EC 492 - Section 1 - Senior Seminar - SPRING 2004 CASE STUDIES IN MACROECONOMIC POLICY Mon. and Wed. 4:10-5:25 P.M. Clark C-364 Instructor: Dr. Nancy Jianakoplos Office: C329 Clark Office Hours: Mon. & Wed. 1:00-3:00 P.M. or by appointment Phone: 491-6537 (office) 491-9722 (home) Fax: 491-2925 Email: Nancy.Jianakoplos@ColoState.edu Class Web Site: http://webct.colostate.edu COURSE OBJECTIVES 1. To use the tools of economics to prepare a written analysis of macroeconomic policy making. 2. To make oral presentations of macroeconomic policymaking case studies. 3. To use economic data and theory to evaluate the motivation, implementation and effectiveness of current and past monetary, fiscal, and exchange rate policy. 4. To learn about job opportunities for economists. COURSE STRUCTURE AND POLICIES 1. EC 304 - Intermediate Macroeconomics is a prerequisite for this course. The instructor assumes you have previously mastered the material typically presented in intermediate macroeconomics courses. 2. Texts: Rukstad, Michael G. Macroeconomic Decision Making in the World Economy: Text and Cases. 3rd ed. 1991. Required Mankiw. Macroeconomics. 5th ed. 2003, or similar intermediate macroeconomic textbook. The Mankiw text is on reserve in the library. 3. Case Presentation: (120 possible points) Each team of two or three students will present one of the nine macro policy cases from the Rukstad text listed on the class schedule. Well in advance of the date set for the presentation, each team of presenters will schedule an appointment to meet with Professor Jianakoplos to discuss the content of their presentation. Guidelines for the case presentations are presented separately. 4. Case Quizzes: (80 possible points) There will be nine quizzes, one in each class session in which a case is to be presented. Quizzes will precede the presentation and cover the material from the text. Each quiz is worth 10 points. Each student will be eligible to take eight of the quizzes (a student is ineligible for the quiz covering the case they present). 1
5. Video Quizzes: (30 possible points) During three class sessions listed on the syllabus videos related to macroeconomic policy making will be shown. Students will take a brief quiz covering the structure of each video. Each quiz is worth 10 points. 6. Case Evaluation Papers: (90 possible points) Each student will prepare three brief (1-2 pages) papers that compare and contrast the cases focusing on monetary policy, fiscal policy, and exchange rate policy, respectively. Each paper is worth 30 points. Paper specifications are presented separately. 7. Paper: (600 points) Each student, either individually or as part of a two or three person group, will prepare a 10-15 page double-spaced typed paper dealing with the conduct of economic policymaking in one of the following situations: 1/ U.S. Federal Reserve Response to Sept. 11, 2001. 2/ Russian Debt Default - August 1998 3/ Converting to the Euro - Jan. 1, 2002 4/ Argentina s Currency Crisis - Dec. 2001/Jan. 2002 5/ Exchange Rate Crisis in Indonesia - 1997 6/ Mexico's Devaluation - December 1994 7/ Japanese Fiscal Responses to the Slump - 1992-1999 8/ Dollarization in Ecuador - 2000 9/ U.S. Budget Crisis - Nov. 15, 1995 10/ U.S. Federal Reserve Preparation for Y2K - 1999 11/ What to do with U.S. Budget Surpluses - 1998-2000 12/ U.S. Fiscal Policy in the 2001 Recession - 2001 13/ New Zealand adopts Inflation Targeting - 1990 14/ Creating the European Central Bank - June 1, 1998 15/ Other topics to be arranged Deadlines and guidelines for the paper are presented separately. 8. Paper Presentation: (120 possible points) During the last 3 weeks of class, an oral version of each paper will be presented to the class by the author(s). Each presentation will be between 15 and 30 minutes long, depending on the number of topics selected. Guidelines and grading criteria for these presentations are presented separately. 9. Paper Presentation Evaluations: (40 possible points) Excluding the day a student makes his or her paper presentation, each student will complete a written evaluation of all of the other paper presentations. 10. Assessment Exams: (120 possible points) During the week of April 26-30, 2004, each student must take the Assessment Examinations in microeconomics and macroeconomics. The exams will be available on WebCT. The exams consist of 20 multiple choice questions pertaining to microeconomics and 20 multiple choice questions pertaining to macroeconomics. Each correct answer is worth 3 points. 2
11. Grades: Your course grade will be determined by adding together all of the points earned in the course. Total possible points are distributed as follows: Case Presentation 120 Case Quizzes 80 Video Quizzes 30 Case Evaluation Papers 90 Paper 600 Paper Presentation 120 Paper Presentation Evaluations 40 Assessment Exams 120 TOTAL 1,200 The grading scale is: A = 1080 or more B = 960-1079 C = 840-959 D = 720-839 F = Below 720 Pluses and minuses will NOT be used. The professor reserves the right to lower the scale. 12. No extra credit projects will be assigned. 13. Behavior: Please help us maintain a pleasant, scholarly atmosphere. Your questions and comments during class help not only yourself, but others to learn and understand. Please participate actively. Please try to avoid distracting others by refraining from private conversations during class, by not reading the newspaper during class, by not coming to class late, and by not leaving class early. Your full cooperation will make this a profitable and enjoyable course. 14. Academic Integrity: The term paper is expected to be your own work. If you have any questions as to what constitutes plagiarism, please contact the instructor. No unauthorized assistance may be used when taking exams or quizzes. Any academic dishonesty will result in a grade of "F" for the course. 3
