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Loyola University College of Business Administration Intermediate Macroeconomic Analysis Economics 206 - Section 001 Instructor: Dr. Barnett Semester: Spring, 2016 Class meetings: Mondays, and Wednesdays, 8:00 a.m. to 9:15 a.m. Room: 112 Miller Hall Office: 319 Miller Hall. Office hours: Office hours: Mondays and Wednesdays, 1:00 p.m. – 3:00 p.m.; Tuesdays, 8:00 a.m. - 10:00 a.m.; and, by appointment. Phone nos.: Office: 864-7950; E-mail: [email protected] Course prerequisites: Principles of Macroeconomics (ECON B101) N.B. This is a reading intensive, lecture/discussion class. Students are encouraged to ask questions. Catalog description: This course considers various theories concerning the functioning of the macroeconomy: Classical, Keynesian and the Neoclassical Synthesis, Monetarism, Supply-Side, Post Keynesian, and Austrian. Rational Expectations, Real Business Cycles and Dynamic Stochastic General Equilibrium, and New Keynesianism will also be considered Course purpose: It is not inaccurate to say that macroeconomic theory is in a state of disarray. Unlike the period from the time of the General Theory, in the mid-1930s, until the early 1970s, when there was “an” orthodox view based on the conventional Keynesian model,1 today no consensus exists. Rather, a number of competing theories coexist. The purpose of this course is to examine these theories in more depth than is the case in the principles of macroeconomics course, and to consider the policy implications of each. Thus we shall be analyzing, comparing, and contrasting the following theories and hypotheses: the Pre-Keynesian/Classical, orthodox Keynesian, Neoclassical Synthesis, Monetarist, Supply-Side, Post Keynesian, including Minsky’s Financial Instability, Fisher’s Debt-Deflation, and the Austrian Business Cycle theories, as well as Rational Expectations, Real Business Cycles and Dynamic Stochastic General Equilibrium, and New Keynesianism theories. However, despite the fact that that there is no agreement as to which is the best theory, given the current state of the economy, and the policy-makers clear reliance on Keynesian in its most crude form, regardless of the modern variant of macroeconomic theory to which they might claim allegiance, short shrift will be paid to Rational Expectations, Real Business Cycles and Dynamic Stochastic General Equilibrium, and New Keynesianism theories. 1 As we shall see, there are those who think that standard or orthodox Keynesianism is not true Keynesianism, in the sense of what Keynes himself really meant. 1 Course Learning Objectives Students completing this course successfully will: 1) be able to explain Pre-Keynesian/Classical theory and its implications for governmental policies; 2) be able to explain the Keynesian theory and its implications for governmental policies; 3) be able to explain the Neoclassical Synthesis and its implications for governmental policies; 4) be able to explain the Monetarist theory and its implications for governmental policies; 5) be able to explain the Supply-Side theory and its implications for governmental policies; 7) be able to explain the Post Keynesian theory, including Minsky’s Financial Instability Hypothesis, and its implications for governmental policies; 9) be able to explain Fisher’s Debt-Deflation Theory; 10) be able to explain the Austrian Business Cycle theory and its implications for governmental policies; and, 11) be able to explain the major flaws in Rational Expectations, Real Business Cycles and Dynamic Stochastic General Equilibrium, and New Keynesianism theories. This is a reading intensive, lecture/discussion class. Students are encouraged to ask questions. Text: Snowden, B., and H. R. Vane. 2005. Modern Guide to Macroeconomics: Its Origins, Development and Current State., Edward Elgar. Ebeling, R., ed. 1996. The Austrian Theory of the Trade Cycle and Other Essays. (Ludwig von Mises Institute.) Referred to in the schedule as ATTC. NB: Some important readings are attached. Grading: There will be two examinations. It is my normal practice to weight, on an individual basis, the exam with the more favorable outcome 60% and the exam with the less favorable outcome 40%.. I reserve the right to adjust your final grade upward or downward by one letter grade based upon your classroom performance. The grading scale is: A>89≥A->86≥B+ >82≥B>79≥B->76≥C+>72≥C>69≥C->66≥D+>62≥D>59≥F. Attendance: You will be held responsible for all lecture material and class discussions as well as all of the reading assignments. Therefore, although there is no formal attendance requirement, you are strongly urged to attend all class meetings. Communications: All Loyola email correspondence will be directed to students’ Loyola email address only. You are responsible for any communications addressed to your Loyola email account. Academic Integrity Statement: I consider honesty and integrity to be of the utmost importance and presume that my students do also, and thus that each and every one of you is a person of integrity. Therefore, I have one simple rule: you are to do your own work. I will not