Credits: 6
Schedule: 07.01.2019 - 22.02.2019
Teacher in charge (valid 01.08.2018-31.07.2020):
Seppo Honkapohja
Contact information for the course (applies in this implementation):
Teacher: Seppo Honkapohja
(email:
Seppo.honkapohja@aalto.fi)
Teaching assistant: Aleksi Paavola
(email:
Aleksi.m.paavola@aalto.fi)
Teaching Period (valid 01.08.2018-31.07.2020):
III Spring (2018-2019), Töölö campus
III Spring (2019-2020), Otaniemi campus
Learning Outcomes (valid 01.08.2018-31.07.2020):
The course develops central areas of macroeconomic theory that are useful for analysis and discussion of policy making. The policy topics covered include foundations of unconventional monetary policies e.g. quantitative easing, the role of financial markets in the recent crisis, current problems and topics in the Euro area and issues in long-term economic growth. Students learn the motivations for policy analysis, become familiar with current policy concerns and acquire analytical skills for assessing these problems.
Content (valid 01.08.2018-31.07.2020):
Formulation and use of New Keynesian models for policy making and analysis, role of financial and labor markets in macroeconomic fluctuations, the Great Recession and the problem of very low interest rates, theory of fiscal and monetary policy, analysis of long-term growth and development.
Details on the course content (applies in this implementation):
Reading list
( * = required reading )
Main text:
W. Carlin and D. Soskice (2015) Macroeconomics: Institutions, Instability, and the Financial System, Oxford University Press,
(CS)
Lecture 1: (date: Jan. 7, 2019)
The basic closed economy model
*CS: ch’s 1.2.7 (IS-curve), 2, 3
Assigned readings:
Friedman M. (1968) The Role of Monetary Policy, The American Economic Review, Vol. 58, No. 1. (Mar., 1968),
pp. 1-17, https://wwz.unibas.ch/fileadmin/wwz/redaktion/witheo/lehre/2009_FS/vwl4/doc/chapter8/Friedman_AER1968.pdf.
Tobin J. (1972) Inflation and Unemployment, American Economic Review, vol. 62, No. 1 (March 1972), pp. 1-8, go to the library and get the article from JSTOR (I try to put the address to the website).
You may also want to have a look at Paul Krugman’s remarks on how Tobin’s article was received in the economics community: https://krugman.blogs.nytimes.com/2016/09/10/tobin-was-right-implicitly-wonkish/.
Essay on assigned reading due on Monday, January 14, 2019
Lecture 2: (date: Jan. 9, 2019)
Monetary policy, basic open economy model (part 1)
*CS: ch’s 4, 13.1-4, 9
Lecture 3: (date: Jan. 14, 2019)
Open Economy: Basic model (part 2), Demand and supply
*CS: ch’s 9, 10, 11
Assigned reading:
Hume D. (1752) Of the balance of trade, http://www.econlib.org/library/LFBooks/Hume/hmMPL28.html.
Rey H. (2015) Dilemma not Trilemma: The Global Financial Cycle and Monetary Policy Independence,
http://www.helenerey.eu/AjaxRequestHandler.ashx?Function=GetSecuredDOC&DOCUrl=App_Data/helenerey_eu/Published-Papers_en-GB/_Documents_2015-16/147802013_67186463733_jacksonholedraftweb.pdf
Essay on assigned reading due on Monday, January 21, 2019
Lecture 4: (date: Jan. 16, 2019)
Aggregate Demand, Introduction to Financial Intermediation
*CS: ch’s 1, 5
Assigned reading:
Kueng L. (2018) Excess Sensitivity of High-Income Consumers, can be downloaded at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2627893,
will be placed at the website
Essay on assigned reading due on Monday, January 28, 2019
Lecture 5: (date: Jan. 21, 2019)
Financial Markets and Economic Fluctuations
*CS: ch’s 5, 6
Bernanke B. (1988) Monetary Policy Transmission: Through Money or Credit? https://www.philadelphiafed.org/-/media/research-and-data/publications/business-review/1988/brnd88bb.pdf.
Lecture 6: (date: Jan. 23, 2019)
Zero lower bound, Slow recovery, Hysteresis
*CS: ch 3.3, 7, 13.5-6, 15.5-7
*Carlin W and D. Soskice (2018) Stagnant productivity and low unemployment: stuck in a Keynesian equilibrium, Oxford Review of Economic Policy, Volume 34, Numbers 1–2, 2018, pp. 169–194, will be placed at
the course website.
Assigned reading:
Blanchard O. (2017) Should We Reject the Natural Rate Hypothesis?, PIIE Working Paper, 17-14, https://piie.com/system/files/documents/wp17-14.pdf.
