FALL TERM 2025
Wednesdays, 10.15-12.15.
Macroeconomic events are a fundamental source of changes in the business environment, financial markets, and the society as a whole. The purpose of this course is to give you a better understanding of the macro-economy, to familiarise you with the workings of the global economy and the main factors that determine the income of nations and their fluctuations. We will consider a wide range of questions such as: why are some countries growing faster than others? How does climate change impact the growth of countries? Why do business cycles occur? How do macroeconomic shocks propagate to the economy? How do they propagate through the financial sector? What are the determinants of exchange rates and inflation? What are the principles and motivation underlying monetary and fiscal policy?
The aim of the course is to provide a set of general knowledge in macroeconomics portable across a large range of professions in the financial and corporate sector, making it possible to understand the main economic forces that dominate the business environment.
The course consists of twelve lectures. Classroom participation is essential. You are encouraged to contribute with insights from your own experiences. Classroom participation will enhance your ability to think critically and to organize your thoughts in a clear and insightful manner. Throughout, theoretical concepts are backed and illustrated by real-world examples from a macroeconomic perspective and from a corporate perspective. The focus of the course will be on policy oriented questions and not as theoretical and model oriented as a standard macroeconomics course in a research oriented master. However, students are expected to handle basic algebra.
Possible textbooks: Macroeconomics, S. Williamson, 4th edition.
Macroeconomics, Charles. I. Jones, 3rd edition.
In addition, the course contains additional readings available on the course website.
Grades are based on a group homework (30%), a mid-term quiz (20%) and a final examination (50%)
Homework: by groups of 4 or 5 maximum. To be handed back the day of lecture 12.
Deadline: November 26 at 10.15am.
Find a YES/NO question which deals with a topical issue in macroeconomics (some suggestions will be provided in class but students are encouraged to come up with their own question). Using policy and academic articles (see among others IMF, World Bank, ECB, Federal Reserve, Economic Policy, NBER, CEPR discussion papers, see also in VOX the columns that refer to research articles) or press articles (FT, The Economist...), provide a critical answer to the question. You are expected to define precisely the question and provide an answer weighting the pros and cons in a 6 pages document (max. 3500 words). Providing data to justify your conclusions is strongly recommended.
Mid-term quiz: Multiple choice questions at the end of lecture 8 (October 22).
Final exam: Multiple choice questions, short exercise(s) and/or more open questions
The file below contain sample questions for the MCQ to practice for the exam. On the quantitative side, students are expected to handle basic calculus.
National accounting and the wealth of nations
What is macroeconomics? The key debates. GDP/Value Added and Welfare. Distributional national accounts. GDP and the production function. Determinants of productivity. The return on capital.
Readings:
Nations seek beyond GDP, Wall Street Journal, 2011. [pdf]
Inequality in the long-run, T. Piketty and E. Saez, Science, 2014. [link]*
The longer run economic consequences of pandemics, O. Jorda, S.R. Singh and A. Taylor, vox column, 2020. [link]*
More technical: Beyond GDP? Welfare across Countries and Time, C. Jones and P. Klenow, American Economic Review, 2016. [pdf]
Solow growth model and capital accumulation. Growth miracles and growth disasters. Development accounting. Why are some countries richer, some emerging and some stagnant? What makes countries efficient – the role of institutions and technology? How does technological progress produce growth? What determines how much R&D a country does?
Readings:
The Myth of the Asian Miracle, Paul Krugman, Foreign Affairs, 1994. [pdf]*
Institutions as a fundamental cause of long-run growth, Acemoglu, Johnson and Robinson, 2005, chapter 6, Handbook of Economic Growth. Read pdf until p53 [pdf]
A 'dark side' to the commodity boom in Africa. New evidence on the resource curse. American Economic Association Blog, 2017 [link]*. For more details: Berman, Couttenier, Rohner, and Thoenig. 2017. This Mine Is Mine! How Minerals Fuel Conflicts in Africa. American Economic Review.