tolerate academic dishonesty in any way, shape, or form. The penalty in my class for cheating, no matter how minor the infraction might appear to be, is an F for the course. If you have any doubt 2 whatsoever as to whether a particular course of action or inaction would constitute academic dishonesty, you should consult me immediately. Electronic Devices: Absolutely no electronic devices of any type are allowed during exams. If you use one during an exam you will receive an F for the course. Disabilities: If you have a disability and wish to receive accommodations, please contact Sarah Mead Smith, Director of Disability Services at 504-865-2990. If you wish to receive test accommodations (e.g., extended test time), you will need to give the course instructor an official Accommodation Form from Disability Services. The Office of Disability Services is located in Marquette Hall 112. Emergency Statement: At times, ordinary university operations are interrupted as a result of tropical storms, hurricanes, or other emergencies that require evacuation or suspension of on-campus activities. To prepare for such emergencies, all students will do the following during the first week of classes: 1. Practice signing on for each course through Blackboard. 2. Provide regular and alternative e-mail address and phone contact information to each instructor. In the event of an interruption to our course due to the result of an emergency requiring an evacuation or suspension of campus activities, students will: 3. Pack textbooks, assignments, syllabi and any other needed materials for each course ad bring during an evacuation/suspension 4. Keep up with course work during the evacuation/suspension as specified on course syllabi and on-line Blackboard courses. 5. Complete any reading and/or writing assignments given by professors before emergency began. Assuming a power source is available.... 6. Log on to university Web site within 48 hours of an evacuation/suspension. 7. Monitor the main university site (www.loyno.edu) for general information. 8. Log on to each course through Blackboard or e-mail within 48 hours of an evacuation/suspension to receive further information regarding contacting course instructors for assignments, etc. 9. Complete Blackboard and/or other online assignments posted by professors (students are required to turn in assignments on time during the evacuation/suspension period and once the university campus has reopened.) 10. Contact professors during an evacuation/suspension (or as soon as classes resume on campus) to explain any emergency circumstances that may have prevented them from completing expected work. Further information about student responsibilities in emergencies is available on the Academic Affairs web site: http://academicaffairs.loyno.edu/students-emergency-responsibilities 3 All dates, except that of the final exam, are approximate. Dates Material Readings (classes) Jan. 20 (1) Introduction Text Ch. 1 & Preliminary Materials section of the Readings Jan. 25-Feb. 3 (4) Keynes and the Old Classical School Text Ch. 2 & Classicals section of the Readings Feb. 15-24 (4) Keynes & the Orthodox Keynesian School Text Ch. 3 & the Keynes section of the Readings Feb. 29-Mar. 2 (2) The Orthodox Monetarist School Text Ch. 4 and section of Readings on Friedman Mar. 7-9 (2) The Supply-Side School Hailstones, T. 1962. A Guide to Supply-Side Economics. Robert F. Dame. & Fink, R.H. 1982. Supply- side Economics. Alethia Books. Chapters 1,3,5,7,& 9 (These books are on reserve.) Mar. 14 (1) First Exam Mar. 9 (3) Mar. 16-30 (2) The New Classical I School and the Real Business Text Ch. 5-6 Cycle School Apr. 4 (1) The New Keynesian School Text Ch. 7 Apr. 6-13 (3) The Post Keynesian School, Minsky’s Financial Text Ch. 8 + sections of Instability Hypothesis, & Fisher’s Debt-Deflation Readings on Minsky and Theory. Fisher Apr. 18-May 11 (8) The Austrian School Text Ch. 9 & The Austrian Theory of the Trade Cycle and other essays MAY 16 FINAL EXAM (9:00 a.m.-11:00 p.m.) All dates, except that of the final exam, are approximate. 4 PRELIMINARY MATERIALS “Refresher” Mankiw, N. G. 1990. “A Quick Refresher Course in Macroeconomics.” Journal of Economic Literature. 28(4): 1645-1660. Read papes 1645-1648. http://scholar.harvard.edu/mankiw/files/Quick_Refresher.pdf Various Economists on the State of Macroeconomics Stiglitz, Jonathan M. Orszag and Peter R. Orszag (2002): Implications of the New Fannie Mae and Freddie Mac Risk-based Capital Standard http://www.pierrelemieux.org/stiglitzrisk.pdf Bernanke (2002): http://www.federalreserve.gov/boarddocs/speeches/2002/20021121/default.htm Solow (2003): Dumb and Dumber in Macroeconomics. http://www2.gsb.columbia.edu/faculty/jstiglitz/festschrift/Papers/Stig-Solow.pdf Bernanke (2004): The Great Moderation. http://www.federalreserve.gov/boarddocs/speeches/2004/20040220/default.htm Mankiw (2006): The Economist as Scientist and Engineer. http://www.economics.harvard.edu/files/faculty/40_Macroeconomist_as_Scientist.pdf Chari and Kehoe (2006): Modern Macroeconomics in Practice: How Theory Is Shaping Policy.
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