Welcome to Macroeconomic Principles in the Global Economy
Week 1
Daolu Cai
NUS Business School
August 10, 2022
I Want You To Be Successful In Life
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I Want You To Be Successful In Life
• The Uniform Code for Military Justice specifies court-martial for any officer who sends a
soldier into a battle without a weapon (Patrick Winston).
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I Want You To Be Successful In Life
• The Uniform Code for Military Justice specifies court-martial for any officer who sends a
soldier into a battle without a weapon (Patrick Winston).
• There ought to be similar protection for students because students shouldn’t go out into
life without the ability to communicate.
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Daolu Cai
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I Want You To Be Successful In Life
• The Uniform Code for Military Justice specifies court-martial for any officer who sends a
soldier into a battle without a weapon (Patrick Winston).
• There ought to be similar protection for students because students shouldn’t go out into
life without the ability to communicate.
• That’s because your success in life (career, romance, and just a happier life) will be largely
determined by your ability to speak, your ability to write and the quality of your ideas.
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Daolu Cai
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I Want You To Be Successful In Life
• The Uniform Code for Military Justice specifies court-martial for any officer who sends a
soldier into a battle without a weapon (Patrick Winston).
• There ought to be similar protection for students because students shouldn’t go out into
life without the ability to communicate.
• That’s because your success in life (career, romance, and just a happier life) will be largely
determined by your ability to speak, your ability to write and the quality of your ideas.
• I’m going to provide a safe environment for you to speak up in class. So please
participate in class, not because a grade is assigned, but it will make you live a more
successful and meaningful life.
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Outline
Welcome back!
Preliminary Questions
Syllabus
What we do in this class
Office Hours
Means of communication
Textbook
Prerequisites
Requirements and Grading:
Problem sets
Important Dates
Grading Policy and Grading Scale
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Welcome back!
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Let’s go to PollEv
Figure: PollEV QR code
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Preliminary Questions
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You as a Chief Economist for Goldman Sachs
1
You work at Goldman Sachs and your clients ask you to assess the possibility of investing
in a fund that would invest in five major emerging national economies: Brazil, Russia,
India, China, and South Africa (BRICS). These countries grow at a different rate.
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You as a Chief Economist for Goldman Sachs
1
2
You work at Goldman Sachs and your clients ask you to assess the possibility of investing
in a fund that would invest in five major emerging national economies: Brazil, Russia,
India, China, and South Africa (BRICS). These countries grow at a different rate.
Forecast: The client would like to know how fast their economy would grow for the next
20 years.
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You as a Chief Economist for Goldman Sachs
1
2
3
You work at Goldman Sachs and your clients ask you to assess the possibility of investing
in a fund that would invest in five major emerging national economies: Brazil, Russia,
India, China, and South Africa (BRICS). These countries grow at a different rate.
Forecast: The client would like to know how fast their economy would grow for the next
20 years.
What do you need to answer this question?
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You as a Chief Economist for Goldman Sachs
1
2
You work at Goldman Sachs and your clients ask you to assess the possibility of investing
in a fund that would invest in five major emerging national economies: Brazil, Russia,
India, China, and South Africa (BRICS). These countries grow at a different rate.
Forecast: The client would like to know how fast their economy would grow for the next
20 years.
3
What do you need to answer this question?
4
We need a theory/model of economic growth
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You as a consultant for Boston Consulting Group
1
You work for BCG and one of your clients (based in Singapore but serving the U.S.
market) would like to know the impact on the company if the US cannot contain the
spread of the Covid-19.
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You as a consultant for Boston Consulting Group
1
You work for BCG and one of your clients (based in Singapore but serving the U.S.
market) would like to know the impact on the company if the US cannot contain the
spread of the Covid-19.
2
What do you need to answer this question?
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You as a consultant for Boston Consulting Group
1
You work for BCG and one of your clients (based in Singapore but serving the U.S.
market) would like to know the impact on the company if the US cannot contain the
spread of the Covid-19.
2
What do you need to answer this question?
3
We need a theory of economic growth with and how health risks affect growth (lack of
natural experiment).
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You as a policymaker
→ www.PollEv.com/dcnus
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You as a policymaker
→ www.PollEv.com/dcnus
1
Fact: Married men live longer
2
Propose a theory consistent with this fact.
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You as a policymaker
→ www.PollEv.com/dcnus
1
Fact: Married men live longer
2
Propose a theory consistent with this fact.
→ www.PollEv.com/dcnus
3
Does marriage have a direct protective effect by providing benefits such as improved
health? Or does increased longevity reflect the possibility that healthy people are more
likely to get married?
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You as a policymaker
→ www.PollEv.com/dcnus
1
Fact: Married men live longer
2
Propose a theory consistent with this fact.
