Download Employment, Growth, Inflation

APPLIED
MACROECONOMICS:
EMPLOYMENT
GROWTH
12
4
1994
2004
-4
INFLATION
50
40
Oil price
$ per
barrel
Iranian
Revolution
30
20
10
0
1970
Yom Kippur
War
1975
1980
VIVEK MOORTHY
2014
ToCEGI
July2016
APPLIDED MACROECONOMICS:
EMPLOYMENT, GROWTH, INFLATION
LIST OF CHAPTERS (Detailed Table of Contents in next 2 pages followed by
Schematic and back pages)
CHAPTER 1: BUILDING THE FRAMEWORK FOR A GROWING ECONOMY
CHAPTER 2: FROM SHORT-RUN TO LONG-RUN PHILLIPS CURVE
CHAPTER 3: THE COSTS AND CONSEQUENCES OF INFLATION
CHAPTER 4: COST PUSH VERSUS DEMAND PULL INFLATION
CHAPTER 5: OPEC AND THE GREAT STAGFLATION
CHAPTER 6: RAPID RISE TO SLOWDOWN OF EMERGING ECONOMIES
CHAPTE‘ : DISSECTING INDIA S STAGFLATION EPISODE
ToCEGI
July2016
DETAILED TABLE OF CONTENTS
Chapter 1: BUILDING THE FRAMEWORK FOR A GROWING ECONOMY
1.1 Demand and Supply in Macroeconomics
1.2 Factors affecting Aggregate Demand
1.3 Factors affecting Aggregate Supply
1.3.1 Conventional Approach to Growth for Developing Economies
1.3.2 The Solow growth framework
1.4 An Alternative Approach to Aggregate Supply
1.4.1 The Ease of Doing Business Survey
1.4.2 Examining the Links between Output and Ease of Doing Business
1.5 The Labour Chain and Potential GDP Growth
1.6 Choosing the Right Output Measure for Macroeconomic Analysis
1.6.1 Fluctuations around Potential GDP: A Hypothetical Case
1.6.2 Classifying Business Cycle Phases Theoretically
1.7 The Links between Unemployment Rate and Output
. . Oku s La and Cyclical Variations
. . The Alge ra a d E o o i s of Oku s La
1.7.3 Okun Law Regressions (Advanced Section)
1.9 The Classification of Actual Recessions
Practice Questions
Bibliography
CHAPTER 2: FROM SHORT-RUN TO LONG-RUN PHILLIPS CURVE
2.1 Impact of Changing Aggregate Demand on Unemployment
2.2 The Original Phillips Curve
2.3 The Phillips Curve Moves to America
2.3.1 The Phillips Curve as a Policy Choice
2.4 The Friedman-Phelps Expectations Augmented Phillips Curve
2.4.1 Level versus Change effects upon Inflation
2.5 Evidence for the Prediction of Accelerating Inflation
The Origins of CPI Data Collection
Organized Workers and Inflation Adjustment
2.5.1 Evidence for the EAPC from European Countries
2.6 Global Evidence on Inflation and Growth
2.7 Output Based Version of the EAPC: The Basic Model
2.7.1 Policy Decision and IAPC loops
Phillips Curve Practice Question
Bibliography
CHAPTER 3: THE COSTS AND CONSEQUENCES OF INFLATION
3.1 Categorizing the Costs
3.2 Menu Costs
3.2.1 Inflation and the Frequency of Price Changes
3.2.2 The Consequences of Staggered Price Changes
3.3 The Costs of Minting, Printing and Counterfeiting
3.4 How Inflation Distorts Price Signals
3.5 Implicit Contracts, Sticky Prices and Cost Based Pricing
3.6 The Shrinkage Effect of Inflation
3.7 The Convenience of Nominal Accounting
3.8 Deflation versus Disinflation
Disinflation versus a Currency Reform
3.9 The Sacrifice Ratio and Disinflation Strategies
Cold Turkey versus Gradualism
3.9.1 The Volcker Disinflation
3.9.2 Rational versus Adaptive Expectations and the Credibility Effect
3.10 The EAPC/ ADSGAP Model with Lags
Bibliography
ToCEGI
July2016
CHAPTER 4: COST PUSH VERSUS DEMAND PULL INFLATION
4.1 The Cost-Push View
4. 2 The Classical Emphasis on Demand Constraints
4.3 Cost Push and Wage Restraint in the Simple Phillips Curve
4.3.1 Origins of the Natural Rate (of Unemployment) Concept
. . Solo s Defe e of The Guideposts a d Fried a s ‘ejoi der
4.4 An Extended Model to Reconcile the IAPC with Demand based Inflation
CHAPTER 5: OPEC AND THE GREAT STAGFLATION
5.1 The Huge Hike in Oil Prices
5.2 Evidence against the OPEC supply shock view
5.3 Impact of the Collapse of the U.S. Dollar on Oil Prices
5.4 Commodity Prices versus the Cartel
5.5 Response of US Policy Makers to Stagflation
5.5.1 Origins of the Core Inflation Concept
5.6 Oil Prices and the World Economy: A Brief Update
Bibliography
CHAPTER 6: RAPID RISE TO SLOWDOWN OF EMERGING ECONOMIES
6.1 The Emergence of the Emerging Markets
6.2 The First BRICs Report: Speeding Along the GDP Autobahn
6.3 The Second BRICs report: From Mild Optimism to Euphoria
6.4 The Unexpected Slowdown
6.5 The Closing of the Goldman Sachs BRICS Fund
6.6 Explaining the rise and fall of the BRICs
Rise in productivity: cyclical or structural?