Essay on assigned reading due on Monday, February 4, 2019
Lecture 7: (date: Jan. 28, 2019)
Fiscal policy, Economic policies in currency unions
*CS: ch 12 (12.1-2, 12.5 mostly descriptive material)
Assigned Reading:
Reconciling risk sharing with market discipline: A constructive approach to euro area reform, CEPR Policy Insight, CEPR Policy Insight No. 91, January 2018, https://cepr.org/sites/default/files/policy_insights/PolicyInsight91.pdf.
You can focus on some specific issue discussed in the report, e.g. on what the
Report regards the main problems in the Euro system are.
Essay on assigned reading due on Monday, February 11, 2019
Lecture 8: (date: Jan. 30, 2019)
Government debt, safe assets
*CS: ch. 14.3-5
*Portes J. and S. Wren-Lewis (2015) Issues in the Design of Fiscal Policy Rules, NIESR Discussion Paper No. 429, https://www.niesr.ac.uk/sites/default/files/publications/dp429.pdf.
Lecture 9: (date: Feb. 4, 2019)
Economic growth: basic theory
*CS: ch. 8.1-6
Allen R. (2009) VoXEU column “Why was industrial revolution British?” https://voxeu.org/article/why-was-industrial-revolution-british.
Lecture 10: (date: Feb. 6, 2019)
Endogenous technological change and endogenous growth
*CS: ch. 8.7.
*Romer, P. Endogenous technological change, Journal of Political Economy, vol.98, Supplement, S71-102. (Sections V-VI only cursorily)
Assigned reading:
Gordon, R.J. (2012), Is the US growth over? Faltering innovation confronts the six headwinds, NBER wp 19315.
Essay on assigned reading due on Monday, February 18, 2019
Lecture 11: (date: Feb. 11, 2019)
Creative destruction,unlimited growth, stagnating growth
*CS: ch 8.8
Nordhaus W. (2015) Are we approaching an economic singularity? Information technology and the future of economic growth, NBER Working Paper No. 21547.
*Oulton, N. (2001), Must the Growth Rate Decline? Baumol's Unbalanced Growth Revisited. Oxford Economic Papers, Vol. 53, No. 4, pp. 605-627.
Lecture 12: (date: Feb. 13, 2019)
Discussion
and review
Assessment Methods and Criteria (valid 01.08.2018-31.07.2020):
50% Exam
50% Assignment
Exam will be changed to home exam.
Spring 2020 re-take exam replaced by independent project.
Elaboration of the evaluation criteria and methods, and acquainting students with the evaluation (applies in this implementation):
Workload: The course has 3 learning elements: lectures,
exercises, and group work.
Lectures (24 h)
Problem sets (12 h)
Short essays (4 graded out of 6; can be
written in pairs).
Assessment Methods and Criteria:
• Exercises: 30 % of the grading
• Short Essays 20 % of the grading
• Exam: scoring 0-5, 50 % of the grading
Short essays: Students can form pairs to write the essays about material connected to some lectures. The essays have maximum length of 2 pages. The reading list above details topics and reading material in connection with 6 lectures. Students return for grading 4 out of the 6 essays.
The essays should contain a summary of the assigned reading. Comments and discussion of the topic can be made as part of the essay.
Deadlines:
(1)Return dates for essays are given in the reading list. The deadline is one week or more after the lecture to which the essay is assigned.
(2) Problem sets (Exercises) are due just before that set is discussed in class. The dates are given at the end of each problem set.
Workload (valid 01.08.2018-31.07.2020):
Contact teaching 24h
Exercises 14h
Essay 35h
Exam preparation and independent study 84 h
Exam 3h
TOTAL 160h (ECTS)
Spring 2020 re-take exam replaced by independent project.
Study Material (valid 01.08.2018-31.07.2020):
Main text: Carlin-Soskice: Macroeconomics: Institutions, Instability, and the Financial System
Other readings to be assigned
Details on the course materials (applies in this implementation):
Compulsory material is indicated by * in the reading list.
Course Homepage (valid 01.08.2018-31.07.2020):
https://mycourses.aalto.fi/course/search.php?search=31E23000
Prerequisites (valid 01.08.2018-31.07.2020):
Intermediate courses in mathematical methods for economics and in econometrics
Grading Scale (valid 01.08.2018-31.07.2020):
0 - 5
Registration for Courses (valid 01.08.2018-31.07.2020):
For course and re-exam via WebOodi
Details on the schedule (applies in this implementation):
Week starting January 7: return of Problem set 1 on January 10
Week starting January 14: return of essay (on lecture topic L1) on January 14, return of Problem set 2 on January 17
Week starting January 21: return of essay (on lecture topic L3) on January 21, return of Problem set 3 in January 24
Week starting January 28: return of essay (on lecture topic L4) on January 28, return of Problem set 4 in January 31
Week starting February 4: return of essay (on lecture topic L6) on February 4, return of Problem set 5 in February 7
Week starting February 11: return of essay (on lecture topic L7) on February 11, return of Problem set 6 in February 14
Week starting February 18: return of essay (on lecture topic L10) on February 18