Economics 302: Intermediate Macroeconomics Professor Francesco

Economics 302: Intermediate Macroeconomics
Professor Francesco Trebbi
Office: Buchanan Tower 1004
email: [email protected]
Winter 2014
phone: (604) 822 – 9932
Office Hours:
By Appointment (please ask, don’t be shy; also available to answer
questions via email).
Course Materials:
(1) A subscription to the Economist (Suggested)
(2) Text: Abel and Bernanke, Macroeconomics, Addison Wesley, Special
UBC edition. (Required, but you may substitute with U.S. 6th edition).
Course Objective:
The course provides the student with an introduction to macroeconomics. A first aim is to develop
the basic analytical tools for understanding macroeconomic fundamentals, both in the short-run
dimension (the business cycle) and in the long-run dimension (economic growth). We will focus on
the aggregate behavior of consumers and producers, the role of expectations in the economy, the
dynamics of prices and unemployment, the consequences of different fiscal and monetary policies. A
second aim is to corroborate the analytical framework with real-world applications, ranging from the
Canadian and United States' historical experience to cross-country comparisons, to develop insight in
interpreting the 2008-09 US financial crisis and the 2011-12 EU debt crisis.
A Note on Course Materials
The bulk of course materials will come from three sources: the lectures, the book, and the course
readings. Lecture notes will be posted directly on my web page. I will also make available some
supplemental lecture notes. The supplemental notes (also posted on my web page) are integration to
the textbook. The lectures of the course will describe important empirical regularities about the
macroeconomy in order to help identify key questions, to guide model-building efforts, to evaluate
the usefulness of the economic models, and/or to provide perspective on major economic
developments.
A Note on Course Materials (continued)
The course readings come from a variety of sources. Most readings come from the Economist. It is
much more cost-efficient for you to buy a subscription to the economist to access these readings
online than for me to include the readings in a course pack (the copyright fees on these articles far
exceed the subscription to the Economist). If you do not wish to, you do not need to buy a
subscription to the Economist. You can use the UBC’s library subscription. From an on-campus
machine you should be able to access all the Economist’s content freely. A simple search for the
article’s title in quotes usually is all you need to retrieve the full text. In case of multiple hits, check
the date of publication –it can be one or two days off between online and paper version.
The readings (in their general content not the minutia) are fair game for all subsequent tests.
Note: The Abel and Bernanke textbook assigned for this class is required. Many students find the
text extremely helpful. I have marked the appropriate readings from the text on the course reading
list.
Course Meeting time
Lectures, starting from the second meeting, will begin on time and end 10 minutes early, as per
university costume.
There will be no practice exercitations before exams.
How to Succeed in the Course
This is a rewarding, but demanding class. To succeed is simple: Come to class, follow the lectures,
and do all the readings. If you feel you are falling behind on the material, talk to me. Do not wait to
the week before the final to ask for help.
Course Grade (and grading policies):
100%
Midterms and Final (Each midterm counts once, final counts three - take the
highest three of those five grades and count 33% each – i.e. the two lowest of those
five grades are dropped).
The first midterm will occur on February 11th 2014 and will last 1 hour and 20 minutes. The
midterm will take place at the beginning of class, for the full 1:20 hours. This is a test comparable to
past midterms posted on my webpage.
The second midterm will occur on March 11th 2014 and will last 1 hour and 20 minutes. The
midterm will take place at the beginning of class, for the full 1:20 hours. This is my “Wall Street
Journal” test. You will analyze one (actual) economic commentary from a financial newspaper.
If you cannot make the exam time and you want to take the midterms, you should not take my class.
No alternate arrangements will be made.
Final Exam times for the final are set by UBC and not me. I NEVER offer alternate final times.
You must be able to make the final time if you enroll in my course. This is a test comparable to past
finals posted on my webpage.
