GCP 503: Macroeconomic Policy in the Global Economy
Revised: May 11, 2022
Kenneth A. Reinert
Phone: 703-993-8212
Email: kreinert@gmu.edu
Office: Van Metre Hall, Room 627
Office hours: Upon email request via Blackboard Collaborate Ultra
Home page: reinert.gmu.edu
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: This is a challenging course. It is highly advisable that you take ITRN 504: Microeconomics and Trade Policy or PUBP 720: Managerial Economics before you take this section of ITRN 503.
Note: GMU has a requirement that masks must be worn in all buildings, including classrooms. If you are experiencing any COVID-19 symptoms, please let me know as quickly as possible and do not come to class. I will work with you to make sure you have all the course materials you need.
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. (2021) An Introduction to International Economics: New Perspectives on the World Economy, Cambridge University Press. In GMU Arlington bookstore but also widely available elsewhere.
Note: We will also be using prepared notes that I will post on Blackboard. 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 25): Introduction to Class
Notes posted on Blackboard.
Reinert, Chapter 1, “Introduction.”
Recommended:
Chapter 3 of Acocella (2005), “Market Failures: Macroeconomic Aspects.”
Week 2 (February 1): Accounting Frameworks: Open Economy Accounts
Notes posted on Blackboard.
Reinert, Chapter 14, “Accounting Frameworks.”
Recommended:
Coyle, D. (2017) “The Political Economy of National Statistics,” in K. Hamilton and C. Hepburn (eds.) National Wealth: What Is Missing, Why It Matters, Oxford University Press, 15-45.
Week 3 (February 8): Account Frameworks: Balance of Payments Accounts
Notes posted on Blackboard.
Reinert, Chapter 14, “Accounting Frameworks” and Chapter 15, “Global Capital Flows.”
Recommended:
Guichard, S. (2017) “10 Years after the Global Financial Crisis: What Have We Learnt about International Capital Flows?” Journal of International Commerce, Economics and Policy, 8:3, 1-30. Posted on Blackboard.
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 (2013) Balance of Payments and International Investment Position Manual.
Week 4 (February 15): Classical Model and Monetarism
Notes posted on Blackboard.
Recommended:
Froyen, R.T. (2013) “Classical Macroeconomics I: Output and Employment,” Chapter 3 of Macroeconomics: Theories and Policies, Pearson, 30-46.
Week 5 (February 22): Classical Model and Monetarism Continued
Notes posted on Blackboard.
Recommended:
Froyen, R.T. (2013) “Classical Macroeconomics II: Money, Pricess, and Interest,” Chapter 4 of Macroeconomics: Theories and Policies, Pearson, 47-62.
Week 6 (March 1): Exchange Rates
Notes posted on Blackboard.
Reinert, Chapter 16, “Exchange Rates and Purchasing Power Parity.”
2015 Big Mac Index Excel file. To be updated.
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 7 (March 8): Midterm Examination
Week 8 (March 15): Spring Break
Week 9 (March 22): Midterm Examination Debriefing
Week 10 (March 29): Keynesian Model
Notes posted on Blackboard.
Recommended:
Batini, N. et al. (2014) Fiscal Multipliers: Size, Determinants, and Use in Macroeconomic Projections, International Monetary Fund.
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 11 (April 5): Keynesian Model Cont.
Notes posted on Blackboard.
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 12 (April 12): Keynesian Model Cont.
Notes posted on Blackboard.
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 19): Exchange Rate Determination
Notes posted on Blackboard.
Reinert, Chapter 17, “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 14 (April 26): Exchange Rate Determination Cont.
Notes posted on Blackboard.
Reinert, Chapter 18, “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 15 (May 3): Review of Semester and Prep for Final Exam
Week 16 (May 10): Final Exam, Macroeconomic Briefing Paper Due on Wednesday, May 11
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 Friday May 13.
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.
Eichengreen, B. (2015) Hall of Mirrors: The Great Depression, the Great Recession, and the Uses – and Misuses – of History, Oxford University Press.
Froyen, R.T. (2013) Macroeconomics: Theories and Policies, Pearson.
Harris, L. (1981) Monetary Theory, McGraw-Hill.
Montiel, P.J. (2011) 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.