Download ITRN503-005 - Schar School of Policy and Government

Spring 2014
Draft as of Sep.23, 2013
Syllabus
ITRN 503-005
Investment and Macroeconomics for International Commerce
Course Outline:
This course introduces you to important concepts and analytical tools frequently used by
economists to tackle a range macroeconomic issues that are relevant to businesses,
governments and households. It examines issues relating to long-term growth as well as
business cycles. Significant attention is paid to macroeconomic stabilization (fiscal and
monetary policy). The course also introduces some basic open macro economy issues such
balance of payments, exchange rates and currency crises. The focus of the course is on
understanding definitions and developing coherent analytical frameworks to tackle
contemporary macroeconomic policy challenges.
Unlike narrow discipline-oriented courses that only focus on analytics, this course
consciously links the analytics to real world on goings and policy issues and conundrums
(and therefore can be somewhat challenging). Since this is a graduate level course with only
one lecture per week, significant degree self-study, reading and initiative is expected. The
course is fairly intensive and students are expected to have fully read the assigned textbook
readings before class.
Lecturer:
Professor Ramkishen Rajan
E-mail: [email protected]
Website: http://ramkishenrajan.gmu.edu/
Teaching Assistant: Sasidaran Gopalan
Email: [email protected]
Office Hours: Anytime by appointment.
Lecture Time: Wednesday, 4:30-7:00pm
Lecture Venue: FH 313
Office Hours: Wednesdays, 3.00 – 4.00pm; Thursdays, 6.00-7.00pm or by appointment.
(Do not leave phone messages; best to e-mail me).
Readings:
Required Text: P. Krugman and R. Wells (2012). Macroeconomics, Worth.
(KW) as well as weekly assigned readings (see URLs end of the syllabus).
Assessment: Mid-term (25%); Open book.
Final Exam (40%); Closed book.
One country Assignment (20%) – Groups of 3.
Presentation and Class participation (15%)
Important Information on Grading:
Grades in this class have to be earned; they are not an entitlement and neither are they
negotiable. I have high standards and in larger classes, it is unlikely (but by no means
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impossible) that more than 30 percent of the class will get an “A” or “A-” grade (i.e. sign of
good performance in my class).
Learning Outcomes:
Students will understand the basic concepts and terms of macroeconomics (such as growth,
inflation) as they apply to policy analysis (such as monetary policy, fiscal policy, exchange
rate policy). Students will understand the causes of economic growth, unemployment and
inflation and issues impacting the effectiveness of monetary and fiscal policy, and be
introduced to open economy topics like relating to capital flows and exchange rates.
SPP Policy on Plagiarism:
The profession of scholarship and the intellectual life of a university as well as the field of
public policy inquiry depend fundamentally on a foundation of trust. Thus any act of
plagiarism strikes at the heart of the meaning of the university and the purpose of the
School of Public Policy. It constitutes a serious breach of professional ethics and it is
unacceptable. Plagiarism is the use of another’s words or ideas presented as one’s own. It
includes, among other things, the use of specific words, ideas, or frameworks that are the
product of another’s work. Honesty and thoroughness in citing sources is essential to
professional accountability and personal responsibility. Appropriate citation is necessary
so that arguments, evidence, and claims can be critically examined. Plagiarism is wrong
because of the injustice it does to the person whose ideas are stolen. But it is also wrong
because it constitutes lying to one’s professional colleagues. From a prudential perspective,
it is short-sighted and self-defeating, and it can ruin a professional career.
The faculty of the School of Public Policy takes plagiarism seriously and has adopted
a zero tolerance policy. Any plagiarized assignment will receive an automatic grade of
“F.” This may lead to failure for the course, resulting in dismissal from the University. This
dismissal will be noted on the student’s transcript. For foreign students who are on a
university-sponsored visa (e.g. F-1, J-1 or J-2), dismissal also results in the revocation of
their visa.
