Course Description 

Economic Research Southern Africa (ERSA) invites applications for an advanced skills workshop on Heterogeneous Agent Macroeconomic Models, instructed by Professor Alexander Ludwig. It will provide participants with cutting-edge tools for policy analysis using quantitative overlapping generations (OLG) models.

This course develops key tools for analysing policy questions using quantitative OLG models. We begin with the classical frameworks of Auerbach, Kotlikoff, and Skinner (1983) and Auerbach and Kotlikoff (1987), and extend these models to incorporate idiosyncratic and aggregate risk. The first part of the course covers partial equilibrium life-cycle models of consumption and savings to introduce participants to the key concepts of life-cycle and precautionary savings. The second part focuses on general equilibrium overlapping generation models with idiosyncratic risk, and the third part extends further to models with aggregate risk. Throughout, we emphasise global solution methods that capture the non-linear dynamics of the economic model. The course concludes with applications to a range of policy questions, including education and tax reforms, pension reforms, and climate policy in models with idiosyncratic and aggregate risk.

We will cover the main course content in lectures and will deepen our knowledge of the material in exercise sessions that are hands on, i.e., we will develop solutions to complex macroeconomic models jointly in the classroom. As course material, participating scholars will receive lecture notes, handouts and the Matlab computer codes developed and discussed in the exercise sessions.

Outline for the Course

• Lecture 1
  • Permanent-Income Life-Cycle Model (PILCH)
  • Extensions: Stochastic income and liquidity constraints
• Lecture 2
  • Two-Generation OLG Model with idiosyncratic and aggregate risk
  • Epstein–Zin–Weil preferences
• Lecture 3
  • Multi-Generation OLG Models
  • Deterministic Auerbach–Kotlikoff model
  • Extensions with idiosyncratic risk
  • Numerical solution methods
• Lecture 4
  • Extensions to models with aggregate risk
  • Krusell–Smith algorithm and extensions
  • Neural networks
• Lecture 5
  • Applications: Human capital models, education policy reforms, pension reforms, climate change

Instructor

Professor Alexander Ludwig joined the European University Institute in September 2024, taking leave from his position as Professor of Economics at Goethe University Frankfurt (2014-2024). He previously taught at Cologne University (2009–2014).

His research investigates the effects of demographic change on growth and the inter- and intra-generational distribution of wealth and welfare, as well as the optimal design of social insurance schemes and education policies. He has published extensively in leading journals including the Journal of Monetary Economics, American Economic Journal, Journal of Economic Theory, and International Economic Review. He has published many Working Papers in our Working Paper Series, which you can learn more about here.

Target Participants

This workshop builds on the introductory course presented by Professor Ludwig in early 2025 and represents a substantial step up in technical level. Participants are not required to have prior experience with OLG models specifically. However, they are expected to have strong prior training in macroeconomic and growth modelling (e.g., familiarity with dynamic general equilibrium models) and be comfortable working with quantitative methods.

The workshop is intended for advanced PhD students, postdoctoral researchers, academic economists, and applied researchers in policy institutions (e.g., central banks, treasuries, and economic think tanks) who wish to develop advanced skills in heterogeneous agent macroeconomic modelling. To apply, complete the form below and in your cover letter, please describe previous experience with macroeconomic modelling, with links to relevant publications.

Format and schedule

Interested applicants are requested to register by completing the registration form below by Monday, 1 December. Application decisions will be communicated by Wednesday, 17 December. Please note that space is limited to 20 students. ERSA will cover the travel and accommodation costs for participants from South African institutions.

For any further information or if you have any questions, please email Yoemna Mosaval, organiser at ERSA (yoemna.mosaval@econrsa.org) with the subject header “Heterogeneous Agent Macroeconomic Models Skills Workshop”.