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Challenges of the European Union and Euro Area
In this class, students are given the tools to understand and analyze the major challenges facing the European Union and of the Eurozone. The tools include a historical perspective as well as an application of basic microeconomic and macroeconomic models. Topics covered include the slowdown of economic growth in Europe in recent decades, the challenges surrounding climate change and green transition, the sustainability of public finance and current topics in the Eurozone.
Principles of Macroeconomics
This course is a continuation of introduction to economics with emphasis on the measurement of national economic performance (GDP, CPI, unemployment rate), basic models of long-run economic growth, the financial market, the labor market, the role of money, the business cycle, as well as fiscal and monetary policy.
Intermediate Macroeconomic Theory
This is a course in macroeconomic theory at the intermediate level. Macroeconomics is concerned with the behavior of the aggregate economy. In the course we will be examining macroeconomic data and studying models designed to help us understand those data. We will pay special attention to the role of policymakers in shaping macroeconomic outcomes, and we will also look into international dimensions of the economy.
International Economics
Understanding the complex ways economies are linked to each other through the flow of goods, services, and assets is increasingly important in this era of globalization. This course introduces students to basic models in international trade and international macroeconomics, building on their knowledge of the principles of micro- and macroeconomics. Among the topics covered are the sources of gains from trade, the impact of globalization on wages, the welfare effects and political economy of trade policy, the determinants of the current account, the role of the exchange rate in adjustment to economic shocks, and the effectiveness of monetary and fiscal policy in open economies. Assignments will include problem sets as well as empirical exercises, which provide an opportunity for students to improve their skills in handling economic data.
Miscellaneous:
Effects of a Tariff combined with a Price Cap:
In March 2025, Trump warned US car makers not to raise prices in response to his newly announced car tariffs. Let's think this through with basic economics: If you just put a tariff on imports, consumers lose and producers win. If you combine a tariff with a price cap on domestically produced goods, consumers lose but producers don't win. All you're doing is maximizing the transfer from domestic consumers to the government. In the graph on the left, the government charges a tariff raising the price of foreign cars to P', while the price of domestic cars is capped at the world-market price P*. The red area indicates the welfare loss net of tariff revenue. Note that domestic output doesn't change at all. Needless to say, this completely defeats the alleged purpose of Trump's tariffs, i.e. to bring back production and jobs to America.
https://x.com/maxgoedl/status/1905586917615239356
Inflation, Wages, and Profits:
A number of people have explained why decompositions of inflation into "profit" and "wage" components don't tell us anything about the *cause* of inflation.
I have tried to make the point for my students with the simplest possible toy model:
Inflation p at time t is purely determined by money supply ("demand") m: p(t) = m(t).
Prices are weighted sum of factor prices (wage rate and rental rate): p(t) = (1-a)*w(t) + a*r(t). Wages are sticky, and determined by past inflation: w(t) = p(t-1).
Now suppose there is a monetary shock driving up inflation. The first graph on the left illustrated the dynamic effect in this model. Since wages are sticky, inflation will automatically drive up the capital rental rate. In fact the rental rate must rise by 1/a>1 on impact. Over time, wages adjust and the rental rate declines.
Let's now do the decomposition: the profit contribution to inflation will be a*r(t) and the wage contribution (1-a)*w(t). Looking at the second graph one might say "inflation is largely driven by profits" during the first few quarters and "largely driven by wages" later on.
But that's nonsense: inflation is purely driven by demand in this simulation. (Btw: it could also be caused by a pure supply shock.)
The bottom line: prices, wages, and profits are endogenous equilibrium objects. It makes no sense to say of any one of them is the *cause* of the others.
https://x.com/maxgoedl/status/1673714730991484931
A Gas Price Cap for 80% of Last Year's Consumption
In October 2022, the German gas commission made a proposal to alleviate the impact of the energy price shock on German consumers. The proposal was to lower the price for 80% of previous year's gas consumption. In the graph below, I compare the incentive effects of this proposal and an alternative, namely a simple price cap without any quantity limit.
https://x.com/maxgoedl/status/1583350372110045185
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