In the Name of God

Quantitative Economics – Spring 2022

Seyed Ali Madanizadeh
Email: madanizadeh@sharif.edu
Office hours: by appointment
TAs: Marzieh Aghaei and Hesam Ahmadian

Overview of Course
This advanced course is designed to help second or third year PhD students to familiarize with
quantitative, computational and numerical methods used in micro-economic, macro-economics
and international trade. Dedicated MS students who have solid research questions in mind and
have good background in programming are also welcome to join the course. Main goals of the
course are the following:

• Introducing students to a variety of quantitative methods used in current economic

research.

• Mastering methods relevant to students’ research through “learning by doing”.

• Help students to start working on their quantitative research and improving their
presentation skills.

• Ultimately, our main goal is to help students to develop their own research idea along
this course.
Warning: You may have to allocate at least 10-15 hours per week for this course. Without that,
you won’t learn much from this course.

Reading List
Three main books extensively used are the following:

• [MMA] Cameron, A. Colin, and Pravin K. Trivedi. Microeconometrics: methods and

applications. Cambridge university press, 2005.

• [DCMS] Train, Kenneth E. Discrete choice methods with simulation. Cambridge

university press, 2009.

• [QE] Sargent, Thomas J., and John Stachurski, Quantitative Economics, 2017

• [DGEM] Heer and Maussner (2009) Dynamic General Equilibrium Modeling

Computational Methods and Applications
 • [DEQMA] Adda and Cooper (2002) Dynamic Economics Quantitative Methods and
Applications

• [k] Kortum, Technology in the Global Economy: A Framework for Quantitative Analysis.
DCMS and QE are made available by their authors for free download. List of the papers are
provided at the end of this document.

Course Schedule
This course is a 15-week 3 unit course comprised of the winter and spring quarter of 2022. First
two weeks of the course is devoted to introducing Python/Julia as the main programming
language used thoroughly in this course. Students are strongly recommended to use Julia, while
Python and MATLAB codes are also acceptable (but not recommended). We will have regular
TA session classes which are required and are considered as part of the course. Midterm is a
take-home exam on 1400/02/15 and Final is also a take-home one based on the university
calendar.

Evaluation
As said earlier, the goal of this course is to master quantitative methods through learning by
doing and ultimately leading you toward your own research. We will evaluate your progress
mainly based on homework and the course project. Homework and the projects can be done by
groups of up-to 2 students. Problem sets are designed to help you master the topics we discuss
in class. You should work hard on them if you want to fully grasp the material. Be aware of the
fact that there is no shortcut! Please honor the due dates as we won’t accept any late
homework.

Homework 50%

Midterm 15%

Final 20%

Projects 15%

Class Activity 5%

For the final project, we define two types of projects you are free to choose. First, you may
replicate one of the papers extensively studied in this course. After replication of the paper, you
have to go further and try to use Iran’s micro data to see if you can get similar results. We also
value replication of empirical papers that we did not have time to cover, but are in the reading
list.
Second type of the project is to use methods studied in the course to answer your own
question. For estimation part, you may use artificial data while using actual data is more
preferred.

Course Website: http://gsme.sharif.edu/~madanizadeh/Files/QE

Course Channel: https://ble.ir/quantecon

Course location: https://vc.sharif.edu/ch/madanizadeh

Topics:

• Introduction to QE (1 Sessions)
o Economic Modeling
o Why Quantitative Economics
o Structural vs Reduced form Estimation
o Computation/Optimization/Estimation
o Static vs Dynamic choices in Economics
o Continuous vs discrete choices in Economics
• Introduction to Julia/Python (3 Sessions in TA classes)
o First things first
▪ About Julia/Python
▪ Setting up Your Python Environment
▪ An Introductory Example
▪ Julia/Python Essentials
o Object Oriented Programming
o How it Works: Data, Variables and Names
o More Language Features
• Simulation Based Methods
o Monte-Carlo Method, MCMC (2 Sessions)
▪ Random number generation: Draws from distributions
▪ Accept/Reject Method
▪ Smoothing
▪ Monte-Carlo Integrals
o Applications in Estimation (2 Sessions)
▪ MLE/MSL
▪ GMM/SMM
▪ Indirect Inference
o Applications in Models
▪ Discrete Choice models (3 Sessions)
• Logit DCMS 1,2 and 3, (4 is optional) + MMA 14
• Probit: DCMS 5 + MMA 12
• M Mixed Logit and GEV: DCMS 6
• Nested Logit
• BLP
▪ Quantitative International Trade models: EKBook (2 Sessions)
▪ Bootstrap (1 Session)
▪ Bayesian Methods (2 Sessions)
 • MCMC
• Gibs Sampling
• Metropolis Hastings
• Bayesian Selection Models
• Iterative Methods in static models
o Numerical optimization (1 Sessions)
▪ Search Method
▪ Newton Method
▪ Advanced Methods
▪ Continuous Choice models
o Applications in Quantitative International Trade Models EK (2002) - AL (2007) (2
Sessions)
• Iterative methods in Dynamic Models
o Introduction to Dynamic Programming (4 Sessions)
▪ Value Function Iteration
▪ Policy Function Iteration
▪ Discrete Dynamic Programming
▪ Dynamic Programming with shocks
o Single Agent Problems (3 Sessions)
▪ Multiple Value Functions
• Search models: Mc Call, Neal (1999), Joshaghani (2017)
• Career Choice models: QE 3.4
▪ Non-Convex Dynamic Programming
• Investment (Convex and Non-Convex Adjustment Costs)
• Menu Cost Model in Monetary Economics (Caplin-Spulber (1987)
▪ Constrained Dynamic Programming
• Models with Borrowing Constraints: Aiyagari (1994), QE 3.3,
Gomes Lectures
o General Equilibrium Dynamic Models (2 Sessions)
▪ Recursive Competitive Equilibrium: RMT 7.1-1.5
▪ Markov Perfect Equilibrium: RMT 7.6
▪ The Lucas Asset Pricing Model: QE 3.2
o Heterogeneous Agents Dynamic Models (2 Sessions)
▪ Heterogeneous Agent models Computations
▪ Models with Borrowing Constraints: Aiyagari (1994) QE 3.3
▪ Het. Firms Investment problem, with and without financial constraints:
Gomes
▪ Models of Uncertainty: Bloom (2008)
 o Bounded Rational Expectation (1 Session)
▪ Krusell, Smith (1999)
• Approximation Methods (2 Sessions)
o Taylor approximation
o Polynomial approximation
o Log-Linearization
o LQ Dynamic Programming