Intermediate Macroeconomics

General Information

This course covers advanced theory and applications in macroeconomics. Topics include growth, determination of income, employment and output, aggregate demand and supply, the business cycle, monetary and fiscal policies, and international macroeconomic modelling.

PREREQUISITES

MATH 1430: College Algebra

ECON 2020: Principles of Microeconomics

ECON 2030: Principles of Macroeconomics

READINGS

Carlin, W. & Soskice, D. (2015). Macroeconomics: Institutions, Instability and the Financial System. Oxford University Press.

LEARNING OUTCOMES

Students are familiar with the various national accounting measures, their computation, and their limitations
Students can define the various macroeconomic variables and describe their composition, usefulness, and short-comings.
Students can utilize macroeconomic models to analyze short-run economic events in both a closed and an open economy.
Students can utilize IS-LM, AD-AS, and the Mundell-Fleming Model to predict the effects of macroeconomic events (i.e. shocks and policies) on interest rates, inflation, unemployment, short-term RGDP, and exchange rates.
Students can utilize macroeconomic models to describe the drivers of long-term economic growth.
Students can utilize the Solow Model of Economic Growth to understand the effects of macroeconomic events (i.e. shocks and policies) on short-run and long-run sustainable RGDP and Per Capita RGDP Growth
Students understand how changes in macroeconomic policy impact the economy
Students can correctly determine the likely impact of fiscal and monetary policy (foreign and domestic) on both short-run and long-run macroeconomic variables

COURSE POLICIES / ADDITIONAL INFORMATION

Attendance is recorded. Unexcused absence lowers the grade accordingly.
It is the students' responsibility to check Canvas and their Webster email regularly.
For every hour spent in class it is expected of the students to invest 3 hours per week outside of class in homework, reviewing material, assignments, etc.

UNIVERSITY POLICIES

Students are required to inform themselves of WUV academic policies.

A full list of these policies is available on the WUV website: http://webster.ac.at/academic-policies

Materials

The Demand Side [Slides][Web Appendix][RCode]

The Supply Side [Slides][Web Appendix][RCode]

Supply-Side Policy, Institutions and Unemployment [Slides]
Growth, Fluctuation and Innovation [Slides][Web Appendix]

The 3-Equation Model and Macroeconomic Policy [Slides][RCode]

Money, Banking and the Macro-Economy [Slides][RCode]
The Financial Sector and Crises [Slides][RCode]

The Global Financial Crises: Applying the Models [Slides]

The 3-Equation Model in the Open Economy [Slides]

The Open Economy: The Demand and Supply Sides [Slides]
Extending the Open Economy Model: Oil Shocks and Imbalances [Slides]

Monetary Policy [Slides]

Fiscal Policy [Slides][Web Appendix]

The Eurozone [Slides]

Real Business Cycle and New Keynesian Models [Slides][Web Appendix]

Weekly Schedule

Week 1

The Demand Side

· Goods Market Equilibrium

· The IS Curve

· Forward-Looking Behavior

· Consumption & Investment

The Demand Side

· The Money Market Equilibrium

· The LM Curve

· Money & Bonds

· Assets & Speculative Motives

Week 2

The Supply Side

· Unemployment

· Supply Side Effects on Unemployment

· Nominal Rigidities and Demand-Side Policies

The Supply Side

· Modelling

· Supply Side Effects on Unemployment

· Nominal Rigidities, Inflation & the Business Cycle

Week 3

Supply-Side Policy, Institutions and Unemployment

· Flows, Matching and the Beveridge Curve

· Unions and Wage-Setting Arrangements

· Efficiency Wage Model

Supply-Side Policy, Institutions and Unemployment

· Hysteresis & Persistence in Unemployment

· Unemployment in OECD Countries

· Labour Market Behaviour in the Crisis

Week 4

Growth, Fluctuation and Innovation

· Short- & Medium-Run Macro Models

· Growth Concepts & Useful Tools

· The Solow Model & Cross-Country Performance

· Technical Progress in the Solow Model

Growth, Fluctuation and Innovation

· The Ramsey/Cass-Koopmans Model

· Endogenous Growth: The Romer Model

· Schumpeterian Growth: The Aghion-Howitt Model

Week 5

The 3-Equation Model and Macroeconomic Policy

· The Role of the Central Bank in Stabilization

· Inflation & Deflation

· The 3-Equation Model

· A Permanent Demand Shock

The 3-Equation Model and Macroeconomic Policy

· A Temporary Demand Shock

· Forecasting & Lags

· The Deflation Trap

· A Supply Shock

Week 6

Money, Banking and the Macro-Economy

· Adaptive & Rational Expectation

· The Lucas Critique

· Money, Banks & the 3-Equation Model

· A Modern Financial System

Money, Banking and the Macro-Economy

· Policy vs Lending Interest Rate

· Banks, Credict Constraints and Collateral

· The Role of Banks in a Fractional Reserve System

· Investment Boom

Week 7

The Financial Sector and Crises

· Bank Behaviour, Cycles & Crises

· Asset Price Bubbles

· The Financial Accelerator

The Financial Sector and Crises

· The Housing Feedback Process & the 3-Equation Model

· The Bank Leverage Centred Feedback Process

· A Balance Sheet Recession

Week 8

The Global Financial Crises: Applying the Models

· Pre-Crisis Financial System

· The Upswing of the Financial Cycle

The Global Financial Crises: Applying the Models

· The Credit Crisis

· Policy Intervention in the Crisis

Week 9

Mid-Term Exam

The 3-Equation Model in the Open Economy

· The Forex Market, CIP & UIP

· MR Equilibrium in the Open Economy & the AD-ERU Model

· Stabilization under Flexible ER: RX Curve

Week 10

The 3-Equation Model in the Open Economy

· Inflation Shock: Comparing Closed & Open Economy

· Demand & Supply Side Shocks

· ER Overshooting & Volatility

The Open Economy: The Demand and Supply Sides

· The Open Economy Accounting Framework

· The Demand Side, Trade Balance & the Supply Side

· The Demand Side & Trade Balance

Week 11

The Open Economy: The Demand and Supply Sides

· The Supply Side in the Open Economy

· The MR Model: AD-BT-ERU

· The UK Economy Before the Crisis

Extending the Open Economy Model: Oil Shocks and Imbalances

· Inflation-Targeting in a Two-Bloc Model

· Different MR 'Growth' Strategies can cause Global Imbalances

· Oil Shocks

Week 12

Extending the Open Economy Model: Oil Shocks and Imbalances

· Current Account Imbalances

· Sector Financial Balances

· Global Interdependence & Imbalances

· A 2-Bloc Model with Inflation-Targeting CB

Monetary Policy

· Monetary Policy & the Economy's Nominal Anchor

· Active Rule-Based Policy

· CB Preferences

· The MR Equation & Taylor Rules

Week 13

Monetary Policy

· The Modern Monetary Policy Framework

· Monetary Policy & the Global Financial Crisis

· Post-Crisis Reform of Financial Regulation & the Macro Policy Framework

Fiscal Policy

· Fiscal Policy's Role in Stabilization

· Automatic Stabilizers

· Debt Dynamics

Week 14

Fiscal Policy

· The Government's Budget Constraint

· Ricardian Equivalence

· Deficit Bias

· Political Economy of Debt

Eurozone

· Optimal Currency Area

· The Eurozone Policy Regime

· Stabilization in the Eurozone: Common Shocks

Week 15

Eurozone

· Stabilization in the Eurozone: Country-Specific Shocks

· Eurozone Governance, Sovereign Risk & the Banking System

Final Exam

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