ECO442 Behavioral Macroeconomics (E)

• Topics

  How do households, firms, and investors form expectations about inflation, growth, and monetary policy? Why do central bank announcements sometimes trigger large movements in financial markets - and other times barely register? And how do beliefs, attention, and uncertainty shape the transmission of macroeconomic policy?

  Addressing these questions, this course introduces students to recent advances in behavioral macroeconomics, with a central focus on expectation formation and its causal impact on economic behaviour. We study how macroeconomic beliefs are formed, updated, and distorted - and why these processes matter critically for central bank policy, financial markets, and aggregate outcomes.

  Topics include:

  • Macroeconomic expectations: measurement and empirical methods using surveys and experiments
  • Central bank policy, communication and forecasting practices in financial institutions
  • Subjective models of the macroeconomy and models with incomplete information

  The course content and associated assessments are designed to help students develop research ideas and empirical skills, and may serve as a foundation for identifying topics that could potentially be extended into a Master's thesis.

• Learning outcome

  Knowledge

  Upon completion of the course, the student can:

  • Understand how to measure macroeconomic expectations and identify their causal effects
  • Explain how beliefs and information shape behaviour
  • Understand how measured expectations can be incorporated into macroeconomic models and policy analysis

  Skills

  • Design and implement surveys or experiments to elicit macroeconomic beliefs
  • Analyze and interpret expectation data and relate empirical findings to economic behavior and market outcomes
  • Effectively present research questions, methods, and empirical results in written and oral formats

  General competence

  • Critically evaluate policy by how it influences expectations
  • Connect theoretical insights with policy debates and financial practice

• Teaching

  • Lectures
  • Workshop on survey design
  • Group work
  • Student presentations

• Recommended prerequisites

  Knowledge of probability and statistics at the undergraduate level. Familiarity with empirical economics is recommended.

• Compulsory Activity

  Survey design and implementation are mandatory and must be completed at least four weeks prior to the essay submission deadline.

  Approved compulsory activities are only valid in the semester in which they were obtained

• Assessment

  The final assessment consists of a group project (2-4 students per group):

  • Writing an essay based on the survey findings (60%). Students will have approximately four weeks to complete the essay.
  • Presenting the results in class (40%). The presentations will be held at the end of the term and will last approximately 10-15 minutes per group.

  All parts of the group project must be passed in the same semester.

• Grading Scale

  A-F.

• Computer tools

  Students may use one of the following: R, Stata, or Python.

• Literature

  Reading list will be published in Leganto.