To help enforce the SPP policy on plagiarism, all written work submitted in partial
fulfilment of course or degree requirements must be available in electronic form so that it
can be compared with electronic databases, as well as submitted to commercial services to
which the School subscribes. Faculty may at any time submit student’s work without prior
permission from the student. Individual instructors may require that written work be
submitted in electronic as well as printed form. The SPP policy on plagiarism is
supplementary to the George Mason University Honor Code; it is not intended to replace it
or substitute for it. (http://www.gmu.edu/facstaff/handbook/aD.html)
Special Needs:
If you are a student with a disability and you need academic accommodations, please see me
and contact the Disability Resource Center (DRC) at 993-2474. All academic
accommodations must be arranged through the DRC.
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Time
Course Outline*
(See lecture notes for specific chapter readings)
Topic
Week 1: Jan. 22
Math Refresher, Course Preliminaries and Introduction to
Macroeconomics
Week 2: Jan. 29
Week 7: Mar.5
Identities, Concepts, Definitions
KW: Chapters 1,2 (skim through yourself)
KW: Chapters 6, 7, 8, 16
Business Cycle and Growth
KW: Chapter 9
Introduction to Aggregate Supply (AS) and Aggregate Demand
(AD) Model
KW: Chapters 11 and 12
AS-AD model (continued)
KW: Chapter 12 (continued)
Fiscal Policy
KW: Chapter 10 and 13 (including Appendix)
Fiscal Policy Contd.
KW: Chapter 10 and 13 (including Appendix)
Mid-Term Test (In-Class; Open Book)
Week 8: Mar.12
Spring Recess
Week 9: Mar.19
Introduction to Monetary Policy
KW: Chapter 14
Monetary Policy continued
KW: Chapters 15 (exclude Appendix) and 17
Basics on Yield Curve
Week 3: Feb.5
Week 4: Feb.12
Week 5: Feb. 19
Week 6: Feb.26
Week 10: Mar.26
Week 11: Apr.2
Week 12: Apr.9
Week 14: Apr.23
External Dimensions of Macroeconomics
KW: Chapter 19
External Dimensions of Macroeconomics continued
KW: Chapter 18
Country Paper Presentations
Week 15: Apr.30
Semester Review
Week 16: May.7
Final Exam (In-Class; Closed Book);
Country Assignment due
Week 13: Apr.16
*This outline is subject to some alterations during the course of the semester.
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Required Readings (Apart from Assigned Text-book chapters)
Week 1: Basics
Math refresher:
http://www.stat.wisc.edu/~ifischer/calculus.pdf
Duke, Elizabeth A., Economic Developments, Risks to the Outlook, and Housing Market
Policies, at the Virginia Bankers Association/Virginia Chamber of Commerce 2012 Financial
Forecast, Richmond, Virginia, January 6, 2012.
http://www.federalreserve.gov/newsevents/speech/duke20120106a.htm
Week 2: Definitions and Concepts
Bergheim, Stefan, “Measures of Well-Being: There is more to it than GDP,” Deutsche Bank
Research, 2006.
http://www.dbresearch.com/PROD/DBR_INTERNET_ENPROD/PROD0000000000202587.pdf
Bullard, J. “Measuring Inflation: The Core is Rotten,” Federal Reserve Bank of St.Louis
Review, July/August 2011.
http://research.stlouisfed.org/publications/review/11/07/bullard.pdf
Bullard, J. “CPI vs. PCE Inflation: Choosing a Standard Measure,” The Regional Economist,
July 2013.
http://www.stlouisfed.org/publications/re/articles/?id=2390
Callen, Tim “What is GDP?” December 2008.
http://www.imf.org/external/pubs/ft/fandd/2008/12/basics.htm
Claessens, Stjin and M. Ahyan Kose.”What is a Recession?”, Finance and Development,
March 2009.
http://www.imf.org/external/pubs/ft/fandd/2009/03/basics.htm
Mishkin, Fredric S., “Headline versus Core Inflation in the Conduct of Monetary Policy,”
Remarks at the Business Cycles, International Transmission and Macroeconomic Policies
Conference, Montreal, Canada, 2007.
