Course: ECON 615 (W, 7:20-10:00)
Term: Spring 2010
Instructor: Garett Jones
Office hours: Wednesday, 1:30pm-3pm, Carow Hall, 8A, and by appointment.
Phone: (314) 973-7243
Website: I will use Blackboard this semester for all course-related materials.
In this course, you will learn the basic tools that macroeconomists use to study the overall economy, and you will apply these tools to understand of how the macroeconomy actually works.
To learn these tools, you will need to have a solid understanding of algebra along with familiarity with multivariate calculus and basic statistics, including bivariate regression. I will take these mathematical tools for granted after week 2. The Schaum’s Outline Introduction to Mathematical Economics and its Easy Outline of Probability and Statistics cover all you’ll need to know–actually, both cover a lot more than you’ll need to know.
Stephen Williamson, Macroeconomics, Third Edition. Our main text. The second edition should also work well, but homework questions will be assigned from the third edition.
Reinhart and Rogoff, This Time is Different: Eight Centuries of Financial Folly. An empirical and theoretical overview of financial crises, a regularity of market-oriented societies. Questions on this book will only be included on the midterm.
Baumol, Litan, Schramm, Good Capitalism, Bad Capitalism: The Economics of Growth and Prosperity. Baumol, the dean of the economics of innovation, writes with Litan and Scramm to draw policy lessons about what kinds of market-oriented systems work best. Questions on this book will only be included on the final.
* indicates required reading.
Week 1: The One-Period Macroeconomic Model
Williamson, Chapters 1, 4-5
* Lucas, (1988). “What do economists do?” Address to students, University of Chicago.
Fuchs, Krueger and Poterba, “Why do Economists Disagree about Policy? The Roles of Beliefs about Parameters and Values” (also published in Journal of Economic Literature),
Weeks 2-3: A two-period world with optimal behavior:
Deficits, Labor Supply, and Dynamic General Equilibrium.
Williamson, Chapters 8-9
* Seater, John, (1993). “Ricardian Equivalence,” Journal of Economic Literature
* Ludvigson, (2004). “Consumer Confidence and Consumer Spending,” Journal of Economic Perspectives.
Baxter and King, (1993). “Fiscal Policy in General Equilibrium,” American Economic Review.
Week 4: Basic Anatomy
Williamson, Chapters 2-3.
Robert Hall, “Struggling to Understand the Stock Market,” American Economic Review,
Corrado, Hulten, and Sichel, “Intangible Capital and Economic Growth,” Federal Reserve Board,
Hamilton and Perez, “What do the Leading Indicators Lead?” Journal of Business
Weeks 5-7: Inflation and Equilibrium Business Cycles
Williamson, Chapters 10-11
*McCandless and Weber, “Some Monetary Facts.” Federal Reserve Bank of Minneapolis.
*Friedman and Friedman (1979), “Anatomy of a Crisis,” chapter 3 of Free to Choose. (handout)
*Bernanke, Gertler, and Gilchrist, “Inside the Black Box: The Credit Channel of Monetary Policy Transmission,” Journal of Economic Perspectives.
Hafer, Haslag, and Jones, “On Money and Output: Is money redundant?” Journal of Monetary Economics.
Ireland, (2002). “Technology shocks in a New Keynesian Model,” Review of Economics and Statistics.
Week 8: Spring Break
Week 9: Midterm Examination
Week 10: The Sticky-Price Keynesian Model
Williamson, Chapter 12
* (First paragraph only) Hicks, (1935). “Mr. Keynes and the Classics: A suggested reinterpretation.”
Weeks 11-12: Monetary policy and Inflation
Williamson, Chapters 15, 17
* Selgin and White, (1994). “How would the invisible hand handle money?” Journal of Economic Literature.
*Friedman, Milton, (1968). “The Role of Monetary Policy,” American Economic Review, 58: 1-17.
*DeLong (1999), “The Triumph (?) of Monetarism,” Journal of Economic Perspectives.
Weeks 13-15: Economic Growth
Williamson, Chapters 6-7
*Paul Romer, “Economic Growth,” in Library of Economics and Liberty,
Sala-i-Martin, Doppelhofer, and Miller, “Determinants of Economic Growth,” American Economic Review.
*Jones and Schneider, “Intelligence, Education, and Economic Performance,” Journal of Economic Growth.
*Acemoglu, Johnson, and Robinson, “Botwsana.”
Acemoglu, “Why not a political Coase theorem?”
In addition, I reserve the right to make minor changes, as well as to provide a few short (<5 pages) handouts in class.
NOTE: Mathematical Appendices for assigned chapters are required reading.
You will have one midterm and a comprehensive final. You will also have homework assignments to turn in. Five percent of your grade will be based on informed class participation (a proxy for attendance and intelligent comments). You are encouraged to work on the homework assignments in groups, but each student must turn in her own assignment, and when essays are assigned, each student must write her own essay.
Homework Assignments 10%
Class Participation 5%
Final Exam 50%
Please note that you are at an Honor Code university. You are expected to conduct yourself in a manner that is consistent with the learning mission of the University. All forms of academic dishonesty are strictly forbidden. This includes but is not limited to the following: communicating with other students during exams; unapproved references to books, notes or “cheat sheets” during exams; and plagiarism–representing another person’s work as your own. You should be aware that plagiarism is often easy to recognize. The minimum penalty for an incident of academic dishonesty will be a score of zero on the assignment where the dishonesty occurred. For further information on academic ethics, please consult the student handbook.
Class Attendance/Missed Exams
I highly recommend class attendance, since I believe there is strong correlation between class attendance and academic performance. If you happen to miss a class, you should ask a classmate to borrow their notes. I will not, as a general rule, offer make-up exams or early finals. Exceptions will be made for students with documented illnesses.
For Further Reading:
Williamson’s book attempts to make the modern “dynamic general equilibrium” worldview accessible to advanced undergraduates and beginning graduate students. This worldview is summarized at a Ph.D. level in the following books:
Sargent, Thomas, 1987, Dynamic Macroeconomic Theory.
Stokey, Nancy and Robert Lucas, Recursive Methods in Economic Dynamics.
Sargent and Ljungqvist, Recursive Macroeconomic Theory.
The above books are all quite theoretical, and don’t attempt to test out their theories against the data. The best book for bringing these theories to the data is probably:
Obstfeld and Rogoff, Foundations of International Macroeconomics, early chapters.
This “DGE” worldview is central to modern finance, as well. John Cochrane’s Asset Pricing is the best Ph.D. textbook on the subject, while Lengweiler’s more basic Microfoundations of Financial Economics should be readable after you’ve finished this course.
Final Exam from Spring 2008 HERE.