ECONOMICS AND FINANCE
Bachelor	TR-NQF-HE: Level 6	QF-EHEA: First Cycle	EQF-LLL: Level 6

Course Introduction and Application Information

Course Code	Course Name	Semester	Theoretical	Practical	Credit	ECTS
ECO2064	Dynamic Economic Models and Differential Equations	Spring	3	0	3	6

This catalog is for information purposes. Course status is determined by the relevant department at the beginning of semester.

Basic information

Language of instruction:	English
Type of course:	Departmental Elective
Course Level:	Bachelor’s Degree (First Cycle)
Mode of Delivery:	Hybrid
Course Coordinator :	Assoc. Prof. KAAN İRFAN ÖĞÜT
Course Lecturer(s):	Assoc. Prof. KAAN İRFAN ÖĞÜT
Recommended Optional Program Components:	None
Course Objectives:	This course provides students mathematical tools that are useful in analyzing dynamic economic models like Mundell – Fleming, Tobin – Blanchard or Dornbusch Models with system of differential equations and phase planes. This course also provides an introduction to the theory of nonlinear dynamics and chaos in nonlinear differential and difference equation systems.

Learning Outcomes

The students who have succeeded in this course;
1- Understand dynamic processes in economics and concepts of dynamic economics.
2- Solve differential equations and equation systems.
3- Analyze stability of dynamic systems on phase diagrams
4- Use Excel to calculate values and to sketch the graph of dynamic variables.
5- Establish dynamic macroeconomic models.
6- Use mathematical methods to analyze dynamic macroeconomic models
7- Simulate the macroeconomic models with Vensim software.

Course Content

I. Continuous Systems of Equations: Solutions to the Differential Equation System
The Phase Plane, Fixed Points and Stability

II. Discrete Systems of Equations
Solutions to the Difference Equation System

III. Closed Economy Dynamics
IS – LM Model
Tobin – Blanchard Model
The Dynamics of Inflation and Unemployment

IV. Open Economy Dynamics Sticky Price Models
Mundell – Fleming Model
Mundell – Fleming Model: Fiscal and Monetary Expansion Under Fixed Exchange Rates
Mundell – Fleming Model: Fiscal and Monetary Expansion Under Flexible Exchange Rates

V. Open Economy Dynamics Flexible Price Models
Dornbusch Model and Overshooting
Dornbusch – Blanchard Model

Weekly Detailed Course Contents

Week	Subject	Related Preparation
1)	Systems of First Order Differential Equations. Solutions to the Differential Equation System, The Phase Plane, Fixed Points and Stability
2)	Systems of First Order Differential Equations:The Phillips Inflation – Unemployment Model
3)	Discrete Systems of Equations Solutions to the Difference Equation System
4)	Closed Economy Dynamics. Dynamic IS – LM Model
5)	Closed Economy Dynamics with Linearization of Nonlinear Differential Equation System Tobin – Blanchard Model
6)	The Dynamics of Inflation and Unemployment Two Simple Models of Inflation Deflationary Death Spirals Money Growth and Inflation
7)	Open Economy Dynamics Sticky Price Models Mundell – Fleming Model: Fiscal and Monetary Expansion Under Fixed Exchange Rates
8)	Open Economy Dynamics Sticky Price Models Mundell – Fleming Model: Fiscal and Monetary Expansion Under Flexible Exchange Rates
9)	Midterm Exam
10)	Open Economy Dynamics Flexible Price Models Dornbusch (Daniel) Model and Overshooting
11)	Open Economy Dynamics Flexible Price Models Modified Dornbusch Model Dornbusch - Blanchard Model
12)	New Growth Theory R&D Modes Learning by Doing Model
13)	Calculus of Variation Inflation – Unemployment Model
14)	Dynamic Optimization and Optimal Control Theory Neoclassical Growth Theory
15)	Nonlinear Dynamics and Introduction to Chaos Kaldor’s non-linear cyclical model Population Models Goodwin’s Growth Model
16)	Final Exam

Sources

Course Notes / Textbooks:	Economic Dynamics, Ronald Shone, Cambridge University Press, 2002
References:	.

Evaluation System

Semester Requirements	Number of Activities	Level of Contribution
Quizzes	3	% 30
Project	1	% 25
Final	1	% 45
Total		% 100
PERCENTAGE OF SEMESTER WORK		% 30
PERCENTAGE OF FINAL WORK		% 70
Total		% 100

ECTS / Workload Table

Activities	Number of Activities	Duration (Hours)	Workload
Course Hours	16	3	48
Quizzes	3	5	15
Midterms	1	12	12
Final	1	25	25
Total Workload			100

Contribution of Learning Outcomes to Programme Outcomes

No Effect	1 Lowest	2 Low	3 Average	4 High	5 Highest

	Program Outcomes	Level of Contribution
1)	Build up a body of knowledge in mathematics and statistics, to use them, to understand how the mechanism of economy –both at micro and macro levels – works.	5
2)	Understand the common as well as distinctive characters of the markets, industries, market regulations and policies.	2
3)	Develop an awareness of different approaches to the economic events and why and how those approaches have been formed through the Economic History and understand the differences among those approaches by noticing at what extent they could explain the economic events.	1
4)	Analyze the interventions of politics to the economics and vice versa.	1
5)	Apply the economic analysis to everyday economic problems and evaluate the policy proposals for those problems by comparing opposite approaches.	3
6)	Understand current and new economic events and how the new approaches to the economics are formed and evaluating.	3
7)	Develop the communicative skills in order to explain the specific economic issues/events written, spoken and graphical form.	2
8)	Know how to formulate the economics problems and issues and define the solutions in a well-formed written form, which includes the hypothesis, literature, methodology and results / empirical evidence.	5
9)	Demonstrate the quantitative and qualitative capabilities and provide evidence for the hypotheses and economic arguments.	5
10)	Understand the information and changes related to the economy by using a foreign language and communicate with colleagues.	2