Course Grading (continued)
Given my grading system above, you need not take the midterms (i.e. the midterms are optional). If
you do not take the midterms, 100% of your course grade will be applied to the final. But, I strongly
suggest you take the midterms and take them seriously. The midterms are easier than the final. That
is my goal. I do not normalize the means of the midterms and final when computing the course
average. I want to reward those who take the midterms and take the midterms seriously. If, for
some reason (extreme medical emergency, death in the family) you cannot make the final exam,
contact me in advance of the exam. For those who have an emergency and contact me in advance,
you will be given a grade of ‘incomplete’. For those who do not contact me in advance, you will fail
the course. Those who receive an incomplete can sit the final exam the next time I teach this macro
class (likely, although not guaranteed, winter of next year). I will then assign a course grade based on
your midterm and final exam scores. I do not give any make up finals! Again, you must notify me in
advance (or as soon as possible) if you are going to miss the final.
Any Exam for which there is a re-grade request must be done within 7 days after I return the exam
to you. The request for re-grade MUST be done in writing and attached to the exam when
submitting the exam for a re-grade. The request must include a description of what the problem is
and why you think the exam should be graded differently. In such cases, I will re-grade the whole
exam – not just the question you identified.
There will be no graded homework, but I will post practice quizzes with separate solution material.
You have to be disciplined in following through with practice, but it is necessary if you do not wish
to hit a wall on the Final.
Communication
On occasion, I will post email questions from students and my answers to these questions. I will
discuss the questions that I think lots of students have. Hopefully, this will be an efficient way to
disseminate information and review core material from the course. All student identifiers will be
removed when I post the questions.
Note: If you do not want your question posted, you can explicitly state that in any emails you send.
Additionally, I will tend to only answer email questions 2 days a week. We will set these days as the
class progresses. Tentatively, I will plan on allocating Monday afternoons and Friday afternoons for
responding to emails.
Honor Code
Even if not explicitly stated on each test, the honor code is always in effect. By taking this course,
you explicitly pledge your honor that you will not cheat (or help others to cheat) in any way on the
quizzes/exams. Any violations will be punished to the greatest extent allowed.
Course Outline/Reading List
The articles listed are required reading. All other readings can be found in the online version of the
Economist. Below, I list the tentative schedule of topics. This is the order in which we will be
covering material in this class. It is tentative in the sense that some lectures are a little longer and
may extend into the following class, while others are shorter, meaning I will introduce a new topic
during that week’s lecture. After each lecture, I will tell you for which readings you will be
responsible.
Topic 0:
Getting in the Mood for Macro!
Pre-Course Readings. Goal: To frame the issues of the course via a few short articles from the popular
press. We will explore many of the details of these articles throughout the course. Topic 0 articles
are here just for inducing interest in the subject.
I.
Overview of Macroeconomics
1.
2.
II.
(Paul Krugman: 9/2/2009)
(Economist: 8/6/2009)
A Brief History of Economic Time: U.S. Recessions? A Double Dip? Where’re the Jobs? Oil Shocks?
Inflation? Financial Crisis? Housing Markets Recovering? European Crisis?
3.
4.
5.
6.
7.
8.
III.
How Did Economists Get It So Wrong?
In Defense of the Dismal Science
The New European Union
http://www.economist.com/blogs/freeexchange/2013/12/euro-crisis
Soft or Hard
(Economist: 4/22/2000)
U, V or W for recovery
(Economist: 8/20/2009)
Poised for Growth?
(Economist: 6/14/2003)
Losing its Way
(Economist: 8/14/2004)
By the Numbers
(Economist: 8/13/2005)
The Times They Are a Changin’: U.S./World Economy in 2009-10
9. Crisis Compels Economists to Reach for New Paradigm
(Wall Street Journal: 11/3/2009)
IV.
Economists and Politics
10. Not Exactly Major League (search major league)
11. Paulson to the Rescue
V.
Economists and Public Discourse
12. The Invisible Hand on the Keyboard
VI.
(Economist: 3/19/2005)
(Economist: 6/3/2006)
(Economist: 8/5/2006)
Macroeconomic Modeling
13. Big Questions and Big Numbers
(Economist: 7/15/2006)
Topic 1:
Introduction to Macro Data
Course Readings Goal: To complement the course lectures via some short articles from the popular
press. Topic 1 readings cover material related to week 1 lectures, and so on. All the subsequent
readings (in their general content, not the minutia) are fair game for the tests.
Chapters 1, 2, and 3.5 from Text.
I.
II.
The Difficulty in Measuring Economic Variables
A.
Difficulty in Measuring Prices
14.
15.
Fighting America's Inflation Flab
Feeling the Heat
B.
