Graduate Macroeconomics

Economics 7007

David Kiefer
telephone 581-7481
e-mail: kiefer@economics.utah.edu

This is the first course in the graduate macroeconomics sequence. It surveys the formal models that are invoked in the contemporary debates of macroeconomic policy; including classical, Keynesian, new classical and new Keynesian theories.

Macroeconomics as a field of study was motivated by an empirical fact, the Great Depression. Likewise, this course begins with a survey of the stylized facts of short-term, economy-wide instability. Nevertheless, much of the quarter is devoted to the analysis of formal models at a theoretical level. Particular attention is given to the search, not for empirical explanation, but for coherence with microeconomics theory.

Brian Snowdon and Howard R. Vane, A Macroeconomics Reader been ordered at the bookstore. Many of the assigned readings are in this book.

The grading scheme is:

Homework assignments (2) 20%,

Midterm examination 35%,

Final examination 45%.

Late assignments lose points; copies and exact duplicates are unacceptable. Exams must be taken at the scheduled time. As a general rule I do not give incomplete grades.

Topic Outline and Reading List

1. Introduction

Claus Offe, “Competitive Party Democracy and the Keynesian Welfare State: Factors of Stability and Disorganization,” Policy Sciences 15 (1983): 225-246.

Kiefer, David, Macroeconomic Policy and Public Choice, Springer-Verlag, 1999, chapter 1.

Snowdon and Vane, reading 1.

2. The Classical Model

Keynes, John Maynard, The General Theory of Employment, Interest and Money, 1936, chapters 1-3.

Thomas Sargent, Macroeconomic Theory, 2nd edition 1987, chapter 1.

Kiefer, chapter 4.1-4.2.

Chiang, Alpha C., Fundamental Methods of Mathematical Economics, chapter 8.

3. The Keynesian Model

Keynes, chapter 18.

Sargent, chapter 2.

Snowdon and Vane, part 1, readings 2, 4 and 5.

4. The Quest for Microfoundations: Nonclearing Markets

Benassy, Jean-Pascal, “Nonclearing Markets: Microeconomic Concepts and Macroeconomic Applications,” Journal of Economic Literature 31, (1993): 732-761.

Kiefer, chapters 2 and 4.

5. The Phillips Curve and Natural Rate Hypothesis

Friedman, Milton, “The Role of Monetary Policy,” American Economic Review 58 (March, 1968): 1-17, Snowdon and Vane, part 2, readings 7.

Kiefer, chapter 5.1-5.5.

Joseph Stiglitz, “Reflections on the Natural Rate Hypothesis,” Journal of Economic Perspectives 11, 1997: 3-10.

James K. Galbraith, “Time to Ditch the NAIRU,” Journal of Economic Perspectives 11, 1997: 93-108.

6. New Classical School and Rational Expectations

David Romer, Advanced Macroeconomics, 1996, chapter 6, part A

Kiefer, chapters 5 and 6.

Sargent, Thomas J. and Wallace, Neil, “Rational Expectations and the Theory of Economic Policy,” Journal of Monetary Economics 2 (1976): 169-183.

Snowdon and Vane, part 3, readings 11-14

7. The New Keynesian School

David Romer, Advanced Macroeconomics, chapter 6, parts B and C

Kiefer, chapter 9.

Snowdon and Vane, part 5, readings 19-22.

8. Endogenous Policy

Barro, Robert J. and Gordon, David, “Rules, Discretion and Reputation in a Model of Monetary Policy,” Journal of Monetary Economics (July, 1983): 101-122.

Fischer, Stanley, “Long-Term Contracts, Rational Expectations, and the Optimal Money Supply Rule,” Journal of Political Economy 85 (February, 1977): 191-206.

Kiefer, chapter 9.

9. The Political Business Cycle

Alesina, Alberto and Sachs, Jeffrey, “Political Parties and the Business Cycle in the United States, 1948-1984,” Journal of Money, Credit and Banking 20 (February, 1988): 63-81.

Kalecki, M., “Political Aspects of Full Employment,” Political Quarterly 4 (1943): 322-331.

Kiefer, chapters 10 and 11.

Kiefer, D., “Partisan Stabilization Policy and Voter Control,” Public Choice 122: 115-132, 2005.

Nordhaus, William D., “Political Business Cycle,” Review of Economics Studies (April, 1975): 169-190.