MACROECONOMIC THEORY Nathalie.Mathieu-Bolh@uvm.edu Tel: (802)-656-0946 Office 335, Old Mill Office Hours: Tuesdays 11:45-12:45 and Thursdays 1:45-2:45 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). 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 01/14-01/18 Chapter 5: Goods and Financial Markets: The IS-LM Model 2 01/21-01/25 Chapter 5: Goods and Financial Markets: The IS-LM Model 3 01/28-02/01 Chapter 7: The AD-AS model 01/28 Add/Drop deadline 4 02/04-02/08 Chapter 8: The Natural Rate of Unemployment and the Phillips Curve 5 02/11-02/15 Chapter 11: Saving, Capital Accumulation and Output 6 02/18-02/22 Tuesday 02/19: Midterm 1 7 02/25-03/01 Chapter 12: Technological Progress and Growth 8 03/04-03/08 Spring Break 9 03/11-03/15 Chapter 16: Expectations, Consumption, and Investment 10 03/18-03/22 Chapter 17: Expectations, Output and Policy 11 03/25-03/29 Chapter 9: The Crisis Tuesday 03/26: Midterm 2 03/29: Last day to withdraw 12 04/01-04/05 Chapter 18: Openness in Goods and Financial Markets 13 04/08-04/12 Chapter 19: The Goods Market in an Open Economy
14 04/15-04/19 Chapter 20: Output, the Interest Rate and the Exchange Rate 15 04/22-04/26 Chapter 21: Exchange Rate Regimes 16 04/29-05/01 Chapter 23: Fiscal Policy: A summing up FINAL EXAM: FRIDAY 05/03/2013 01:30-04:15 PM IN LAFAYETTE 302 ~ GRADES~ A s: Scores superior to 90% B s: Scores between 80 and 90% C s: Scores between 70 and 80% D s: Scores between 60 and 70% F s: Scores 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.