→ www.PollEv.com/dcnus
3
Does marriage have a direct protective effect by providing benefits such as improved
health? Or does increased longevity reflect the possibility that healthy people are more
likely to get married?
4
Why is it important?
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You as an adviser to governments
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You as an adviser to governments
→ www.PollEv.com/dcnus
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You as an adviser to governments
→ www.PollEv.com/dcnus
1
Fact: Richer Countries/families have less kids
2
Pose a story consistent with this fact.
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You as an adviser to governments
→ www.PollEv.com/dcnus
1
Fact: Richer Countries/families have less kids
2
Pose a story consistent with this fact.
→ www.PollEv.com/dcnus
3
Human is the only species known to have less offspring when facing abundance of
resources.
4
Why is it important? How to boost fertility in countries like Singapore? (Labor market
institutions or opportunity cost?)
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The end of ”the end of inflation”? EU versus US
1
Fact:
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The end of ”the end of inflation”? EU versus US
1
Fact: Rising inflation in recent year(s)?
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The end of ”the end of inflation”? EU versus US
1
Fact: Rising inflation in recent year(s)?
2
Causes:
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The end of ”the end of inflation”? EU versus US
1
Fact: Rising inflation in recent year(s)?
2
Causes:
•
•
•
•
•
Expansionary Monetary Policy (low interest rate)
Expansionary Fiscal Policy (aggresive spending)
Disruptions in the supply chain?
Corporate greed?
War in Ukraine?
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The end of ”the end of inflation”? EU versus US
1
Fact: Rising inflation in recent year(s)?
2
Causes:
•
•
•
•
•
3
Expansionary Monetary Policy (low interest rate)
Expansionary Fiscal Policy (aggresive spending)
Disruptions in the supply chain?
Corporate greed?
War in Ukraine?
Need a framework:
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The end of ”the end of inflation”? EU versus US
1
Fact: Rising inflation in recent year(s)?
2
Causes:
•
•
•
•
•
3
Expansionary Monetary Policy (low interest rate)
Expansionary Fiscal Policy (aggresive spending)
Disruptions in the supply chain?
Corporate greed?
War in Ukraine?
Need a framework: We need a model to disentangle what cause inflation and access
the relative importance of these hypotheses.
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Summary of This Thought Experiment
1
Can data tells us everything?
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Summary of This Thought Experiment
1
Can data tells us everything?
2
Why yes and why not?
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Summary of This Thought Experiment
1
Can data tells us everything?
2
Why yes and why not?
3
NO. We need both data and theory. Because many theories/stories may be consistent
with the same set of facts (data)...
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Summary of This Thought Experiment
1
Can data tells us everything?
2
Why yes and why not?
3
NO. We need both data and theory. Because many theories/stories may be consistent
with the same set of facts (data)...
4
... and these different stories (theory) calls for different policy interventions.
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Syllabus
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What do we do?
1
The purpose of this course is to use the tools of modern macroeconomics to assess the
economic outcomes of countries and the economic environment faced by global businesses.
2
In this course, we will learn how to build and assess economic models by confronting them
with data in our formal exposition of modern macroeconomics.
3
For global companies to effectively navigate in a volatile global landscape, these tools are
essential.
4
Throughout the course, we will focus on how to use modern macroeconomic tools, leaving
us to spend most of our class time on applications.
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My info
Name: Daolu Cai (bizcd@nus.edu.sg)
Office: Mochtar Riady Building, 6-28
Office Phone:
My Office Hours: TBA, and by appointment
Website: Canvas
T.A.:
Office: TBD
Office Hours: TBD
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Office hours
• Please feel free to discuss course related problems with me during regular consultation
hours.
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Office hours
• Please feel free to discuss course related problems with me during regular consultation
hours.
• You are strongly advised to discuss your difficulties before they become too
serious.
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Email
1
Email is the most efficient way to reach me.
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Email
1
Email is the most efficient way to reach me.
2
Please include the course number in the subject line.
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Email
1
Email is the most efficient way to reach me.
2
Please include the course number in the subject line.
3
I usually respond within 24 hours (except weekends). If you don’t hear back from me by
then, please do not hesitate to resend me an email.
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Efficient Email Communication (practice this if you are on the job market)
1
Subject: Name, Class and topic- but not a complete sentence
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Efficient Email Communication (practice this if you are on the job market)
1
Subject: Name, Class and topic- but not a complete sentence
2
Content: Make it short. People rarely read long emails.
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Efficient Email Communication (practice this if you are on the job market)
1
Subject: Name, Class and topic- but not a complete sentence
2
Content: Make it short. People rarely read long emails.