Difficulty in Measuring Output/Output Growth
16.
17.
Divining the Future
Leading Us Astray?
C.
Difficulty in Measuring Unemployment
18.
It’s The Taking Part That Counts
D.
Difficulty Measuring Well Being
19.
20.
Chilled Out
France to count happiness in GDP
(Economist: 10/7/2000)
(Economist: 6/24/2006)
(Economist: 1/15/2005)
(Economist: 4/8/2006)
(Economist: 7/30/2005)
(Economist: 2/25/2012)
(Financial Times: 9/14/2009)
The Yield Curve
21.
22.
Topic 2:
The Long and the Short of It
Inversion and Reversion
(Economist: 1/7/2006)
(Economist: 9/7/2006)
Production, the Labor Market and Economic Growth
Chapters 3, 6.1 and 6.3 (skim 6.2 - do not worry about the math) from Text
I.
Production and Labor Markets
23. A Stickier Problem
(Economist:
24. Has Structural Change Contributed to a Jobless Recovery? (FED at:
http://www.ny.frb.org/research/current_issues/ci9-8/ci9-8.html )
25. In the bleak midwinter
(Economist:
26. Jobless Growth
(Economist:
27. The Land of Leisure
(Economist:
II.
26/8/2010)
12/16/2010)
6/3/2010)
2/4/2006)
Growth in the New Economy
28. Productivity on Stilts
29. Performing Miracles
(Economist: 6/10/2000)
(Economist: 6/17/2000)
III.
Productivity
30.
31.
32.
33.
IV.
Secret Sauce
A thinkers’ guide
The gamble
Use IT or lose it
(Economist: 11/12/2009)
(Economist: 4/1/2000)
(Economist: 5/13/2007)
(Economist: 5/17/2007)
Income Inequality
34. Like a piece of string
(Economist: 10/13/2012)
Topic 3:
Consumption, Saving, and Investment
Chapters 4.1, 4.2 and Appendix 4.A from Text
I.
Consumption/Savings
35. Low and Slow
http://www.economist.com/blogs/freeexchange/2012/07/americas-economy
36. Europe’s Other Debt Crisis
(Economist: 10/26/2013)
37. The Shift Away from Thrift
(Economist: 4/9/2005)
38. Home truths
(Economist: 10/12/2006)
39. U.S. Household Deleveraging and Future Consumption Growth
(http://www.frbsf.org/publications/economics/letter/2009/el2009-16.html )
II.
Investment
40. The Profits Prophet
41. Hey, small spender
Topic 4:
(Economist: 10/5/2013)
(Economist: 10/6/2012)
Fiscal Policy
Chapter 9.2 and 15 from Text (skip 15.4)
I.
Government Savings
42. Tomorrow’s Burden
43. The Money Comes Pouring In
II.
(Economist: 10/22/2009)
(Economist: 7/15/2006)
Taxes
44. When cuts aren’t kind enough
(Economist: 9/22/2005)
45. The Case for Flat Taxes
(Economist: 4/16/2005)
46. What’s Wrong With Cutting Taxes?
(Simon Johnson for NYT
http://economix.blogs.nytimes.com/2010/12/09/whats-wrong-with-cutting-taxes/ )
III.
Supply Side Economics
47. Europe Isn’t Working (Regulation)
IV.
(Economist: 4/5/1997)
Fiscal Policy in Action
48. Fiscal Cliff
http://www.economist.com/blogs/freeexchange/2012/07/fiscal-cliff-and-economy
49. Stampede to Stimulus
(Economist: 1/17/2008)
50. Scattering Cash
(Economist: 1/24/2008)
51. Stimulus: To Spend or Not to Spend?
(Business Week: 1/28/2009)
52. Why the war against terror will boost the economy. (Business Week: 11/5/2001)
Topic 5:
Introduction into Money/Federal Reserve Policy
Chapters 7, 9.3, 14.1 and 14.2 from Text
I.
Monetary Basics
53. Some Monetary Facts
(McCandless and Weber
www.minneapolisfed.org/research/QR/QR1931.pdf )
54. Who Needs Money
(Economist: 1/22/2000)
II.