. ‘e isiti g Japa s Prolo ged Stag atio
6.7.1 Outlook for China: Implications of Japan
6.8 Geopolitical Importance of the BRICs
6.9 Outlook for the Emerging Economies and their Equity Markets
Bibliography
CHAPTE‘ : DISSECTING INDIA S STAGFLATION EPISODE
. I dia s High Gro th Phase
7.1.1 Chronicling the Nine Percent Euphoria
7.2.1 Real Time Projections of Growth and Inflation
7.3 NREGA, Labour Shortages and Wage Increases
Facts and Figures about NREGA
. Exoge ous Ad i istered Food Pri e Hikes?
. The Pre aili g I flue tial Vie a out I dia s I flatio
7.5.1 Food Prices and Inflation in Select Asian Countries
7.6 The Food Inflation Episode in China
A Numerical Example of Food Inflation in a Two Sector Growing Economy
Food supply chains and inflation
7.7 Profits and Sales during Stagflation
DATA APPENDIX
Data Revisions
Discrepancy between data reported by RBI and IMF
Evaluating the 2015 GDP Revisions
Criticisms of the reliability of the new series
SCHEMATIC OF BOOKS (EGI, FMPRA, GMFM mini-books and MIFA comprehensive book)
MACROECONOMICS: AN INTEGRATED FINANCIAL APPROACH (MIFA)
MODULE AND CHAPTER
CHAPTERS RENUMBERED JULY 2015
MODULE ONE
CHAPTER 1
CHAPTER 2
CHAPTER 3
CHAPTER 4
BUILDING BLOCKS
THE SUBJECT MATTER
PRICE INDICES AND INFLATION MEASUREMENT
OUTPUT AND NATIONAL INCOME ACCOUNTING
CONSUMPTION, SAVINGS AND INVESTMENT
MODULE TWO
CHAPTER 5
CHAPTER 6
THE LABOUR AND PRODUCT MARKETS
BUILDING THE FRAMEWORK FOR A GROWING ECONOMY
PHILLIPS CURVE AND INFLATION (2 parts, CH 3 and 4 of EGI)
CHAPTER 7
COST PUSH, DEMAND PULL AND STAGFLATION (3 parts, CH 5, 6 & 7 of EGI)
CHAPTER 8
THE COMPLEX ANATOMY OF UNEMPLOYMENT (to be completed)
MODULE THREE
CHAPTER 9
CHAPTER 10
CHAPTER 11
CHAPTER 12
MONETARY POLICY FOUNDATIONS (A Policy Rate approach)
CENTRAL BANKS, POLICY RATES AND BANK RESERVES
LINKING INFLATION, INTEREST RATES & OUTPUT
CENTRAL BANK INDEPENDENCE AND INFLATION BIAS
THE LOANABLE FUNDS APPROACH TO THE REAL INTEREST RATE
MODULE FOUR
CHAPTER 13
CHAPTER 14
CHAPTER 15
FINANCIAL MACROECONOMY AND FISCAL POLICY
FISCAL POLICY, THE DEBT MARKET AND INTEREST RATES
LINKING SHORT RATES, LONG RATES AND OUTPUT
THE FISCAL-MONETARY POLICY NEXUS (and application to India)
MODULE FIVE
CHAPTER 16
MONETARY POLICY, BANKS AND THE FINANCIAL SYSTEM
BANKS, CREDIT CREATION AND MONEY (& Money Supply in Great Depression)
MONEY DEMAND, QUANTITY THEORY AND INFLATION
THE POST WAR EVOLUTION OF MONETARY POLICY
CHAPTER 17
CHAPTER 18
MODULE SIX
CHAPTER 19
CHAPTER 20
CHAPTER 21
MODULE SEVEN
CHAPTER 22
OPEN ECONOMY
BALANCE OF PAYMENTS AND EXCHANGE RATE SYSTEMS (five parts)
GLOBAL FINANCIAL MARKETS AND EXCHANGE RATES (Six parts)
Section on Monetary Policy, 1920s Equity Market and the Great Crash
EXCHANGE RATE & OUTPUT ADJUSTMENTS: EPISODES AND POLICIES
Section on From Gold Standard to Interwar Period
SPECIAL TOPICS
LABOUR MARKET POLICIES FOR MACROECONOMIC STABILITY
CHAPTER
1
Broadly Corresponds To Module Two of Full Book (MIFA)
APPLIED MACROECONOMICS: EMPLOYMENT, GROWTH AND INFLATION (EGI) Completed
TITLE OF CHAPTERS
BUILDING THE FRAMEWORK FOR A GROWING ECONOMY
2
3
4
5
6
7
FROM SHORT-RUN TO LONG-RUN PHILLIPS CURVE
COSTS AND CONSEQUENCES OF INFLATION
COST-PUSH, DEMAND-PULL AND STAGFLATION
OPEC AND THE GREAT STAGFLATION
RAPID RISE TO SLOWDOWN OF EMERGING ECONOMIES
DISSECTING INDIA’S STAGFLATION EPISODE
CHAPTER
PROLOGUE
1
2
3
4
5
6
7
Broadly Corresponds To Module Three and Parts of Module Four of Full Book (MIFA)