CLASS SCHEDULE Monday Wednesday January 21 Introduction/ Case Assignments January 26 January 28 Jobs and Resumes Getting Started on Your Paper Paper Topics/Groups due February 2 February 4 Data & Charts & Graphs Macro Models Monetary Video February 9 February 11 Case: U.S. Financial Crisis 1931 Section 1 (Macro Policy Event) draft due February 16 February 18 Case: Paul Volcker and the Fed: 1979/82 Section 2 (Economic Situation) draft due February 23 February 25 Case: The United Kingdom under Thatcher Fiscal Video Monetary Cases Evaluation Paper due March 1 March 3 Case: Keynesian cure for the Depression Section 3 (Economic Analysis) draft due March 8 March 10 Case: Tax Cut of 1964 Section 4 (Policy Implementation) draft due SPRING BREAK March 22 March 24 Case: Privatization in the U.K. Exchange Rate Video Fiscal Cases Evaluation paper due March 29 March 31 Case: U.K. and the Gold Standard Section 5 (Economic Outcomes) draft due April 5 April 7 Case: Kennedy and the Balance of Payments Micro and Macro Assessment Exam review April 12 April 14 Case: Decline of the Dollar 1978 Exchange Rate Cases Evaluation paper due Completed Papers Due 4
April 19 April 21 Paper Presentations Paper Presentations April 26 April 28 Paper Presentations Paper Presentations Micro and Macro Assessment exams must be completed during this week May 3 May 5 Paper Presentations Paper Presentations Dr. J treats for dinner at Potts 5
GUIDELINES FOR CASE PRESENTATIONS I. Content Presentations should deal with the following 6 topics: 1. What is the macroeconomic policymaking event? Clearly state the issue, actors, time and country involved. 2. What is the economic situation at the time of the event? Provide a perspective on GDP, inflation rate, unemployment rate, exchange rate, budget deficit, monetary policy stance, and other economic conditions at the time of decision. Use data to clearly specify the economic situation. 3. What is the economic analysis of the policy? Within the framework of an economic model analyze the: 1/ economic situation, 2/ policy alternatives, and 3/ predicted impact of the policy chosen. Clearly illustrate the situation using an economic model. 4. How is the economic policy implemented? What are the policy objectives (or desired outcomes)? Which policy was chosen, why? Which policy options were not chosen, why? What institutional arrangements or constraints affected the decision? 5. What are the economic outcomes of the policy implementation? Compare the theoretically expected with the actual outcome. Use data to describe the outcome. 6. What policymaking conclusions can be drawn from this case? What do we learn about economic policymaking from this case? Note: The text does not focus sufficiently on the economics of most cases, but you should. II. Style Your group presentation must be at least 20 minutes, but no more than 30 minutes, not including time for questions and discussion. In planning your class presentation, the objective is to guide your classmates through the issues as they relate to your event. Remember they are relying partly on you to prepare them for the case evaluation paper. Use PowerPoint, the blackboard, overheads, handouts, worksheets, review questions, summaries, and/or other ways to make it easier for your classmates to take notes and understand the material. Develop at least two questions for discussion to engage the rest of the class in the learning experience. This is your chance to demonstrate how to be a "great professor"! Be sure to practice your presentation so that it falls within the allotted time interval. III. Evaluation Each member of the group must participate in the presentation. The grade for the presentation is the same grade for each group member. 6
EC 492 Case Presentation Grade Sheet Names Date Grade (out of 120) Topic I. Content (10 Points) Description of Macro Policy Making Event Clearly state the issue, actors, time and country involved. (10 Points) Description of Economic Situation Provide a perspective on GDP, inflation rate, unemployment rate, exchange rate, budget deficit, monetary policy stance and other economic conditions at the time of decision. Use data to clearly specify the economic situation. (10 Points) Economic Analysis of the Economic Situation Within the framework of an economic model analyze the : 1/ economic situation, 2/ policy alternatives, and 3/ predicted impact of the policy chosen. (10 Points) Policy Implementation What are the policy objectives (or desired outcomes)? Which policy was chosen, why? Which policy options were not chosen, why? What institutional arrangements or constraints affected the decision? (10 Points) Describe the economic outcomes of the policy Compare the theoretically expected with the actual outcomes. Use data. 7
