dates may occur depending on which courses you choose.

This course introduces advanced econometric techniques in modern empirical macroeconomics and applies them to real-world data to address current issues, models, and techniques in macroeconomics. Its main objective is to provide students with practical experience in macroeconometric modeling to study contemporary macroeconomic topics such as economic growth, unemployment and inflation, monetary policy and central banking, trade and the balance of payments, exchange rates and capital flows, and income and wealth inequality. To achieve this, the course emphasizes both macroeconomic theory, which shapes macroeconomic models and informs empirical strategies, and econometric methods, including time-series econometrics, to test economic theories and hypotheses. This approach integrates macro-level relationships with econometric techniques to provide empirical insights into macroeconomic policymaking. By integrating econometrics with macroeconomics, the course emphasizes both econometric concepts and their practical applications, exploring how macroeconomic policies such as monetary and fiscal policies affect the real economy and financial markets. Additionally, the course explores other analytical and computational modeling approaches such as, stock-flow consistent (SFC) models and agent-based modeling (ABM) to introduce alternative macroeconomic frameworks and evaluate various methods for investigating economic phenomena.

Advanced Macroeconomics

How can we better understand macroeconomic crises, inflation, and inequality when dominant theories fall short? This course critically examines both mainstream and heterodox macroeconomic frameworks, assessing their ability to explain major economic challenges.

In this course, we place macroeconomic models in real-world contexts and move beyond conventional approaches by introducing alternative and critical perspectives. The aim is to integrate theoretical inquiry with empirical macro modelling, enabling students to both critique and construct models that reflect contemporary issues such as financial instability, income and wealth inequality, and the effectiveness of monetary and fiscal policy.

By bridging theory with econometric and computational methods, the course highlights the interaction between model-building and empirical testing in analysing key macroeconomic phenomena—including growth, unemployment, monetary policy, and inflation. It emphasizes post-Keynesian approaches and Stock-Flow Consistent (SFC) models, which offer deeper insight into the dynamics between the real and financial sectors.

Example themes and methods

• Mainstream and post-Keynesian macroeconomic paradigms • Demand-led growth, inflation, unemployment, inequality • Endogenous money, global finance, financial fragility • Monetary and fiscal policy, central banking • Trade, balance of payments, exchange rates and capital flows • Real-financial interaction through SFC modelling • Theoretical construction of macro models

Concepts and Theories

• Critique of mainstream (neoclassical, New Keynesian, DSGE models) • The principle of effective demand, pricing, distribution and growth • Endogenous money, interest rate policy and financial instability • Monetary circuit theory and structural macro dynamics • Government spending, investment, and consumption dynamics • Fiscal policy and monetary sovereignty • Open economy macroeconomics and global finance

Advanced Econometrics Can we empirically validate—or challenge—macroeconomic theory using modern econometric methods? This course focuses on empirical strategies for macroeconomic analysis by introducing advanced econometric techniques and their applications to macro-level phenomena. It complements theoretical insights from Advanced Macroeconomics by providing the methodological tools needed to test models of inflation, unemployment, monetary policy, and more using real-world data.

The course covers a range of modern econometric techniques, including, Quantile Autoregressive Distributed Lag (QARDL), Non-Linear ARDL (NARDL), Cross-sectional ARDL (CS-ARDL) Method of Moments Quantile Regression (MMQR), Johansen cointegration, Granger causality, Asymmetric Causality, and Time-Varying Causality to understand the patterns in economic data.

Students will apply advanced econometric techniques byusing econometric software, primarily R, along with, MATLAB and STATA, with additional programs introduced as needed for specific topics.

The course equips students with the tools to empirically evaluate macroeconomic models introduced in the theoretical component. It aims to develop practical modelling skills and empirical strategies for macroeconomic analysis by introducing advanced econometric techniques and their applications to macro-level phenomena. By integrating econometrics with macroeconomic frameworks, students are trained to produce research that is both theoretically informed and empirically grounded.

Example themes and methods • Advanced time-series and panel data analysis • Empirical testing of macroeconomic models • Dynamic and non-linear modelling (QARDL, NARDL, MMQR) • Granger and asymmetric causality, time-varying causality • Applied econometric software training (R, MATLAB, STATA)

Concepts and Theories • Stationarity, unit roots, and cointegration • Regime shifts in macroeconomic data (Fourier terms) • Model specification and estimation techniques • VAR/ VECM, Granger and asymmetric/time-varying causality • Non-linear ARDL (NARDL), QARDL, and MMQR • Panel data models (static and dynamic), • Cross-sectional dependency (CSD) and heterogeneity

Readings and preparation work will be specified and made available on the course’s Moodle page shortly before the course begins.

The total workload associated with a 10 ECTS course is 270 hours.

For this course, the workload is allocated as:

Classes: 36 hours Preparation for classes (readings, exercises, and other tasks): 188 hours (approx. 5 to 6 hours per hour of class) Exam and project work: 56 hours

1. Students receive feedback from the teacher through in-class discussions, exercises, and Q&A sessions. Individual feedback on the final exam may also be provided upon request.

