Seminar in Macroeconomic Policy

Course Type: Undergraduate (Elective) 

Prerequisites: Macroeconomics (Econ 205 and 206) and/or Econometrics (Econ 301)

Note 1: I do not take attendance

Note 2: You are not allowed to use electronic devices (e.g., mobile phones, tablets, laptops, etc.) in class unless permitted

Note 3: No appointment, no meeting. Some suggestion (click here)

Grades: Class Participation (20%), Midterm Exam (40%), Final Exam (40%)

For 2024: This course surveys episodes of high inflation/deflation/disinflation, discussing their possible causes and consequences. We will  cover relevant research methods along the way. The course is based on Matlab and R. Whereas R is freely available, Matlab is proprietary. However, Bilkent provides the license for Matlab to all students (click here). Please make sure that these are installed on your computer (this is your responsibility).  

• "The Ends of Four Big Inflations," by Thomas J. Sargent

• "The Ottoman Economy in World War I," by Şevket Pamuk

• "The Macroeconomics of the Great Depression: A Comparative Approach," by Ben S. Bernanke

• "The Ends of 27 Big Depressions," by Martin Ellison, Sang Seok Lee and Kevin Hjortshøj O’Rourke (I will send the paper to you)

  • "Macroeconomic Nowcasting and Forecasting with Big Data," by Brandyn Bok, Daniele Caratelli, Domenico Giannone, Agria M. Sbordone and Andrea Tambalotti

  • Lecture Notes on the Kalman Filter and Smoother

• "Macroeconomic Policies and the New Central Bank in Turkey, 1929-1939," by Şevket Pamuk

• "The Incredible Volcker Disinflation," by Marvin Goodfriend and Robert G. King 

• "Rational Expectations and Volcker's Disinflation," by Thomas J. Sargent

• "Japan's Financial Crisis and Economic Stagnation," by Takeo Hoshi and Anil K Kashayp

• "Two Decades of Japanese Monetary Policy and the Deflation Problem," by Takatoshi Ito and Frederic S. Mishkin

• "Deleveraging and Monetary Policy: Japan Since the 1990s and the United States Since 2007," by Kazuo Ueda

• "Stabilization and Growth in Transition Economies: The Early Experience," by Stanley Fischer, Ratna Sahay and Carlos A. Végh

• "Exchange Rate and Inflation under Weak Monetary Policy: Turkey Verifies Theory," by Refet S. Gürkaynak, Burçin Kısacıkoğlu and Sang Seok Lee

  • The Assessment of the Turkish Monetary Policy Turnaround (Prepared for the Ankara Social Sciences and Humanities Congress)

• "Türkiye’s (Unique) Response to Post‑pandemic Inflation," by Hakan Kara and Çağrı Sarıkaya (I will send the paper to you)

Old Courses:

For 2022: This course examines the Turkish economy over the last decades, with the focus on the exchange rate and the inflation rate. The reading for the course can be accessed here. This requires additional lecture notes to facilitate understanding and they are provided below: 

• New Keynesian model

  • Solving the basic New Keynesian model in Matlab, Dynare, R, and Julia

• Kalman filter and smoother and maximum likelihood estimation: 

  • Lecture notes 1

  • Lecture notes 2

• Structural vector autoregressions

We will turn to the main course reading after covering these materials first. 

The course is based on four programming languages: Dynare, Julia, Matlab, and R. Whereas Julia and R are freely available, Matlab is proprietary. However, Bilkent provides the license for Matlab to all students (click here). Please make sure that these are installed on your computer (this is your responsibility). The version of Dynare we will use works with Matlab (However, it works in other environments too, for instance Octave). The code as well as the data sets will be distributed as the course progresses.

