CERGE-EI Master of Arts in Applied Economics. Course Description. 1. Course Name Applied Microeconomic Analysis. 2. Abbreviation AMA. 3.

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1 Applied Microeconomic Analysis AMA This course of microeconomics is aimed to introduce you to the economic fundamentals that underline working of the market and price formation, profitability, and the distribution of value. Economic fundamentals like costs, market demand, market competition and interaction, and government policies, are critical to strategic pricing decisions, capacity management, new market entry and exit decisions, to name a few. In particular, by the time you absolve this course, you will, among the others, learn how to do several things: 1. How to identify the costs categories that are relevant for critical business decisions such as pricing, capacity abandonment and exit, and new market entry. A typical business s costs fall into numerous categories and mistakes in identifying which of these categories truly matter for the decision at hand can lead to decisions that impair a business s competitiveness and destroy profitability. 2. How to construct simple models of how government interventions shape the determination of prices and the distribution of value in competitive markets. Insight about the impact of government intervention can not only make you a more informed consumer of the business and economic press (which can help you in job interviews!), it can help you spot opportunities for using the institutions in the non-market environment of your business to capture additional value or prevent the capture of value at your expense by others. 3. How the interplay between cost and demand fundamentals determine profit-maximizing pricing decisions in a various market conditions like monopoly, oligopoly, monopolistic

2 competition and perfectly competitive market. Pricing is one of the most important business decisions and an understanding of the role of economic fundamentals can translate directly into more profitable pricing decisions. 4. How various forms of price discrimination and advertisement can increase monopoly profit. Firms in noncompetitive markets often have substantial power to influence price. In such cases, it can often pay the firm to charge different prices to different groups. For example, movie theaters regularly charge less for admission for senior citizens, students, and youths than for adults. 5. How to represent various strategic interactions between firms in markets as games and how to determine the outcome of such games through equilibrium analysis. Game theory has become a widely used tool by strategic planners, management consultants, and investment analysts, and the construction of simple games can only force the decision maker or analyst to surface and confront hidden assumptions about competition and competitors. 6. How the government can cope with pollution and other externalities. Why market fails in generating public goods? What are common pools and why property rights are so important? The difference between the private and social costs is crucial in understanding the need for the government intervention in the market. Perloff, Jeffery, Microeconomics, Pearson, 2011, 6-th edition.

3 Macroeconomic Policy Analysis MPA Macroeconomics is the study of economic growth and business cycles. It aims to explain observed aggregate time series for economic variables like GDP, consumption, investment, prices and wages, and the rate of unemployment. In this course we will concentrate on the study of business cycles, or economic phenomena in the short run. In the short run an economy experiences nominal rigidities (sticky prices and wages) and expectational errors (prices that are different from what was expected). Rigidities and expectations make nominal aggregate demand, which could fluctuate because of some shock, affect real economic activity such as output and unemployment. Therefore, it is necessary to engage in aggregate demand management in order to stabilize the economy. We will study such stabilization policies (mostly fiscal and monetary) and the most efficient ways of performing them. The global financial and economic crisis of is a topic that will concern us throughout the course. We will attempt to look at it from a macroeconomist s point of view and evaluate different economic policies enacted around the world. We will dive into the world of macroeconomic data and the economic blogosphere, which debates current events. Introducing advanced macroeconomics : growth and business cycles / Sörensen, Peter Birch; Whitta-Jacobsen, Hans Jörgen. (2nd ed.) (2010)

4 Quantitative Methods 1 QM1 The goal of this course is to provide students with a knowledge of know the elements of statistical inference, namely multivariate statistics and multivariate data analysis methods. Students will understand and be able to perform standard descriptive and inferential data analysis, investigate and test relationship between variables, and specify, use and interpret multivariate models, including regression-type models. The course will also emphasize empirical analysis and focus on the use of data in practice along with the use of available statistical software. An empirical project is an integral part of the course. If possible, economics, financial, and business applications will be chosen during the course to reflect the interests and backgrounds of students. Studenmund (2011): Using Econometrics: A Practical Guide, 6/e, Pearson.

5 Quantitative Methods 2 QM2 This course is the second part of the Quantitative Methods sequence. We will first review the linear regression model covered in the first half of the sequence and then discuss circumstances under which the results from the ordinary least squares regression are biased and what can be done about it. Topics will include non-linear regression functions, instrumental variables regression, regression with panel data, and regression with limited dependent variable. These techniques are widely used in economic research carried out in governmental institutions, international organizations, central banks, as well as financial and business environment. Each topic will be illustrated by many examples. Students will learn how to answer empirical questions by formulating the right empirical model, choosing the right method, performing the estimation and interpreting and presenting their results. Objectives The goal of this course is to equip students with basic understanding of the standard econometric methods, as well as with the actual estimation skills and experience with empirical analysis. Regular hands-on sessions will allow students to master the estimation techniques, first by replicating the textbook examples, solving selected empirical assignments and carrying out two empirical projects. I. Nonlinear Regression Functions

6 a. Effect of X on Y in Linear Regression (Revision) b. Effect of X on Y in Nonlinear Regressions c. Polynomials d. Logarithms e. Interactions II. III. IV. When OLS Results are Biased a. Omitted Variable Bias b. Functional Form Misspecification c. Measurement Error Bias d. Missing Data and Sample Selection Bias e. Simultaneous Causality f. Biased Standard Errors ( Biased Inference) Instrumental Variables Regression a. One Regressor - One Instrument b. General Set-up c. Instrument Validity Regression with Panel Data a. Panel Data b. Two Time Periods (Before/After Comparisons) c. Pooled OLS Estimation d. Fixed Effect Estimation e. Repeated Cross-Section Data f. Difference-in-Difference Estimator V. Regression with Limited Dependent Variable a. Linear Probability Model b. Probit and Logit c. Effect of X on Y d. Measures of Fit e. Other Limited Dependent Variable Models Stock, J.H. and Watson, M.W. (2012) Introduction to Econometrics, 3 rd ed., Global / International Edition, Prentice Hall.

7 Project Seminar PS This is not a traditional course, but rather a credit-bearing, structured way to guide students through the writing of the Project. Writing a successful Project is one of the requirements for the degree, and it does not fall within the requirements of any of the other courses. Therefore, it belongs in the curriculum of the overall degree program as a separate course. The teacher of the Project Seminar will determine either an individual or a group work schedule leading to the completion of the final draft of the Project before the end of the semester. In brief, the Project is a capstone text that should reflect some of the student s best work in the MAE program, and should use much of the knowledge and skills gained in the other MAE courses. The student chooses a topic for the Project in consultation with the Project Seminar teacher and other professors, and researches and writes the project in several drafts in consultation with professors. The student must have one professor as her or his supervisor for the Project, and that supervisor and the Project Seminar teacher must approve the final draft of the Project. Near the end of the semester, and indeed near the end of the MAE Program, all students in the Project Seminar will present their Projects to a public audience. Professors and other students will be invited to the presentation and be encouraged to engage in a discussion about the Project. The Project Seminar teacher will grade the Project based on the quality of the text and the Project Seminar based on the written Project, the presentation, and the diligence/performance of the student. none