Monetary Policy In Action
55. A Blunt Tool
(Economist: 6/30/2001)
56. QE through the looking glass
http://www.economist.com/blogs/freeexchange/2012/11/monetary-policyunintended-consequences
57. Desperate Measures
(Economist: 1/22/2008)
III.
Know Your Central Banker
58. The Education of Ben Bernanke
(New York Times: 1/20/2008)
59. Mark Carney: The man who speaks the truth
(Globe and Mail: 12/14/2011)
(http://www.theglobeandmail.com/news/opinions/jeffrey-simpson/mark-carney-theman-who-speaks-the-truth/article2270030/)
Topic 6:
Inflation and Unemployment in the Short Run (Putting it All Together)
Chapters 8-11 from Text
I.
A Look at Recessions
60. Recessions Compared
http://www.economist.com/blogs/dailychart/2011/07/american-recessions-andrecoveries
II.
Why We Care about Inflation
61. Germany's hyperinflation-phobia
http://www.economist.com/blogs/freeexchange/2013/11/economic-history-1
62. Inflation Fears (Simon Johnson on 2009 Inflationary Prospects)
(http://economix.blogs.nytimes.com/2009/05/28/inflation-fears/#more-14731 )
III.
Should We Care About Deflation?
63. The Big Inflation Scare
64. Hear that Hissing Sound?
IV.
Shifts in Aggregate Supply: Technology Shocks
65. A Thinkers' Guide
V.
(Economist: 4/1/2000)
Shifts in Aggregate Supply: Oil Shocks
66. The 2011 Oil Shock
67. Unstoppable?
68. Counting the Cost
VI.
(New York Times, Krugman 5/29/2009)
(Economist: 5/17/2003)
(Economist: 3/3/2011)
(Economist: 8/21/2004)
(Economist: 8/27/2005)
Credit Crunch and Credit Crisis
69. Mend the Money Machine
(Economist: 5/4/2013)
70. Everything You Need to Know about the Credit Crisis
http://freakonomics.blogs.nytimes.com/2008/10/15/everything-you-need-to-knowabout-the-financial-crisis-a-guest-post-by-diamond-and-kashyap/
Topic 7:
A Deeper Look at Policy in Action
Chapter 12 and 14.3 from Text
I.
A Policy Discussion
71. NGDP Targeting
http://www.economist.com/blogs/freeexchange/2011/10/monetary-policy-3
72. Bernanke’s Response to the Financial Crisis (in his own lectures)
http://www.federalreserve.gov/newsevents/files/chairman-bernanke-lecture320120327.pdf
II.
The Inflation/Unemployment Tradeoff
73. Curve Ball
III.
(Economist: 9/30/2006)
Monetary Rules (see web page for online locations)
74. Money Rules
http://content.ksg.harvard.edu/blog/jeff_frankels_weblog/2012/12/25/central-banks-can
-phase-in-nominal-gdp-targets-without-losing-the-inflation-anchor/
IV.
Putting it all Together
75. A Nasty Whiff of Inflation
76. Between Bears and Hawks
Topic 8:
I.
Special Topics
The 2009 Recession and Recovery
77. A Joyless Recovery
78. The Long Climb
79. Surviving the Slump
II.
(Economist: 4/20/2013)
The European Union
83. A Trio of Trilemmas
84. Fixing Europe's single currency
V.
(Economist: 6/2/2001)
(Economist: 3/11/2006)
China
82. Speed isn’t everything
IV.
(Economist: 10/29/2009)
(Economist: 10/1/2009)
(Economist: 5/28/2009)
A Primer on Japan in the 1990s.
80. Chronic Sickness
81. After the Flood
III.
(Economist: 9/24/2005)
(Economist: 5/13/2006)
(Economist: 7/6/2013)
(Economist: 9/23/2010)
Political systems and the Macroeconomy
85. Politics, race and redistribution
Topic 9:
(Economist: 3/11/2004)
The International Economy
Chapter 5 and 13 from Text
86. The passing of the Buck?
(Economist: 12/4/2004)
87. Growth After the Crisis
(http://www.imf.org/external/pubs/ft/fandd/2009/09/giavazzi.htm )
88. Reflections on the Trade Deficit and Fiscal Policy
(Greg Mankiw
http://www.economics.harvard.edu/faculty/mankiw/columns/trade_deficit_dec_2005.pdf)