The death of innovation, the end of growth, TED Talk, Robert Gordon [video link]
Is China's Growth Miracle Over?, Zheng Liu, Federal Reserve Bank of San Francisco Economic Letter, 2015. [link]
Globalization Helps Spread Knowledge and Technology Across Borders, IMFBlog, 2018 [link]
The origins of climate change. Climate change and growth. Economic damages and the climate change externality. Environmental policies (Carbon tax and Quota-based mechanisms). The challenges of environmental policies. Redistributive effects of environmental policies.
Readings:
Testing the pollution-haven hypothesis, American Economic Association, based on Tanaka et al., October 2022 [link]*. More technical: North-South Displacement Effects of Environmental Regulation: The Case of Battery Recycling. Tanaka et al., American Economic Review: Insights, 2022. [link]
Global Warming from an Economic Perspective, Conny Olovsson, Riksbank, 2020. [link]
The Portfolio of Economic Policies Needed to Fight Climate Change, O. Blanchard, C. Gollier and J. Tirole, Annual Review of Economics, 2023. [link]
More technical: Climate Change Around the World. Per Krussell and Anthony Smith, NBER WP 2022. [link]
Definition of the business cycle. The output gap. Business cycles across different economies and different sectors. Business cycles facts. Business cycles and unemployment. Causes of business cycles. Supply and demand shocks. Real Business Cycles and Demand-Driven Cycles. The Covid-19 recession.
Readings:
The World Economic Outlook, IMF, April 2023 (Update July 2023). Chapter 1 covers the the growth forecasts around the world. There are lots of other information in this publication: pick your favourite topic and see whether by now you can understand a thorough discussion of recent developments, growth prospects and risks. Check also the summary videos on the website. [link]. The update from July 2023 provides more up-to-date information on global growth forecasts. This should be your main reading. [link]*.
For France: Macroeconomic Projections, Banque de France, June 2023. [link]
Unemployment among young workers during Covid-19, S. Aaronson and F. Alba, Brookings, Sept. 2020. [link]*
Flattening the Pandemic and Recession Curves, Pierre-Olivier Gourinchas, March 13, 2020. Mimeo Clausen Center UC Berkeley. [pdf]
Supply versus Demand: Unemployment and Inflation in the Covid 19 recession, D. Baqaae and E. Fahri, vox column, June 2020. [link]
Measurement and history of inflation. Energy prices and the macroeconomy. What is money? Banks and the money multiplier. Quantity theory of money and long run inflation. Seigniorage and hyperinflation.
Readings:
The Bolivian Hyperinflation and Stabilization, Jeffrey Sachs, The American Economic Review, Vol. 77, No. 2, Papers and Proceedings of the Ninety-Ninth Annual Meeting of the American Economic Association. (May, 1987), pp. 279-283 [pdf]*
14m bolivars for a chicken: Venezuela hyperinflation explained, The Guardian, 2018. [link]*
Zimbabwe after hyperinflation: in dollars they trust. The Economist, 2013. [link]
Plunging Oil Prices: A Boost for the U.S. Economy, a Jolt for Texas. Dallas Fed Economic Letter, 2015. [link]
Stabilization policy using monetary policy. The trade-off between inflation and unemployment. Rational expectations and credibility. How do central banks set interest rates? How does this affect the economy? Monetary policy in extraordinary times and quantitative easing.
