ITRN 503 Macroeconomic Policy

ITRN 503: Macroeconomic Policy in the Global Economy

Revised: March 23, 2016

Kenneth A. Reinert

Phone: 703-993-8212
Email: kreinert@gmu.edu
Office: Founders Hall, Room 627
Office hours: Wednesdays, 6-7 PM and by appointment
Home page: reinert.gmu.edu

Study Guide

Course Description

This course provides an analytical introduction and overview of basic concepts in macroeconomic theory with an emphasis on applications to problems in the United States and the contemporary global economy. Covers topics such as inflation, growth and business cycles, fiscal and monetary policies, balance of payments and exchange rates.

Note: It is highly advisable that you take ITRN 504: Microeconomics and Trade Policy before you take ITRN 503.

Learning Outcomes

Knowledge and Understanding

Students will understand the basic concepts and terms of macroeconomics, including schools of thought, as they apply to policy analysis. Students will understand the use of balance of payments in country analysis and the determination of exchange rates.

Analytical Skills and Abilities

Students will be converstant with systems of macroeconomics accounting and major macroeconomic models and understand their appropriate use.

Professional Development

Students will be conversant with the basic terms of macroeconomics and international finanance as used in the profession.

Required Books

Reinert, K.A. (2012) An Introduction to International Economics: New Perspectives on the World Economy, Cambridge University Press. In GMU Arlington bookstore.

Note: We will also be using prepared notes that I will provide you. These draw most closely (but not exclusively) from Froyen (2013). If you wish to, you can order a used copy of this textbook, but it is not necessary.

Course Requirements and Grading

Midterm exam- 30 percent
Cumulative final exam- 30 percent
Country briefing paper- 25 percent
Class participation- 15 percent

Course Outline and Readings

Week 1 (January 19): Introduction to Class

Notes to be handed out.

Reinert, Chapter 1, “Windows on the World Economy.”

The Economist (2014) “The Dangers of Deflation: The Pendulum Swings to the Pit,” October 25.

The Economist (2016) “The Yuan and the Markets,” January 16.

Recommended:

Chapter 3 of Acocella (2005), “Market Failures: Macroeconomic Aspects.”

Week 2 (January 26): Snow Day

Week 3 (February 2): Accounting Frameworks: Open Economy Accounts

Notes to be handed out.

Reinert, Chapter 13, “Accounting Frameworks.”

Recommended:

Froyen, R.T. (2013) “Measurement of Macroeconomic Variables,” Chapter 2 of Macroeconomics: Theories and Policies, Pearson, 13-28.

Week 4 (February 9): Account Frameworks: Balance of Payments Accounts

Notes to be handed out.

Reinert, Chapter 13, “Accounting Frameworks.”

Recommended:

High, J. (2009) “Balance of Payments,” in K.A. Reinert, R.S. Rajan, A.J. Glass and L.S. Davis (eds.), The Princeton Encyclopedia of the World Economy, Princeton University Press, 102-107. Available through library on-line catalog.

International Monetary Fund (2009) Balance of Payments and International Investment Position Manual.

Week 5 (February 16): Classical Model and Monetarism

Notes to be handed out.

Recommended:

Froyen, R.T. (2013) “Classical Macroeconomics I: Output and Employment,” Chapter 3 of Macroeconomics: Theories and Policies, Pearson, 30-46.

Week 6 (February 23): Classical Model and Monetarism Continued

Notes to be handed out.

Recommended:

Froyen, R.T. (2013) “Classical Macroeconomics II: Money, Pricess, and Interest,” Chapter 4 of Macroeconomics: Theories and Policies, Pearson, 47-62.

Week 7 (March 1): Exchange Rates

Reinert, Chapter 14, “Exchange Rates and Purchasing Power Parity.”

2015 Big Mac Index Excel file.

Recommended:

Popper, H. (2009) “Real Exchange Rate,” in K.A. Reinert, R.S. Rajan, A.J. Glass and L.S. Davis (eds.), The Princeton Encyclopedia of the World Economy, Princeton University Press, 955-957. Available through library on-line catalog.

Week 8 (March 8): Spring Break

Week 9 (March 15): Midterm Examination

Week 10 (March 22): No Class-Work on Macroeconomic Briefing Paper!

Week 11 (March 29): Keynesian Model

Notes to be handed out.

Recommended:

The Economist (2016) “Fighting the Next Recession: Unfamiliar Ways Forward,” February 20.

Froyen, R.T. (2013) “The Keynesian System I: The Role of Aggregate Demand,” Chapter 5 of Macroeconomics: Theories and Policies, Pearson, 63-88.

Froyen, R.T. (2013) “The Keynesian System II: Money, Interest, and Income,” Chapter 6 of Macroeconomics: Theories and Policies, Pearson, 89-123.

Skidelsky, R. (2010) “Introduction” in Keynes: The Return of the Master, Public Affairs, xv-xxii.