FINANCIAL MACROECONOMICS: A POLICY RATE APPROACH (FMPRA) Mostly Completed
TITLE OF CHAPTERS
THE RATIONALE FOR THIS BOOK
CENTRAL BANKS, POLICY RATES AND BANK RESERVES
LINKING INFLATION, INTEREST RATES & OUTPUT
CENTRAL BANK INDEPENDENCE AND INFLATION BIAS
THE LOANABLE FUNDS APPROACH TO THE REAL INTEREST RATE
FISCAL POLICY, THE DEBT MARKET AND INTEREST RATES
LINKING SHORT RATES, LONG RATES AND OUTPUT
THE FISCAL-MONETARY POLICY NEXUS and application to India’s FRBMA
CHAPTER
PART A
1
2
3
4
5
PART B
6
7
8
9
10
11
Broadly Corresponds To Module Six of Full Book (MIFA)
GLOBAL MACROECONOMICS AND FINANCIAL MARKETS (GMFM) In Progress
TITLE OF CHAPTERS
BALANCE OF PAYMENTS, EXCHANGE RATES AND THE INTERNATIONAL MONETARY SYSTEM
SYSTEM OF EXCHANGE RATES AND LINK TO FOREIGN EXCHANGE CONVERTIBILITY
THE INTERNATIONAL MONETARY SYSTEMS AND ITS CHANGES
BALANCE OF PAYMENTS ACCOUNTING
INTERACTION BETWEEN BOP, ECONOMY AND MONEY SUPPLY
INDIA’S EXCHANGE RATE AND FOREX POLICIES AND THEIR IMPACT SINCE INDEPENDENCE
GLOBAL FINANCIAL MARKETS AND EXCHANGE RATES
THE GLOBAL FOREIGN EXCHANGE MARKET
APPROACHES TO EXCHANGE RATE AND ASSET PRICE DETERMINATION
IMPACT OF NEWS ON EXCHANGE RATE AND FINANCIAL MARKETS
PROFITING FROM MARKET INEFFICIENCY
MONETARY POLICY, EQUITIES AND EXCHANGE RATES
Section on 1920s Equity Market and the Great Crash
LONG TERM INVESTMENT STRATEGIES
HIGHLIGHTS AND NOVEL FEATURES OF THIS BOOK
• Develops an integrated framework, combining short run fluctuations with long
run growth, unlike widely used text books that treat these topics separately.
o Works out growth arithmetic for relevant variables, some needed for financial
macroeconomics, instead of the usual graphical treatment in main text books.
o Wide ranging discussion of alternative approaches to growth and development
--- emphasizes role of property rights, title to land, and labour supply constraints.
--- investigates the impact of Ease of Doing Business rank upon GDP growth.
• Expounds a classical macroeconomics approach and related concepts.
o Provides wide ranging evidence on the natural rate hypothesis and the expectations
augmented Phillips curve, integrating the latter with a demand approach to inflation.
o Puts together evidence challenging the conventional view that the mid-1970s
stagflation was due to the October 1973 quadrupling of oil prices.
• E a i es I dia’s stagflatio episode upto 2013, using these concepts.
Should be useful for policy makers, academics, business and financial analysts and
journalists following the Indian economy.
o Evaluates the role of policy paralysis, National Rural Employment Guarantee Act of
2006, minimum support price system in agriculture, dietary trends, and Reserve Bank
of India policies in influencing food prices, inflation and growth, for the ten years
ending 2013.
o I ludes a Data Appe di , itte a ea efo e I dia’s o t o e sial e GDP se ies
revisions in January 2015, followed by an update assessing these revisions a year
later.
Ca
e used fo a ou se o I dia’s e o o
o e e gi g e o o ies.
o Entirely made-in-India, also incorporates doctoral research done at IIM Bangalore.
o Analyzes the boom and subsequent slowdown of BRIC economies, and compares
growth and inflation trends in China, India and major ASEAN countries.
• Most important of all, the model developed here yields values of inflation that
a o e to the e t al a k’s de isio s, a al sed i the su se ue t ook
Financial Macroeconomics: A Policy Rate Approach (see Schematic of Books).