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Advanced Macroeconomics I

Photograph of a corridor in the Federal Reserve Bank. The semicircular arches are interspersed with open areas that allow the light in. The photograph shows lines of perspective that start near the top and meet near the bottom of the photograph.

Federal Reserve Bank, San Francisco, California. (Image by Ric e Ette on Flickr.)


MIT Course Number


As Taught In

Fall 2009



Course Features

Course Description

This course covers three sets of topics. The first part will cover business cycle models with imperfect information. We will ask questions such as:

  • What shocks drive business cycles?
  • What is the relative role of shocks to fundamentals and shocks affecting expectations about (current and future) economic developments?
  • How do informational frictions affect the shape of the responses to various shocks?

The second part will cover models of investment with credit constraints. We will ask questions such as:

  • What is the transmission mechanism from shocks to the financial sector to the real economy?
  • What determines optimal decisions about capitalization at the individual and at the social level?

The third part will cover search models of decentralized trade applied both to labor markets and to financial markets. In particular, the models will have informational imperfections.

Lorenzoni, Guido, and Veronica Guerrieri. 14.461 Advanced Macroeconomics I, Fall 2009. (MIT OpenCourseWare: Massachusetts Institute of Technology), (Accessed). License: Creative Commons BY-NC-SA

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