Download MACROECONOMIC THEORY Mondays and Wednesdays 10:30-11:30

MACROECONOMIC THEORY
[email protected]
Tel: (802)-656-0946
Office 335, Old Mill
Office Hours: Mondays and Wednesdays 10:30-11:30
or by appointment
Class webpage: https://bb.uvm.edu/
COURSE OBJECTIVE AND DESCRIPTION
The objective of this course is the exploration and the deeper understanding of contemporary
macroeconomic issues through commonly used theoretical models.
A review of core models is followed by three extensions. Those extensions focus on the role of
expectations, the implications of openness of modern economies and economic pathologies such as
depressions. Throughout the course, the models presented are used to understand the effects of fiscal
and monetary policies on the economy. Whenever appropriate, current events are discussed in light of
macroeconomic theory.
MAIN QUESTIONS COVERED
How do fiscal and monetary policies affect the economy in the short and medium run? (IS-LM
model and AD-AS model, IS-LM model with expectations).
Do disinflation policies inevitably lead to high unemployment and recession? (Phillips curve,
Okun’s law)
How do saving and technological progress impact production and growth in the long run?
(Solow growth model).
How do expectations affect today’s interest rates, stock prices, consumption and investment?
(IS-LM model with expectations, permanent income theory, life-cycle theory, Tobin’s q).
How does the openness of the economy and exchange rate regimes affect the outcome of fiscal
and monetary policies? (Mundell-Fleming model).
What caused the recent economic crisis and what are the remedies to it? (IS-LM and The
liquidity trap).
What is the effect of government deficits and debt? (Intertemporal budget constraint,
Keynesian and Ricardian theories).
COURSE REQUIREMENTS
Homework assignments (25% of the semester performance).
2 Midterms (25% +25% of the semester performance).
Final (25% of the semester performance).
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The lowest homework assignment grade is dropped.
The homework assignments have to be returned in class at the due dates. There is
about one assignment per chapter. Due dates for homework are announced in class.
Since the homework solutions are posted online, late homework cannot be accepted.
In case there is a departmental assessment, this will be included in the homework grade
and weigh 1%.
Extra-credit opportunities are announced in class. They generally relate to press articles
to summarize. In case we have visitors, you will be required to prepare questions. This
preparation will be graded as extra credit.
You are expected to attend all lectures. Homework and exams are essentially lecture
based. Homework due dates are announced in class. Therefore, missing lectures would
seriously put you at risk of failing this class.
You are responsible for checking the class website every week. It contains important
announcements and reminders, course outlines and homework material.
READING
Selected chapters from the following textbook: Macroeconomics by Blanchard, O. and D.
Johnson, 6th edition, Pearson.
List of articles and research papers posted on the Blackboard webpage.
~ PROVISIONAL COURSE SCHEDULE ~
(Chapters from the textbook)
Week
Date
Chapter in Textbook
1
08/27-09/31
Chapter 5: Goods and Financial
Markets: The IS-LM Model
2
09/03: Labor day
Chapter 5: Goods and Financial
Markets: The IS-LM Model
09/05-09/07
3
09/10-09/14
Chapter 7: The AD-AS model
09/10 Add/Drop deadline
4
09/17-09/21
Chapter 8: The Natural Rate of
Unemployment and the Phillips
Curve
5
09/24-09/28
6
10/01-10/05
Chapter 11: Saving, Capital
Accumulation and Output
Chapter 12: Technological Progress
and Growth
10/03: Midterm 1
7
10/8-10/12
Chapter 16: Expectations,
Consumption, and Investment
8
10/15-10/19
Chapter 17: Expectations, Output
and Policy
9
10/22-10/26
Chapter 9: The Crisis
10
10/29-11/02
Chapter 18: Openness in Goods and
Financial Markets
10/29: Last day to withdraw
11/02: Midterm 2
11
11/05-11/09
Chapter 19: The Goods Market in an
Open Economy
12
11/12-11/16
Chapter 20: Output, the Interest Rate
and the Exchange Rate
13
11/19-11/23: Thanksgiving break
14
11/26-11/30
Chapter 21: Exchange Rate Regimes
15
12/03-12/05
Chapter 23: Fiscal Policy: A
summing up
16
FINAL EXAM:
FRIDAY 12/14/2012 01:30 - 04:15 PM
IN LAFAYETTE 300
~ GRADES~
A: Score superior to 90%
B: Score between 80 and 90%
C: Score between 70 and 80%
D: Score between 60 and 70%
F: Score below 60%
~ ON-LINE ARTICLES~
All along the semester, I assign readings of articles. They are used as an introduction or a
complement to the chapters studied. Examples of those articles are:
China Quietly Relaxes Control on Foreign Capital, The NYTimes, March 2012.
This article illustrates concepts related to exchange rate regimes and monetary policies.
Over the Cliff: From the Subprime to the Global Financial Crisis, F. Mishkin, Journal of Economic
Perspectives 2011.
This article is used to discuss the origins and macroeconomic effects of the most recent
economic crisis.
The Lessons of 1937, C. Romer, The Economist June 2009.
This article is used to illustrate the Keynesian model and discuss policy options to address
severe recessions.
~ POLICIES~
You need to be aware of UVM policies by reading the UVM Rights and Responsibilities of
Undergraduate Students. I also have a few specific guidelines. You can always talk to me if you
have any questions or concerns .
Absences:
- For unexpected absences, accepted excuses with adequate documentation are:
Dean’s office excuse or unplanned athletic competition.
- If a student is not present at the date and time of a test without an accepted excuse, he/she
gets a grade of zero.
Classroom Code of Conduct:
- Students need to arrive in class on time.
- I expect students to focus, participate and take notes during class.