Illinois State University
Department of Economics
Spring 2002
This syllabus contains important information
about this course. Please read it very carefully, and, preserve it for
reference during the rest of the semester.
Information about the Course
Title: Adv. Macro Theory (ECO 441)
Class Time: 12:35-1:50 Tuesdays
and Thursdays
Place: SCH 313
Catalog Description:
"National income analysis with emphasis on the contemporary theories
of consumption, investment and interest, also consideration of the level,
growth, and fluctuations of national income." Graduate Catalog,
2001-2002, P. 70.
Prerequisites: ECO
241 and work in calculus.
Information about the Instructor
Name: Hassan Mohammadi
Office: 423 D Stevenson
Hours: T&R 10:00 -11:00, 2:00
- 3:00, or by appointment
Phone: 438-7777
E-Mail: hmohamma@ilstu.edu
Website: www.econ.ilstu.edu/hmohamma/
Introduction
This course is an introduction to macroeconomics at an advanced level.
It serves as an overview of the field for students who do not intend
to continue in macroeconomics, and a starting point for those who tend
to continue to more advanced courses and research in macroeconomics
and monetary economics.
Macroeconomics has evolved over time, both in the nature
of questions that it addresses and in the kind of answers that it offers.
These changes reflect two types of developments in the field. First,
new theories are developed and old theories are discarded in light of
new evidence. Second, the economy evolves in ways that spur new questions
and demand new answers. The materials presented in this course will
partly reflect these new developments.
Course Objectives
The objectives of this course include:
1. Development of a general equilibrium macroeconomic model of the economy
consisting of labor market, commodity market, money market, and foreign
exchange market.
2. Investigation of the response of key macro variables (output, employment,
real wage, inflation, interest rate, …) to exogenous shocks under
alternative assumptions about expectations.
3. Examination of the role of economic policy (monetary and fiscal)
under alternative assumptions about expectations.
4. Investigation of developments in theories of consumption and investment.
5. Examination of basic developments in growth theories.
Required Background
Students enrolled in this course are expected to have completed intermediate
macro, statistics, and calculus, and have working knowledge of a word-processing
software (MS Word) and a spreadsheet software (MS Excel).
Required Course Materials
REQUIRED TEXT:
Macroeconomic Theory and Policy, William H. Branson, Third Edition,
1989.
RECOMMENDED TEXTS:
Advanced Macroeconomics, David Romer, First Edition, 1996.
An excellent text for those interested in growth theories.
Macroeconomics In The Global Economy, Jeffery Sacks
and Felipe Larrain, 1993.
An excellent exposition of macroeconomic issues in a less technical
language.
Monetary Economics, Theory and Policy, Bennett
T. McCallum, 1989.
International Monetary Economics, Bennett T. McCallum, 1996.
Excellent texts for those interested in monetary aspects of macroeconomics.
Foundations of International Macroeconomics, M.
Obstfeld and K Rogoff., 1996.
Excellent reading for those interested in open economy macroeconomics.
OTHER READINGS:
1. Macroeconomics is a dynamic field. Many day-to-day
events affect the economy. You are expected to keep track of these developments,
and analyze their economic consequences. There are many good sources
for current information, including the Wall Street Journal, the Economist,
and many online sources such as CNBC.com.
2. You should be familiar with alternative
sources for domestic and international data on macro vairables. Some
good sources include Economic
Report of the President, World
Economic Outlook, NBER,
Federal Reserve regional banks, and International Financial Statistics
(IFS). A detailed list of online data sources is available at Economic
and Social Data.
3. You must be familiar with numerous economic journals,
which publish articles relevant to this course. A partial listing of
these journals are:
1. American Economic Review
2. Economic Journal
3. Journal of Political Economy
4. Quarterly Journal of Economics
5. Review of Economics and Statistics
6. Brookings papers on Economic Activity
7. Canadian Journal of Economics
8. Economic Inquiry
9. International Economic Review
10. Journal of Finance
11. Journal of International Economics
12. Journal of Monetary Economics
13. Journal of Money, Credit, and banking
14. Oxford Economic papers
15. Southern Economic Journal
16. Economia Internazionale
17. European Economic Review
18. Oxford Bulletin of Econ. and Statistics
19. Journal of Macroeconomics
20. Journal of Post Keynesian Economics
Course Requirements
Your performance in this course is evaluated based on
three exams, some homework assignments, and a class presentation. The
course grade will be a weighted average of grades you obtain on each
of the above. The weights, and points are summarized below:
Percent Points Date
|
Points (weight) |
Date |
| Homework |
50 (12.5%) |
weekly |
| Exam1 |
100 (25%) |
February 28 |
| Exam2 |
100 (25%) |
April 11 |
| Final |
100 (25%) |
May 8 |
| Seminar |
50 (12.5) |
will be announced later |
Exams: Are designed
to help monitor your progress in understanding the subject, and are
the primary criteria for your course grade. They are in the form of
essay questions or problems.
Assignments: Consist
mostly of essay-type questions and problem sets and will emphasize the
mechanics and applications of the macro models.
Seminar: The purpose
of the seminar is to introduce you to the vast empirical literature
surrounding macroeconomics. To do so, each of you will review, summarize,
and present an article from a refereed journal on a topic relevant to
course materials. The article should address an empirical aspect of
a subject that we investigate in the course.
I have developed the following procedure for class presentations:
1. By March 21, you provide me with a list of three articles. The articles
should be selected from reputable economic journals and published since
January 1995.
2. One of these articles will be selected for your class presentation.
3. Your next task is to provide a 2-to-3 page review of the article.
The review should include
a. Author's primary objective,
b. Theoretical framework,
c. Empirical specification of the model,
d. Data,
e. Empirical results,
f. Summary of major findings.
COURSE CONTENT (Based on Branson's
Text)
I. INTRODUCTION: Chapters 1 and
2
1. National Income Accounting
II. THE IS-LM MODEL: Chapters 4 and 5
1. The IS Curve
2. The LM Curve
3. Equilibrium and Adjustment
4. Monetary and Fiscal Policy: An Introduction
III. FLEXIBLE PRICE MODELS:
1. Aggregate Supply and Demand: Chapters 6, 7, 8
2. Monetary and Fiscal Policy: Chapter 9, 16
3. Search, Wage Rigidity, and Unemployment: Chapter 10
4. Rational Expectations and Demand Policy: Chapter 11
5. Government Finance and the Public Debt: Chapter 21
IV. KEY MACROECONOMIC FUNCTIONS
1. Consumption and Consumer Expenditure, Chapter 12
2. Investment Demand, Chapter 13
3. The Demand for Money, Chapter 14
V. STABILIZATION:
1. Effectiveness of Monetary and Fiscal Policies: Chapter 16
2. The Phillips Curve, Stabilization Policy and Rational Expectations,
Chapter 20
VI. THE FOREIGN SECTOR AND THE BALANCE
OF PAYMENTS, Chapter 17
1. The Current Account and Product Market Equilibrium
2. The Capital Account and Balance-of-Payments Equilibrium
3. Balance-of-Payments Adjustment and the LM Curve
4. Balance-of-Payments Adjustment Policy with Fixed and Flexible Exchange
Rates
VII. LONG-RUN GROWTH WITH FULL EMPLOYMENT
1. Neo-classical growth model, Chapter 24.