Week 12 (April 5): Keynesian Model Cont.

Notes to be handed out.

Recommended:

Froyen, R.T. (2013) “The Keynesian System III: Policy Effects in the IS-LM Model,” Chapter 7 of Macroeconomics: Theories and Policies, Pearson, 124-145.

Froyen, R.T. (2013) “The Keynesian System IV: Aggregate Supply and Demand,” Chapter 8 of Macroeconomics: Theories and Policies, Pearson, 146-174.

Week 13 (April 12): Keynesian Model Cont.

Notes to be handed out.

Recommended:

Froyen, R.T. (2013) “The Keynesian System III: Policy Effects in the IS-LM Model,” Chapter 7 of Macroeconomics: Theories and Policies, Pearson, 124-145.

Froyen, R.T. (2013) “The Keynesian System IV: Aggregate Supply and Demand,” Chapter 8 of Macroeconomics: Theories and Policies, Pearson, 146-174.

Week 14 (April 19): Exchange Rate Determination

Reinert, Chapter 15, “Flexible Exchange Rates.”

Recommended:

Slavov, S. and R.K. Rajan (2009) “Fear of Floating,” in K.A. Reinert, R.S. Rajan, A.J. Glass and L.S. Davis (eds.), The Princeton Encyclopedia of the World Economy, Princeton University Press, 416-418. Available through library on-line catalog.

Week 15 (April 26): Exchange Rate Determination Cont.

Reinert, Chapter 16, “Fixed Exchange Rates.”

Recommended:

Siklos, P.L. (2009) “Impossible Trinity,” in K.A. Reinert, R.S. Rajan, A.J. Glass and L.S. Davis (eds.), The Princeton Encyclopedia of the World Economy, Princeton University Press, 619-622. Available through library on-line catalog.

Week 16 (May 3): Review of Semester, Macroeconomic Briefing Paper Due on Sunday May 8th

Week 17 (May 10): Final Exam

Macroeconomic Briefing Paper

One requirement of this course is for you to write a briefing paper on the macroeconomy of a country of your choice, other than the United States. You do not need to pick a particular “type”of country: every country has a macroeconomic history and faces current macroeconomic issues.

The paper is to be between 3,500 and 4,000 words.  It is to be written in non-technical language suitable for a policy-maker. The paper must include an Excel-prepared chart based on the World Banks’s World Development Indicators (WDI) or other relevant source for your country. The paper is due on Sunday May 8th.

The briefing paper is to include sections on recent macroeconomic history, exchange rate regime and management (check the IMF classification), balance of payments issues (check IMF balance of payments statistics), inflation issues, unemployment issues, and monetary policy. Potential World Development Indicators to include in your chart include: GDP at market prices (constant 2005 US$); Current account balance (BoP, current US$); Current account balance (% of GDP); Net financial account (BOP, current US$); Reserves and related items (BOP, current US$); Unemployment, total (% of total labor force) (national estimate); Central government debt, total (% of GDP); External debt stocks (% of GNI); Short term debt (% of total reserves); GDP deflator (base year varies by country); Gross capital formation (% of GDP); Gross savings (% of GDP).

Try your best to include some quality research sources in your briefing paper. Here, Google is not your friend! Google Scholar is your friend. So too is the e-journals resource of Mason’s library system. See also the Library’s resources for the ICP Program.

Some Policies

No texting in class.

Exams are not “open book” or “open notes.”

There is no “extra work” that can be done for “extra credit.”

Students are responsible for obtaining notes from other class members if they miss a class.

The GMU honor code will be enforced. To be more specific: If I can show that a student cheated on an exam, that student will fail the course.

It is my personal policy not to discriminate among students based on race, ethnicity, religious faith, national origin, gender, sexual orientation, or physical ability (see below).

Academic Accommodation for a Disability

If you are a student with a disability and you need academic accommodations, please see me and contact the Disability Resource Center (DRC) at 703-993-2474.  All academic accommodations must be arranged through the DRC.

Useful Books

Acocella, N. (2005) Economic Policy in the Age of Globalisation, Cambridge University Press

Corden, W.M. (2002) Too Sensational: On the Choice of Exchange Rate Regimes, MIT Press.

Coyle, D. (2014) GDP: A Brief But Affectionate History, Princeton University Press.

Froyen, R.T. (2013) Macroeconomics: Theories and Policies, Pearson.

Harris, L. (1981) Monetary Theory, McGraw-Hill.

Montiel, P.J. (2003) Macroeconomics in Emerging Markets, Cambridge University Press.

Skidelsky, R. (2010) Keynes: The Return of the Master, Public Affairs.

Snowdon, B., H. Vane and P. Wynarczyk (1994) A Modern Guide to Macroeconomics: An Introduction to Competing Schools of Thought, Edward Elgar.