(10 Points) Policymaking Conclusions What do we learn about economic policymaking from this case? (10 Points) Discussion Questions Ask at least two questions to generate class discussion of the case. II. Style (15 Points) Time Presentation must be at least 20 minutes and no longer than 30 minutes excluding time for questions and discussion. (20 Points) Visual Aids Use visual aids to present the class. Make sure they can be seen clearly. (15 Points) Oral Presentation Speakers could be heard, were well prepared, but did not read their presentation. The presentation was well organized and sequenced. 8
GUIDELINES FOR PAPERS 1. Objective The objective of this paper is to write a case study of a current macroeconomic policymaking event either individually or as part of a group. The grading criteria and standards are the same for papers prepared by individuals or groups. If you choose to work in a group, the grade for the paper will be the same for each group member. 2. Content The contents of the paper should address each of the following aspects: a. Carefully describe the macroeconomic policymaking event. Clearly state the issue, actors, time and country involved. b. Use data to describe the economic situation at the time of the decision. Include perspectives on GDP growth, inflation, unemployment, exchange rates, budget deficit, monetary policy and other relevant economic data for at least twoyears before the event. c. Provide economic analysis of the situation and economic policy alternatives within the framework of an economic model. What insight does economic theory give as to the appropriate choice? There should be graphs illustrating the case using a macro economic model. d. Carefully explain the economic policy implementation available. Analyze the options with respect to the overall objectives of economic policy, institutional arrangements and constraints on policymakers. What policy was chosen? Why were other policies not chosen? e. What were (or are expected to be) the economic outcomes of the decision. Use data to evaluate the success or failure of the policy if available. How did the actual outcome compare with the outcome expected? f. Discuss the policymaking conclusions regarding macroeconomic policymaking that can be drawn based on this case. 3. Title Page Each paper should begin with a title page indicating the title of the paper, the names of the authors, the date, and an abstract of the paper (single spaced) not exceeding 200 words. 4. Footnotes Footnotes should be listed at the end of the paper. Footnotes should contain only statements that are not critical to the topic or provide more detailed information than is necessary for comprehension. Most papers will have no footnotes. 5. References Prepare a list of all references consulted in alphabetical order by author. A style sheet for references will be distributed. In the body of the paper cite sources of data and information by placing the author, year ( and page when appropriate) in brackets. You must include analysis based on at least TWO references to an academic (including 9
Federal Reserve, IMF, or other governmental agency) articles (not data). You should ask the instructor whether the journal reference you are using is appropriate. 6. Tables, Graphs, Figures You must include tables of data referred to in the text. The source(s) of the data should be noted on the table. Be sure to explain the significance of these data in the body of the paper. You must also include at least FIVE graphs or charts (and at least 2 different types) to illustrate your paper. The source(s) of the data to construct these aids must be noted below the illustrations. 7. Macroeconomic Model You must include economic analysis based on a macroeconomic model in your paper. 8. Style To adequately achieve the objective of the paper, 10-15 pages are probably required. Papers should be double-spaced throughout with one-inch margins on all sides. Since rewriting the paper is part of the process, you should use a word processor to write your paper. Use section headings corresponding to the underlined phrases in the content section. Please number the pages of the paper. 9. The paper is worth 600 points. The points and schedule for completion are listed below. Late papers at each stage of the process will have 25 points deducted for each 24-hour period they are late beginning at 5:30 p.m. on the due date. Wed., Jan. 28 50 points Topic and Group Members Wed., Feb. 11 50 points Section 1 draft* Wed., Feb. 18 50 points Section 2 draft* (include tables, charts) Wed., Mar. 3 50 points Section 3 draft* (include model graph) Wed. Mar. 10 50 points Section 4 draft* Wed. Mar. 31 50 points Section 5 draft* (include tables, charts) Wed. April 14 300 points Complete Paper * All drafts must include title page and reference page. 10
Evaluation of Paper Names Grade (out of 300) Topic I. Completeness and incisiveness of content (300 points) Abstract (25 points) Economic Policy Making Event (25 points) Economic Situation (25 points) Economic Analysis (25 points) Policy Implementation (25 points) Economic Outcomes (25 points) Policymaking Conclusions (25 points) Two Academic references (25 points) Five graphs or figures (50 points) 11
II. Presentation/Format (50 points) Abstract (5 points) Reference List (10 points) Page formatting, spacing, margins, font (5 points) Page numbers (5 points) Headings (5 points) Visually Attractive (10 points) Grammatically Correct (10 points) 12