http://www.federalreserve.gov/newsevents/speech/mishkin20071020a.htm
Felix, A. and K. Watkins (2013). “What is Behind the Inflation Numbers?,” Federal Reserve
Bank of Kansas City, Denver, http://www.kansascityfed.org/publicat/rme/RME-2Q2013.pdf
Weeks 3 and 4: Long-term Growth and Productivity; AS-AD Model
Bernanke, Ben, “Recent Developments in the Labor Market,” At the National Association for
Business Economics Annual Conference, Washington, D.C., March 2012.
http://www.federalreserve.gov/newsevents/speech/bernanke20120326a.htm
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Bies, Susan Schmidt, “Productivity and Economic Outlook,” Remarks before the Tech
Council of Maryland’s Financial Executive Forum, 2006.
http://www.federalreserve.gov/newsevents/speech/Bies20060118a.htm
Gordon, Robert. “Is US Economic Growth Over? Faltering Innovation Confronts the Six,”
VoxEU 2012.
http://www.voxeu.org/article/us-economic-growth-over
Levine, Linda, “Economic Growth and the Unemployment Rate,” CRS Report for Congress,
April 2012.
http://fpc.state.gov/documents/organization/189144.pdf
Ramirez-Djumena, Natalie and Jair Rodriguez. “The Ingredients of Sustained Growth,”
Finance and Development, December 2008.
http://www.imf.org/external/pubs/ft/fandd/2008/12/picture.htm
Shackleton, Robert (2012). “ Productivity and Growth in CBO’s Forecasts, ” July 31, 2012
http://www.cbo.gov/sites/default/files/cbofiles/attachments/CBOForecast_NABE_Present
ation_07-31-12.pdf
AS-AD Model
Bernanke, Ben S., “Energy and the Economy,” Remarks before the Economic Club of Chicago,
2006.
http://www.federalreserve.gov/newsevents/speech/bernanke20060615a.htm
Bernanke, Ben S. “The Near- and Longer-Term Prospects for the U.S. Economy,” At the
Federal Reserve Bank of Kansas City Economic Symposium, Jackson Hole, Wyoming, August
26, 2011.
http://www.federalreserve.gov/newsevents/speech/bernanke20110826a.htm
Weeks 5 and 6: Fiscal Policy
Austin, Andrew, D. “Overview of the Federal Debt,” CBO, May 12.
http://fpc.state.gov/documents/organization/168673.pdf
Bernanke, Ben, “Fiscal Sustainability,” at the Annual Conference of the Committee for a
Responsible Federal Budget, Washington, D.C., June 14, 2011.
http://www.federalreserve.gov/newsevents/speech/bernanke20110614a.htm
Douglas W. Elmendorf., “The Long-term Budget Outlook,” CBO, June 2012.
http://www.cbo.gov/sites/default/files/cbofiles/attachments/LTBO_Testimony.pdf
Horton, Mark and Asmaa El-Ganainy, “What is Fiscal Policy?”, Finance and Development,
June 2009.
http://www.imf.org/external/pubs/ft/fandd/2009/06/pdf/basics.pdf
Labonte, Marc, “The Economic Implications of the Long-Term Federal Budget Outlook,:
CBO,
August 2011.
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http://fpc.state.gov/documents/organization/171384.pdf
Laffer, Arthur, B., “The Laffer Curve: Past, Present, and Future”, The Heritage Foundation,
June 2004.
http://s3.amazonaws.com/thf_media/2004/pdf/bg1765.pdf
Levit, Mindy R. “The Federal Budget: Issues for FY2013 and Beyond,” CRS, May 2012
http://www.fas.org/sgp/crs/misc/R42362.pdf
Thornton, D. “The U.S. Deficit/Debt Problem: A Longer-Run Perspective,” Federal Bank of St.
