Macroeconomics A European Text SIXTH EDITION Michael Burda and Charles Wyplosz OXFORD UNIVERSITY PRESS
Detailed Contents List of Tables xiii List of Figures xv List of Boxes xix 1 PART I Introduction to Macroeconomics 1 1 What is Macroeconomics? 3 1.1 Overview of Macroeconomics 4 1.2 Macroeconomics in the Long Run: Economic Growth 10 1.3 Macroeconomics in the Short Run: Business Cycles 12 1.4 Macroeconomics as a Science 76 1.5 The Methodology of Macroeconomics 19 1.6 Preview of the Book 22 2 Macroeconomic Accounts 26 2.1 Overview 27 2.2 Gross Domestic Product 27 2.3 Flows of Incomes and Expenditures 35 2.4 Balance of Payments 47 Summary 46 PART II The Macroeconomy in the Long Run 57 3 The Fundamentals of Economic Growth 53 3.1 Overview 54 3.2 Thinking about Economic Growth: Facts and Stylized Facts 55 3.3 Capital Accumulation and Economic Growth 61 3.4 Population Growth and Economic Growth 69 3.5 Technological Progress and Economic Growth 72 3.6 Growth Accounting 74 Summary 78 4 Explaining Economic Growth in the Long Run 8i 4.1 Overview 82 4.2 The Convergence Hypothesis 83 4.3 Conditional Convergence and Missing Inputs 85 4.4 Possibility of Endogenous Growth 94 4.5 Growth Policy 98 Summary 703 5 Labour Markets and Unemployment we 5.1 Overview 707 5.2 Demand and Supply in the Labour Market 708 5.3 A Static Interpretation of Unemployment 7 78
5.4 A Dynamic Interpretation of Unemployment 726 5.5 The Equilibrium Rate of Unemployment 730 ^ Summary 733 6 Money, Prices, and Exchange Rates in the Long Run 737 6.1 Overview 738 6.2 Money and the Neutrality Principle 739 6.3 Nominal and Real Exchange Rates 745 6.4 The Exchange Rate in the Long Run: Purchasing Power Parity 749 Summary 750 ' PART III The Macroeconomy in the Short Run 753 7 Borrowing, Lending, and Budget Constraints 755 7.1 Overview 756 7.2 Thinking About the Future 756 7.3 The Household's Intertemporal Budget Constraint 758 7.4 The Firm and the Private Sector's Intertemporal Budget Constraint 767 7.5 Public and Private Budget Constraints 765 7.6 The Current Account and the Budget Constraint of the Nation 773 Summary 776 8 Private Sector Demand: Consumption and Investment 779 8.1 Overview 780 8.2 Consumption 787 8.3 Investment 789 Summary 200 9 Money and Monetary Policy 204 9.1 Overview 205 9.2 Money: What is it? Who Makes it? 206 9.3 Short-run Equilibrium in the Money Market 274 9.4 Monetary Policy in Practice 279 9.5 Financial Institutions and Monetary Control 226 Summary 237 10 Macroeconomic Equilibrium in the Short Run 235 10.1 Overview 236 10.2 Aggregate Demand and the Goods Market 237 10.3 The Goods Market and the IS Curve 245 10.4 The Money Market, Monetary Policy, and the 77? Curve 250 10.5 Macroeconomic Equilibrium 255 Summary 260 11 International Capital Flows and Macroeconomic Equilibrium 263 11.1 Overview 264 11.2 The Implications of Being Small 265 11.3 International Financial Flows 266 11.4 Output and Interest Rate Determination under Fixed Exchange Rates 270 11.5 Output and Interest Rate Determination under Flexible Exchange Rates 276 11.6 Fixed or Flexible Rates? 280 Summary 283
XI 12 Output, Employment, and Inflation 286 12.1 Overview 287 12.2 General Equilibrium with Flexible Prices: The Neoclassical Case 288 12.3 The Phillips Curve: Chimera or a Stylized Fact? 297 12.4 Accounting for Inflation: The Battle of the Mark-ups 298-12.5 Inflation, Unemployment, and Output 305 Summary 377 13 Aggregate Demand and Aggregate Supply 374 13.1 Overview 375 13.2 Aggregate Demand and Supply under Fixed Exchange Rates 376 13.3 Aggregate Demand and Supply under Flexible Exchange Rates 327 13.4 How to Use the AS-AD Framework 333 Summary 347 14 Asset Markets 344 14.1 Overview 345 14.2 How Asset Markets Work 345 14.3 Functions of Asset Markets 348 14.4 Asset Prices and Yields 353 14.5 Information and Market Efficiency 358 14.6 Asset Markets and Macroeconomics 367 Summary 367 15 The Exchange Rate 377 15.1 Overview 372 15.2 The Foreign Exchange Markets 373 15.3 The Interest Parity Conditions 375 15.4 Exchange Rate Determination in the Short Run 378 15.5 The Exchange Rate in the Long Run 384 15.6 From the Long to the Short Run 389 15.7 Exchange Rate Volatility and Currency Crises 394 Summary 396 PART IV Macroeconomic Policy in a Global Economy 407 16 Demand Management Policies 403 16.1 Overview 404 16.2 Demand Management: What are the Issues? 405 16.3 Feasible Demand Management Policy 473 16.4 Sources of Business Cycle Fluctuations and the Future of Demand Management Policies 422 Summary 430 17 Fiscal Policy, Debt, and Seigniorage 434 17.1 Overview 435 17.2 Fiscal Policy and Economic Welfare 436 17.3 Macroeconomic Stabilization 438 17.4 Deficit Finance: Public Debt and Seigniorage 446 17.5 How to Stabilize the Public Debt 457 Summary 456 18 Policies for the Long Run 460 18.1 Overview 467
XII 18.2 Market Efficiency and the Theory of Supply-Side Policy 462 18.3 Product Market Policies 468 18.4 Taxation as the Price of Intervention 472~ 18.5 Labour Market Policy 476 18.6 Supply-Side Policy in Practice 483 Summary 489 19 The Architecture of the International Monetary System 493 19.1 Overview 494 19.2 History of Monetary Arrangements 495 19.3 The International Monetary Fund 507 19.4 Currency Crises 570 19.5 The Choice of an Exchange Rate Regime 576 Summary 526 20 Epilogue 529 20.1 The Keynesian Revolution 530 20.2 The Monetarist Revolution 532 20.3 The Rational Expectations Revolution 535 20.4 The Microfoundations of Macroeconomics 536 20.5 New Keynesian Macroeconomics: The Latest Synthesis 536 20.6 Institutional and Political Economics 537 20.7 Labour Markets 539 20.8 Search and Matching 540 20.9 Growth and Development 547 20.10 Conclusions 542 References 544 Glossary 546 Index 565