2. The activity is evaluated regularly based on the study board's evaluation procedure. The responsible for the activity will be informed of any evaluation of the activity at the start of the semester. See link to the study board's evaluation practice here: https://intra.ruc.dk/nc/for-ansatte/organisering/raad-naevn-og-udvalg/studienaevn-oversigt/studienaevnet-for-erhvervs-og-samfundsoekonomi/arbejdet-med-kvalitet-i-uddannelserne/

After the course, students will be able to:

• understand the relationship between macroeconomic theory and empirical analysis

• appreciate the link between modern macroeconomics, econometrics, and applied work by focusing on relevant real-world data

• gain knowledge and practical experience in macroeconometric modeling, with a special emphasis on applications and data analysis

• learn how to apply econometric methods to test economic theories and hypotheses

• develop mathematical relationships between variables to capture aspects of economic reality

• learn advanced topics used in empirical macroeconomics, such as univariate time series modelling, multivariate models, and multivariate causality models

• become familiar with key econometric concepts (e.g., autocorrelation, stationarity, heteroscedasticity)

• replicate the results of published empirical studies and conduct alternative empirical investigations

• use techniques to build effective economic models and conduct high-level research in macroeconomic-related topics

• interpret the empirical results of macro models, using insights from advanced econometric methods to inform theoretical debates.

Individual written portfolio and oral exam Content of the portfolio for the joint exam In the context of Advanced Macroeconomics and Advanced Econometrics courses, there is strict character limit of 14,400–16,800 per student (including spaces). Note that this reflects a 50–50% allocation across the two courses. Students are required to submit one integrated portfolio product rather than two separate submissions. The goal of this joint product is to demonstrate their ability to combine macroeconomic theory with advanced empirical methods in a coherent and rigorous analysis. The project should thus focus on a topic where a well-articulated macroeconomic model or theoretical framework provides the foundation for empirical investigation using advanced econometric techniques.

Purpose and Integration The aim of the portfolio is to reflect the learning outcomes of both courses by: • Explaining how macroeconomic theory guides the research question and informs the structure of the empirical model. • Designing and implementing an empirical strategy to test hypotheses or model implications using real-world macroeconomic data and advanced econometric methods. • Interpreting empirical findings in light of macroeconomic theory, highlighting how results support, challenge, or refine theoretical positions. • Demonstrating how advanced econometric methods are employed to tease out meaningful and policy-relevant results. • Interpreting these empirical results within the context of macroeconomic theory, identifying whether they support, challenge, or refine existing theoretical understandings. • Reflecting on the theoretical implications of the findings and suggesting directions for further theoretical development. By combining theoretical modelling and empirical analysis in a single coherent product, students are expected to demonstrate integrated competence in both fields.

The Structure and Content Expectations Given the empirical nature of the joint course, students are encouraged to keep the introduction brief, focusing on motivating the research question and explaining its theoretical relevance. The goal is to establish a clear link between the chosen macroeconomic framework and the empirical model. The portfolio should include the following components: • A light introduction that motivates the topic and clearly formulates the research question, which should be directly tied to the empirical model. • A concise but conceptually grounded theoretical framework (Advanced Macroeconomics), where students describe the macroeconomic model or theoretical lens that informs their empirical work. • A clear empirical strategy (Advanced Econometrics), where students describe and justify their modeling choices and data techniques. • Since the written product is constrained by character count, students are encouraged to include detailed tables, data descriptions, and robustness checks in the appendix, while using the main text to demonstrate theoretical and methodological reasoning.

Oral Examination Expectations The student begins the oral examination with a brief presentation, after which the examination proceeds as a dialogue. In addition to the written product, students will be assessed on their ability to: • Explain how macroeconomic theory shapes the research question and empirical model. • Interpret empirical results in relation to the theoretical framework. • Demonstrate the application and relevance of advanced econometric methods. • Assess whether empirical findings support, challenge, or refine macroeconomic theory. • Reflect on the broader theoretical implications and suggest avenues for further research.

Assessment criteria It will be assessed to which degree the student demonstrates:

a) the ability to apply key concepts and theories from both macroeconomics and econometrics to analyze complex economic issues

b) a clear understanding of competing macroeconomic paradigms and their implications for real-world dynamics and policy

c) the ability to design and implement appropriate empirical strategies using real-world macroeconomic data

d) critical interpretation of econometric results in relation to theoretical expectations and policy relevance

e) critical engagement with the assumptions, limitations, and ideological underpinnings of both theoretical and empirical models

f) clarity, structure, and coherence in written communication across the portfolio

g) the ability to engage thoughtfully in oral discussion, respond to questions, and reflect on both written work and course content

h) integration of relevant academic literature and empirical evidence in both written and oral components

i) methodological awareness and sound justification for the choice of models and techniques in both macroeconomic and econometric analysis

In this exam, the use of generative AI (GenAI) tools is allowed as per the university's guidelines for the use of AI. Specifically, the following points must be observed: • When using GenAI tools, you must include a description of the purpose of using GenAI and which GenAI are used and how they have used. The description is assessed the same way as other methodology sections regarding the use of relevant literature, course’s general learning objectives, and assessment criteria. • Text copied from GenAI chats must be quoted the same way as citations from other texts. The citations and your demonstrated ability to interpret, evaluate and critically assess them is part of the overall assessment of the exam. Please consider including the prompt in a footnote to the citation if you find it relevant to demonstrate your description and analysis of the subject matter. • Ordinary spell checking and other language suggestions as known from Word or other word processing programs are allowed without declaration.