EUBA Masters Macroeconomics

Fall 2015 --- Jeffrey Parker

Course Outline and Reading List

Note: The chapter numbers on the reading list for the Mankiw text refer to the 2nd European edition. If you are using a different edition, use the chapter titles to determine which chapter contains the material that we will cover.

Note: Titles appearing in bold, red text are links that you can follow to access the reading.

Week 1: Introduction to Macroeconomics

What do macroeconomists do and how do they do it? Data as the raw materials of macroeconomics.

Required reading:

  • Mankiw, Chapter 1: The Science of Macroeconomics
  • Mankiw, Chapter 2: The Data of Macroeconomics
  • Easterlin, Richard A. 2001. “Income and Happiness: Towards a Unified Theory.” Economic Journal 111 (473), 465-484. (Focus on the main ideas here, and don't get confused by the details or the math.)
  • Henderson, J. Vernon, Adam Storeygard, and David N. Weil. 2012. “Measuring Economic Growth from Outer Space.” American Economic Review 102 (2):994-1028. (Don't worry about the complicated econometrics in Section II. Just try to get the main idea and the message from the diagrams and tables.)

Week 2: National Income, Output, and its Components

The circular flow of income and expenditures. Simple theories of consumption and investment spending. The equilibrium of income and expenditures.

Required reading:

  • Mankiw, Chapter 3: National Income: Where It Comes From and Where It Goes

Week 3: Money, the Banking System, and Inflation

What is money? How is the quantity in circulation determined? Banking and central banking. Basic theories and consequences of inflation.

Required reading:

  • Mankiw, Chapter 4: The Monetary System: What It Is and How It Works (Note: There will be differences between the U.S. and European editions in the details of reserve creation.)
  • Appelbaum, Binyamin, “The Fed’s Policy Mechanics Retool for a Rise in Interest Rates,” International New York Times, 12 September 2015.
  • Mankiw, Chapter 5: Inflation: Its Causes, Effects, and Social Costs (Note: These two chapters are combined as a single chapter in some older editions.)

Week 4: Open Economy

How do international flows of goods and credit affect the macroeconomic balance? How do exchange rates work?

Required reading:

  • Mankiw, Chapter 6: The Open Economy

Week 5: Labor, Employment, and Unemployment

What do we mean by unemployment and how is it measured? Long-run (natural) and short-run (cyclical) unemployment. Frictional and structural unemployment.

Required reading:

Weeks 6 and 7: Economic Growth

Basic sources of economic growth. The Solow growth model. Theoretical and empirical concepts of convergence. Growth policies. Endogenous growth theory.

Required reading:

  • Mankiw, Chapter 8: Economic Growth I: Capital Accumulation and Population Growth
  • Mankiw, Chapter 9: Economic Growth II: Technology, Empirics, and Policy
  • Mankiw, N. Gregory, David Romer, and David N. Weil. 1992. “A Contribution to the Empirics of Economic Growth.”  Quarterly Journal of Economics 107 (2):407-37.
  • Sala-i-Martin, Xavier. 1997. “I Just Ran Two Million Regressions.”  American Economic Review 87 (2):178-83.

Midterm Exam: 19.00-20.00 on 4 November

Weeks 8 and 9: Aggregate Supply, Aggregate Demand, and the IS/LM Model

The general model of aggregate supply and demand in the short and long runs. Expenditure equilibrium and the IS curve. Monetary equilibrium and the LM curve. IS/LM and aggregate demand.

Required reading:

  • Mankiw, Chapter 10: Introduction to Economic Fluctuations
  • Mankiw, Chapter 11: Aggregate Demand I: Building the IS/LM Model
  • Mankiw, Chapter 12: Aggregate Demand II: Applying the IS/LM Model

Week 10: Modeling the Open Economy

Adapting the IS/LM framework to incorporate international trade and capital flows. The Mundell-Fleming model with floating exchange rates and perfect capital mobility. The effect of fixed exchange rates.

Required reading:

  • Mankiw, Chapter 13: The Open Economy Revisited: The Mundell-Fleming Model and the Exchange-Rate Regime

Week 11: Aggregate Supply and the Phillips Curve

The shape of the aggregate-supply curve in the short run and long run and its implications for the effects of aggregate-demand changes. The traditional and modern Phillips curve.

Required reading:

Week 12: Stabilization Policy and Issues of Government Deficits and Debt

Pros and cons of active use of monetary and fiscal policy to offset the business cycle. What limits a government’s ability to run deficits and accumulate debt over time?

Required reading:

  • Mankiw, Chapter 15: Stabilization Policy
  • Mankiw, Chapter 16: Government Debt

Week 13: Macroeconomics in a Currency Union

Adapting our theories for Slovakia and other members of the euro zone. What is gained? What is lost?

Required reading:

  • Mankiw, Chapter 17: Common Currency Areas and European Economic and Monetary Union