Readings:
The Transmission Mechanism of Monetary Policy, Bank of England’s Monetary Policy Committee. [pdf]*
Monetary policy in extraordinary times, David Miles interviewed by Viv Davies, VoxEU, 2011. [interview link]
Soaring inflation puts Central Banks on a difficult journey, by T. Adrian, C. Erceg and F. Natalucci, IMF Blog. August 2022. [link]
Today’s inflation and the Great Inflation of the 1970s: Similarities and differences, by Ha et al., VoxEU, 2022. [link]*
Federal Reserve announces extensive new measures to support the economy. Press Relese by the Federal Reserve, March 23, 2020. [link]
What Central Banks have done to help the economy survive Covid-19. Bloc-Notes Eco, Banque de France. April 2020. [link]
How much do governments spend and why? Where do governments raise their revenue? Principles of taxation. Fiscal deficits and debt. Debt sustainability. Stabilization policy using fiscal policy.
Readings:
Fiscal Policies to Protect People During the Coronavirus Outbreak. IMF Blog. March 2020. [link]*
Will public debt be a problem when the Covid-19 crisis is over?, G. Davies, Financial Times, June 2020. [link]*
C.M. Reinhart & K.S. Rogoff, 2010. Growth in a Time of Debt. NBER WP 15639 [pdf].
T. Sargent, An american history lesson for Europe, 2012, Wall Street Journal, based on T. Sargent's Nobel Prize lecture (US then, Europe Now). [pdf].
America's deficit: confronting the monster, The Economist, 2010. [link] or [pdf]
Government Spending Is No Free Lunch, R. Barro, Wall Street Journal, 2009. [link]
Measuring the output responses to fiscal policy, Auerbach and Gorodnichenko, Vox column, 2010. [link]
Credit markets and economic fluctuations. Credit booms and busts. Debt, leverage and the business cycle.
Readings:
Household debt and macroeconomic fluctuations, A. Mian and A. Sufi, vox column, 2010. [link]*
Kalemli-Ozcan and Papaioannou, 2012. Banking integration: friend or foe, vox column, 2012. [link]
Corporate Bond Spreads and the Pandemic II: Heterogeneity across Sectors, Fed Saint Louis Blog, April 2020. [link]
Open economy macroeconomics and exchange rates - Part 1 [slides]
Definitions of exchange rates – nominal and real. The Law of One Price and Purchasing Power Parity. Balance of payments. Current account imbalances. Balance of payments theory of exchange rates.
Readings:
The Purchasing Power Parity Debate, A.M. Taylor and M.P. Taylor, Journal of Economic Perspectives, 2004. [pdf]
Donald Trump's Tax Proposals Could Double The Trade Deficit, L. Burman, Tax Policy Center, 2016. [link]*
Open economy macroeconomics and exchange rates - Part 2 [slides]
Exchange rates and asset markets. Interest rates and Uncovered Interest Parity. Stabilization policies in open economies. Currency unions.
Readings:
How do UK based Foreign Echange Dealers think their market operates?, Cheung, Chinn and Marsh, International Journal of Finance and Economics. [pdf]
Market are realing from higher rates. The world economy is next. The Economist, Sept. 2022. [link]
Revenge of the Optimum Currency Area, P. Krugman, NBER Macroeconomics Annual, 2012. [pdf]*
How big are fiscal multipliers? New evidence from new data, Mendoza, Vegh and Ilzetzki, vox column, 2009. [link]*
Currency crises. Self fulfilling prophecies. Financial factors and amplification. Balance sheets effects. Sovereign debt crises.
Readings:
This Time is Different: A Panoramic View of Eight Centuries of Financial Crises, Carmen M. Reinhart and Kenneth S. Rogoff, NBER WP 13882, 2008. [pdf]*
From Stagflation to Debt Crisis. Ha et al., voxeu, July 2022. [link]*. More detailed policy report can be found here.
Is COVID-19 triggering a new emerging-market crisis?, Bruegel Blog, March 2020.
Caught by a cresting debt wave. Kose Ayhan et al., Finance & Development, IMF , June 2020.
More technical: Jeanne, Olivier D., Currency Crises: A Perspective on Recent Theoretical Developments, CEPR Discussion paper, 2000. [pdf]
Presentation by Raphael Brun-Aguerre, economist at J.P. Morgan
Wrap up.