MACROECONOMICS FOR ECONOMIC POLICY

Transcription

1 COURSE SYLLABUS MACROECONOMICS FOR ECONOMIC POLICY Instructors: Adam Reiff (lecturer), Rita Peto (TA) Department: Department of Economics, Central European University Semester and year: Fall, 2014/2015 Course level: Economic Policy MA 1 st year core course Number of credits: 4 CEU Credits (8 ECTS Credits) Pre-requisites: none Office hours: TBA Course Description The objective of the course is to provide a systematic introduction to macroeconomics for students of Economic Policy. The course is designed to provide students with a unified framework that can be used to analyze key macroeconomic issues such as growth, inflation, unemployment, budget deficits, recessions, productivity, interest rates, exchange rates, trade balance, monetary and fiscal policy. We develop simple theories that highlight the micro level underpinnings of aggregate outcomes, and use these models and other empirical evidence to address prominent issues of macroeconomic performance. The focus is on economic models that may be imperfect, still useful descriptions of economic reality. In understanding and interpreting these models, only very basic analytical concepts are used. Learning Outcomes Students understand the motivation for, the mechanics and significance of the relevant concepts taught. By the end of this course, students will: ü understand what macroeconomists study; ü understand how macroeconomists think; ü be familiar with key concepts in macroeconomics; ü be able to identify key questions; ü be familiar with basic macro models; ü be able to evaluate the usefulness of economic models; ü be able to use these models to analyze simple economic policy measures. Course Requirements A total of eighteen lectures and six seminars will be given during the term, each of them lasting for 100 minutes. The course material primarily comes from in-class lectures and discussions. The lectures describe important empirical regularities in order to help 1

2 identify key questions, guide model-building efforts, evaluate the usefulness of economic models, and provide perspective on major economic developments. Students are expected to come to class prepared to discuss the day's topic and encouraged to participate in class discussions. Besides regular class attendance, students are also assumed to carry out a fair amount of work on your own, including completing readings and problem sets as assigned. The text required for the course is Mankiw, Macroeconomics (5 th Ed.), Worth Publisher. (1) Final exam (50% of the final grade). Comprehensive exam on all materials in class meetings and required readings. Date: December 12, (2) Midterm (25% of the final grade). Comprehensive exam on all materials in the first 10 class meetings and the corresponding required readings. Date: November 3, (3) Homework assignments (20% of the final grade). There will be five assignments to be submitted, each for 4% of the final grade. These will be given on seminars 1-5, and will be due on seminars 2-6. (4) Class participation (5% of the final grade). COURSE SCHEDULE There will be eighteen lectures on the following topics: 1. Sep 23, Introduction, Data & Measurement (Chapters 1-2) Overview of Macroeconomics Measuring prices, output and (un)employment National Income Accounts 2. Sep 25, National Income (Chapter 3) Supply: production function, factors of production, division between factors Demand: components Equilibrium in goods and financial markets 3. Sep 30, Money and Inflation (Chapter 4) Quantity theory Fisher effect Costs of inflation 4. Oct 2, Unemployment (Chapter 6) 2

3 The natural rate of unemployment Frictional vs structural unemployment Duration of unemployment Unemployment trend in the US and Europe 5. Oct 7, Economic Growth I. (Chapter 7) The Solow-model The Golden rule level of capital Population growth 6. Oct 9, Economic Growth II. (Chapter 8) Technological progress Growth promoting policies Comparison of theory and empirics Endogenous growth 7. Oct 14, Economic fluctuations (Chapter 9) Sticky prices Short run aggregate demand and supply Stabilization policy after demand and supply shocks 8. Oct 16, Aggregate demand I (Chapter 10) Goods market: IS-curve Money market: LM-curve Equilibrium 9. Oct 28, Aggregate demand II (Chapter 11) Policy analysis in the IS-LM model IS-LM: theory of aggregate demand The Great Depression 10. Oct 30, Aggregate supply (Chapter 13) 3

4 Alternative models of short run aggregate supply The Phillips-curve Inflation expectations 11. Nov 11, Policy debates (Chapter 14) Active or passive policy? Rules or discretion? 12. Nov 13, Fiscal policy (Chapter 15) The size of government debt Traditional and Ricardian views of debt Other perspectives of debt 13. Nov 18, Consumption: micro approach (Chapter 16) Keynesian theory Fisher s theory of intertemporal choice Modigliani s life-cycle hypothesis Friedman s permanent income hypothesis Hall s random walk hypothesis 14. Nov 20, Investment: micro approach (Chapter 17) Business fixed, residential and inventory investment Determinants of investment Financing constraints 15. Nov 25, Money supply and demand (Chapter 18) Money supply: reserve banking and instruments of monetary policy Models of money demand 16. Nov 27, Business cycle theory (Chapter 19) Real business cycle theory New Keynesian economics 17. Dec 2, Open economy (Chapters 5 and 12) 4

5 Flows of goods and capital Savings and investment Exchange rates The Mundell-Fleming model 18. Dec 9, Summary There will be six problem-solving seminars on the following dates: 1. Oct 3, Oct 10, Oct 21, Nov 14, Nov 28, Dec 10,