STYLE GUIDE FOR RESEARCH PAPERS 1. Title Page Each paper should begin with a title page that includes 1/ title of paper, 2/ name(s) of author(s), 3/ date, and 4/ abstract. The abstract should briefly summarize the main points of the paper in 200 words or less. The first three items on the title page should be centered and double spaced. The abstract should be single spaced. 2. Body a. Use 12 point font. b. Double space text. c. Make one-inch margins on all four sides of each page. d. Number each page. e. Use the following section headings (centered) 3. Footnotes I. The Macroeconomic Policymaking Event II. Economic Situation III. Economic Analysis IV. Economic Policy Implementation V. Economic Outcomes VI. Policymaking Conclusions Footnotes should be listed on a separate page at the end of the paper. Footnotes should be single space with a double space between notes. Footnotes should contain only statements that are not critical to the topic or provide more detailed information than is necessary for comprehension. Most papers will have no footnotes. Example: FOOTNOTES 1. We ignore the effects of taxes in our estimation of the model. Bellante and Saba (1986) show that taxes do not significantly affect the results. 2. Of the 384 single women in the sample, 46% are widowed, 38% divorced, and 16% never married. In contrast, among the 230 men in the sample, 18% are widowed, 41% are divorced and 41% are never married. 4. References. 13
Kate Turabian s A Manual for Writers of Term Papers, Theses, and Dissertations (1996) describes 2 systems for citations: 1/ notes and bibliography and 2/ parenthetical references and reference lists. Use the second format. In the body of the text cite the appropriate literature whenever you use data or allude to someone else s work or writing by including the author and date in brackets. Do not cite your literature as footnotes, but provide a complete list all of your references in the format described below by author in alphabetical order at the end of your paper. The cite in the body of the text should match the list of references at the end of your paper. IMPORTANT: You must cite your references each time you use them in the text. You must also list references by author at the end of your paper ( in alphabetical order with all appropriate information). Failure to do so constitutes plagiarism (i.e., the assumption of another author s work as your own.) Example: In 1972, for example, 39 percent of female, full-time, private sector wage and salary workers were covered by pensions, compared to 54 percent of male workers (U.S. Department of Labor 1997). King and Leape (1987) suggest that information accumulates with age, so variables measuring age and age squared of the individual are included. At the end of the text on a separate page list the references in alphabetical order by author. Any questions regarding how to cite a document should follow Turabian (1996). The general form for references is: Examples: Author. Date. Title. Place: Publisher. REFERENCES King, Mervyn A. and Jonathan I. Leape. 1987. Wealth and Portfolio Composition: Theory and Evidence. Journal of Public Economics 69:155-193. U.S. Department of Labor. 1997. Report on the American Workforce. Washington, D.C. U.S. Department of Commerce. Bureau of Economic Analysis. 2000. Gross Domestic Product: Third Quarter 2000 (Final) Corporate Profits: Third Quarter 2000 (Revised); available from http://www.bea.doc.gov/dn1.htm; Internet; accessed 22 January 2001. 14
Evaluation of Paper Presentation Names Date Topic Grade (out of 120) 1. Organization A. Time (25 points) B. Logical and Interesting (25 points) 2. Visual Aids Clear and Appropriate (25 points) 3. Content Appropriate Economic (25 points) 4. Style/Clarity A. Audible (10 points) B. Not Read (10 points) 15
Case Evaluation Papers You may work together on these papers, but each student must submit their own paper written in their own words. (30 Points) Monetary Policy Cases: Due Wed., Feb. 25, 2004 Prepare 1-2 typewritten pages in response to the following question: Compare (show similarities) and contrast (explain differences) in monetary polices undertaken in the three cases with respect to the following issues: a. policy goals b. economic conditions c. tools of monetary policy employed Use specific information about the cases to support your statements. (30 Points) Fiscal Policy Cases: Due Wed., Mar. 24, 2004 Prepare 1-2 typewritten pages in response to the following question: Compare (show similarities) and contrast (explain differences) in fiscal polices undertaken in the three cases with respect to the following issues: a. policy goals b. economic conditions c. tools of fiscal policy employed Use specific information about the cases to support your statements. (30 Points) Exchange Rate Policy Cases: Due Wed., April 14, 2004 Prepare 1-2 typewritten pages in response to the following question: Compare (show similarities) and contrast (explain differences) in exchange rate polices undertaken in the three cases with respect to the following issues: a. type of exchange rate system b. economic conditions c. priority of domestic versus international considerations Use specific information about the cases to support your statements. 16