Course Outline and Reading List
Note: The chapter numbers on the reading list for the Mankiw text refer to the 2nd European edition. If you are using a different edition, use the chapter titles to determine which chapter contains the material that we will cover.
Note: Titles appearing in bold, red text are links that you can follow to access the reading.
Week 1: Introduction to Macroeconomics
What do macroeconomists do and how do they do it? Data as the raw materials of macroeconomics.
Required reading:
- Mankiw, Chapter 1: The Science of Macroeconomics
- Mankiw, Chapter 2: The Data of Macroeconomics
- Easterlin, Richard A. 2001. “Income and Happiness: Towards a Unified Theory.” Economic Journal 111 (473), 465-484. (Focus on the main ideas here, and don't get confused by the details or the math.)
- Henderson, J. Vernon, Adam Storeygard, and David N. Weil. 2012. “Measuring Economic Growth from Outer Space.” American Economic Review 102 (2):994-1028. (Don't worry about the complicated econometrics in Section II. Just try to get the main idea and the message from the diagrams and tables.)
Week 2: National Income, Output, and its Components
The circular flow of income and expenditures. Simple theories of consumption and investment spending. The equilibrium of income and expenditures.
Required reading:
- Mankiw, Chapter 3: National Income: Where It Comes From and Where It Goes
Week 3: Money, the Banking System, and Inflation
What is money? How is the quantity in circulation determined? Banking and central banking. Basic theories and consequences of inflation.
Required reading:
- Mankiw, Chapter 4: The Monetary System: What It Is and How It Works (Note: There will be differences between the U.S. and European editions in the details of reserve creation.)
- Appelbaum, Binyamin, “The Fed’s Policy Mechanics Retool for a Rise in Interest Rates,” International New York Times, 12 September 2015.
- Mankiw, Chapter 5: Inflation: Its Causes, Effects, and Social Costs (Note: These two chapters are combined as a single chapter in some older editions.)
Week 4: Open Economy
How do international flows of goods and credit affect the macroeconomic balance? How do exchange rates work?
Required reading:
- Mankiw, Chapter 6: The Open Economy
Week 5: Labor, Employment, and Unemployment
What do we mean by unemployment and how is it measured? Long-run (natural) and short-run (cyclical) unemployment. Frictional and structural unemployment.
Required reading:
- Mankiw, Chapter 7: Unemployment and the Labor Market
- Rocheteau, Guillaume. 2006. “Understanding Unemployment.” Federal Reserve Bank of Cleveland Economic Commentary (October 15).
- Ritter, Joseph A., and Lowell J. Taylor. 1997. “Economic Models of Employee Motivation.” Federal Reserve Bank of St. Louis Review 79 (5):3-21.
- Nickell, Stephen, Luca Nunziata, and Wolfgang Ochel. 2005. “Unemployment in the OECD since the 1960s: What Do We Know?” Economic Journal 115 (500):1-27.
Weeks 6 and 7: Economic Growth
Basic sources of economic growth. The Solow growth model. Theoretical and empirical concepts of convergence. Growth policies. Endogenous growth theory.
Required reading:
- Mankiw, Chapter 8: Economic Growth I: Capital Accumulation and Population Growth
- Mankiw, Chapter 9: Economic Growth II: Technology, Empirics, and Policy
- Mankiw, N. Gregory, David Romer, and David N. Weil. 1992. “A Contribution to the Empirics of Economic Growth.” Quarterly Journal of Economics 107 (2):407-37.
- Sala-i-Martin, Xavier. 1997. “I Just Ran Two Million Regressions.” American Economic Review 87 (2):178-83.
Midterm Exam: 19.00-20.00 on 4 November
Weeks 8 and 9: Aggregate Supply, Aggregate Demand, and the IS/LM Model
The general model of aggregate supply and demand in the short and long runs. Expenditure equilibrium and the IS curve. Monetary equilibrium and the LM curve. IS/LM and aggregate demand.
Required reading:
- Mankiw, Chapter 10: Introduction to Economic Fluctuations
- Mankiw, Chapter 11: Aggregate Demand I: Building the IS/LM Model
- Mankiw, Chapter 12: Aggregate Demand II: Applying the IS/LM Model
Week 10: Modeling the Open Economy
Adapting the IS/LM framework to incorporate international trade and capital flows. The Mundell-Fleming model with floating exchange rates and perfect capital mobility. The effect of fixed exchange rates.
Required reading:
- Mankiw, Chapter 13: The Open Economy Revisited: The Mundell-Fleming Model and the Exchange-Rate Regime
Week 11: Aggregate Supply and the Phillips Curve
The shape of the aggregate-supply curve in the short run and long run and its implications for the effects of aggregate-demand changes. The traditional and modern Phillips curve.
Required reading:
- Mankiw, Chapter 14: Aggregate Supply and the Short-Run Tradeoff Between Inflation and Unemployment
- Phillips, A.W. 1958. “The Relation Between Unemployment and the Rate of Change of Money Wage Rates in the United Kingdom, 1962-1957.” Economica 25 (100):283-299.
- Friedman, Milton. 1968. “The Role of Monetary Policy.” American Economic Review 58 (1):1-17.
Week 12: Stabilization Policy and Issues of Government Deficits and Debt
Pros and cons of active use of monetary and fiscal policy to offset the business cycle. What limits a government’s ability to run deficits and accumulate debt over time?
Required reading:
- Mankiw, Chapter 15: Stabilization Policy
- Mankiw, Chapter 16: Government Debt
Week 13: Macroeconomics in a Currency Union
Adapting our theories for Slovakia and other members of the euro zone. What is gained? What is lost?
Required reading:
- Mankiw, Chapter 17: Common Currency Areas and European Economic and Monetary Union