Louis, November/December 2012.
http://research.stlouisfed.org/publications/review/12/11/Thornton.pdf
Week 7: Mid-term Test
Week 8: Spring Recess
Weeks 9 and 10: Monetary Policy
Bernanke, Ben, “Housing, Housing Finance, and Monetary Policy,”, Testimony before At the
Federal Reserve Bank of Kansas City's Economic Symposium, Jackson Hole, Wyoming, 2007.
http://www.federalreserve.gov/newsevents/speech/Bernanke20070831a.htm
Bernanke, Ben, “Five Questions about the Federal Reserve and Monetary Policy,” at the
Economic Club of Indiana, Indianapolis, Indiana, October 1, 2012.
http://www.federalreserve.gov/newsevents/speech/bernanke20121001a.htm
Federal Reserve Bank of San Francisco, “US Monetary Policy: An Introduction,” 2004.
http://www.frbsf.org/publications/federalreserve/monetary/MonetaryPolicy.pdf
Carlstrom, Charles T. and Timothy S. Fuerst, “The Taylor Rule: A Guidepost for Monetary
Policy?” Cleveland Fed, July 2003.
http://www.clevelandfed.org/research/commentary/2003/0703.pdf
Financial Crisis and Monetary Policy
Time-line of the Crisis
http://www.newyorkfed.org/research/global_economy/Crisis_Timeline.pdf
Bernanke, Ben S. “The Federal Reserve's Balance Sheet,” at the Federal Reserve Bank of
Richmond 2009 Credit Markets Symposium, Charlotte, North Carolina, April 3, 2009.
http://federalreserve.gov/newsevents/speech/bernanke20090403a.htm
Bernanke, Ben S. “The Effects of the Great Recession on Central Bank Doctrine and
Practice,”at the Federal Reserve Bank of Boston 56th Economic Conference, Boston,
Massachusetts, October 18, 2011
http://www.federalreserve.gov/newsevents/speech/bernanke20111018a.htm
Dodd, Randall and Paul Mills, Outbreak: U.S. Subprime Contagion,” Finance and
Development, June 2008.
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http://www.imf.org/external/pubs/ft/fandd/2008/06/dodd.htm
The Economist, “QE, or not QE? An assessment of the most controversial weapon in the
central banker’s armoury,” July14th 2012.
http://www.economist.com/node/21558596
Also look at Fed NY: http://www.ny.frb.org/
Week 11: Yield Curve
Yield Curve Basics
http://www.learningmarkets.com/Stocks-InvestingBasics/200907081026/understanding-the-yield-curve.html
Yield Curve Analytics
http://fixedincome.fidelity.com/fi/FIHistoricalYield
Benner, Kate, “Old Conundrum, New Twist: Inverted or Flat, the Yield Curve Points to a
Weaker Federal Reserve, Not a Downturn”, July 2004.
http://money.cnn.com/2005/07/12/markets/bondcenter/bond_yields/index.htm?cnn=ye
s.
Bernanke, Ben S., “Reflections on the Yield Curve and Monetary Policy,” before the
Economic Club of New York, New York, New York, March 2006.
http://www.federalreserve.gov/newsevents/speech/bernanke20060320a.htm
Bernanke, Ben S., “Globalization and Monetary Policy,” At the Fourth Economic Summit,
Stanford Institute for Economic Policy Research, Stanford, California
http://www.federalreserve.gov/newsevents/speech/Bernanke20070302a.htm
Weeks 12 and 13: Open Economy Macroeconomics
Catao, Luis A.V. Why Real exchange Rates?” Finance and Development, September 2007.
http://www.imf.org/external/pubs/ft/fandd/2007/09/pdf/basics.pdf
The Economist, “The Big Mac Index,” February 1, 2007.
http://www.economist.com/markets/indicators/displaystory.cfm?story_id=8649005
Heakal, Reema, “Understanding the Current Account,” Investopedia.
http://www.investopedia.com/articles/03/061803.asp
Neary, Peter. “Purchasing Power Parity,” May 2004.
http://users.ox.ac.uk/~econ0211/papers/pdf/ppp.pdf
Pakko, Michael, R. and Patricia S. Pollard, “Burgernomics: A Big Mac Guide to PPP,” The
Federal Reserve Bank of St. Louis, November/December 2003.
http://research.stlouisfed.org/publications/review/03/11/pakko.pdf
Stein, Herbert, “Balance of Payments,” The Concise Encyclopedia of Economics.
http://www.econlib.org/library/Enc/BalanceofPayments.html
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