For 2021: This course investigates the Great Recession of 2007-2009 and its aftermath to draw lessons for the ongoing crisis. Due to the pandemic and the resulting changes in teaching arrangements, notes 1 and 2 are not applicable this year. Here are the links to the papers: 

Introduction:

• "A Tale of Two Depressions Redux," by Barry Eichengreen and Kevin O'Rourke

A. Monetary Policy:

• "Over the Cliff: From the Subprime to the Global Financial Crisis," Journal of Economic Perspectives by Frederic S. Mishkin

• "The Real Effects of Disrupted Credit: Evidence from the Global Financial Crisis," Brookings Papers on Economic Activity by Ben S. Bernanke

• "Measuring the Effects of Federal Reserve Forward Guidance and Asset Purchases on Financial Markets," Journal of Monetary Economics by Eric T. Swanson

• "Macroeconomic Nowcasting and Forecasting with Big Data," Annual Review of Economics by Brandyn Bok, Daniele Caratelli, Domenico Giannone, Agria M. Sbordone and Andrea Tambalotti

  • New York Fed Staff Nowcast

• What's the Fed Doing in Response to the COVID-19 Crisis? What More Could It Do? 

• "Funding Pandemic Relief: Monetise Now," VoxEU by Refet S. Gürkaynak and Deborah J. Lucas (Prof Gürkaynak will be our guest speaker)

B. Fiscal Policy:

• "Are Government Spending Multipliers Greater during Periods of Slack? Evidence from Twentieth-Century Historical Data," American Economic Review P&P by Michael T. Owyang, Valerie A. Ramey and Sarah Zubairy

• "Automatic Stabilizers in a Low-Rate Environment," American Economic Review P&P by Olivier J. Blanchard and Lawrence H. Summers (available through Bilkent University library)

• "Fiscal Space and the Aftermath of Financial Crises: How It Matters and Why," Brookings Papers on Economic Activity by Christina D. Romer and David H. Romer

• The Covid-19 Fiscal Multiplier: Lessons from the Great Recession

C. Monetary-Fiscal Interactions:

• "Understanding the Fiscal Theory of the Price Level," Economic Review by Lawrence J. Christiano and Terry J. Fitzgerald

For 2020: This course covers the interwar period (1919 to 1939), with the focus on the Great Depression.

A. Books:

• "Lessons from the Great Depression," by Peter Temin (Call No. HB3717 1929 T45 1989) 

• "Golden Fetters: The Gold Standard and the Great Depression, 1919-1939," by Barry Eichengreen (Call No. HG297 E53 1992)

• "Lords of Finance: The Bankers Who Broke the World," by Liaquat Ahamed (Call No. HG172 A2 A43 2009)

B. Articles:

B.1 Overview:

• "The Ends of Four Big Inflations," in Inflation: Causes and Effects by Tom Sargent

• "Great Depression," in Encyclopaedia Britannica by Christina Romer 

• "The Macroeconomics of the Great Depression: A Comparative Approach," Journal of Money, Credit and Banking by Ben Bernanke

B.2 US:

• "The Great Contraction, 1929-1933," in A Monetary History of the United States, 1867-1960 (Chapter 7) by Milton Friedman and Anna Schwartz (E-book available on https://library.bilkent.edu.tr)

• "Nonmonetary Effects of the Financial Crisis in the Propagation of the Great Depression," American Economic Review by Ben Bernanke

• "What Ended the Great Depression?," Journal of Economic History by Christina Romer

• "The Nation in Depression," Journal of Economic Perspectives by Christina Romer

• "The Missing Transmission Mechanism in the Monetary Explanation of the Great Depression," American Economic Review P&P by Christina Romer and David Romer

• "Great Expectations and the End of the Depression," American Economic Review by Gauti Eggertsson

B.3 Cross-Country:

• "The Gold Standard, Deflation, and Financial Crisis in the Great Depression: An International Comparison," in Financial Markets and Financial Crises (Chapter 2) by Ben Bernanke and Harold James

• "Funding the Great War and the Beginning of the End for British Hegemony," in Debt and Entanglement between the Wars by Martin Ellison, Tom Sargent and Andrew Scott

• "The Exchange Rate and the International Transmission of Business Cycle Disturbances," Journal of Money, Credit and Banking by Ehsan Choudhri and Levis Kochin

• "The Slide to Protectionism in the Great Depression: Who Succumbed and Why?," Journal of Economic History by Barry Eichengreen and Douglas Irwin

• "The Gold Standard and the Great Depression," Contemporary European History by Barry Eichengreen and Peter Temin

C. Summary:

• Keynes on the Suspension of the Gold Standard: https://www.youtube.com/watch?v=0PYSFqCSsGU