An alternative approach to teaching Macroeconomics: Computational Macroeconomics

Modern macroeconomics is mainly based in the solution and simulation of Dynamic Stochastic General Equilibrium (DSGE) models. Standard DSGE models have not, in general, a closed-form solution and they need to be solved numerically. This is an important entry barrier for the study of modern macroeconomics at an under-graduate level, not due to complexity at the theoretical level but to the need to apply computational methods. However, a spreadsheet contains tools that can be used for the numerical simulation of simple macroeconomic models. This document is part of a book, Computational Macroeconomics, by the authors with the main objective to introduce under-graduate students to the basis of Computational Macroeconomics. It comprises a series of computer exercises, using different theoretical simple models. The book is divided into three parts: Basic Dynamic Models, Dynamic General Equilibrium and Economic Growth. The objective is to solve very simple dynamic macroeconomics models using numerical and computational techniques in a spreadsheet like Excel. The book contains a set of simple spreadsheets which solve numerically a number of dynamics model and performing shocks analyses by computing impulse-response function for the macroeconomic variables. In this paper we present one of the exercises included in the book, consisting of the numerical simulation of a dynamic version of the standard IS-LM model.