3
Endings: No long endings endings, just your name.
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Efficient Email Communication (practice this if you are on the job market)
1
Subject: Name, Class and topic- but not a complete sentence
2
Content: Make it short. People rarely read long emails.
3
Endings: No long endings endings, just your name.
4
Be precise: put the main point of the email in the first sentence in the email.
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Some examples of what you should NOT do (1)
dear instructor,
for hw1, i have questions about 2 and3. for 2, in the textbook example, it uses years of
schooling per log wage. so for our hw, do i use log incwage? but i think we do not have year of
schooling so do i need to use level of education? does this question ask one graph like
textbook? or do you mean that this needs to make all graph that i get data from 1? like
marital status over wage? for3, i use excel to make graph so is this okay to use excel? thanks.
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Some examples of what you should NOT do (2)
where did I loose points from the final? I knew one was wrong but I am not sure about other
parts? what is the average of the final? I asked risk questions when I took the final. Please
consider if I am between b and b+ Thanks
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A good example of efficient communication from a student
Dear Professor Cai,
For the future homework, until otherwise directed, are we allowed to work in groups of
two?
Thank you,
Cindy
But what makes this email an excellent example of efficient communication?
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A good example of efficient communication from a recent student, 2020
Hello Dr. Cai,
I have some general questions about grad school selection and the type of program
that can best help me in the future. Is there a good time this Thursday after our class
or after 3PM?
Sam
What makes this email an excellent example of efficient communication?
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A good example of efficient communication from a student in this class
Dear Daolu,
I just wanted to inform you that I will not be able to join our first class in person since
I am still serving SHN at PGPR until Friday.
I’ll be in class starting the week after.
Kind regards,
Identifiers Removed
What makes this email an excellent example of efficient communication?
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No textbooks for this class
There is no textbook assigned for the course. If you wish to consult a textbook for reference,
the following textbooks can be quite useful:
1
Stephen D Williamson and Fourth and Edition. Macroeconomic, volume 440. Wesley,
Pearson Addison, 2013
2
N Gregory Mankiw. Macroeconomics 10th ed, 2018
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Tentative Schedule
Week
Topics
1
Review, Preliminaries
Introduction to Modern Macroeconomics
Measurement and Macroeconomic Data
Economic Growth
The Solow Growth Model
Income Differences Across Nations
Case Study (I)
A Simple Model of the Macroeconomy
Midterm Review
Case Study (II)
Midterm Assignment
2
3
4
5
6
Readings (Optional)
S.Williamson. C1
S.W. C2 and 3
S.W. C6
S.W. C7
S.W. C4
Recess Week
7
8
9
10
11
12
13
A Simple Model of the Macroeconomy - continuation
A Dynamic Consumption-Saving Model
Fiscal Policies
Interest Rates
Case Study (III):
Exchange-Rate Fluctuations
Monetary Policy
Exchange-Rate Regimes
Case Study (IV):
Wrap-up
Final Assignment
S.W. C8
SW C15
Reading Week
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Prerequisites, standard stuff
1
Algebra and introduction to microeconomics and macroeconomics (BSP1005 or EC1301
or BSP1707, BSP2701).
2
During class, I will explain in detail the mathematical and statistical tools that we will be
using.
3
Some experience in Excel is also helpful. Part of our problem sets contains basic data
questions. I will also cover some of the basic functions that we will need.
4
If you don’t have Microsoft Excel, an open-source substitute is available: Open Office or
Google Doc
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Requirements and Grading:
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Problem sets
1 I will give 2 problem sets (group assignment) during the course.
2 No late problem sets will be accepted.
3 All of your answers should be typed and submitted via LumiNus, including graphs and algebra. Work that is not typed
gets an automatic penalty of 25% of the total grade.
4 Problem sets are team-based (group of min 5 - max 6). All the team members are expected to work cooperatively as
a group. I just need one copy per group.
Learning how to work in a group effectively is crucial for your success in life.
Make sure you do your work and contribute to your team. If there are any issues with your team in terms of
collaboration, address them early on before it becomes too late. I’d prefer that you attempt to solve it on your before
coming to me as the final recourse.
5 Nearly identical works will be considered as plagiarism and an automatic zero will be assigned for that assignment.
6 On occasion, I will post some of the questions received on the course website (with my answers). Student identifiers will
not be included if I post them. This way, I hope that information can be disseminated to a broader audience.
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Exams an Important Dates
1
Midterm Individual Assignment: Week 6
2
Final Individual Assignment: Week 13
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Grading Policy and Grading Scale
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Grading
The following table gives the composition of the final scores:
Activities
Group Assignment
Individual Quiz
Class Participation
Midterm Individual Assignment
Final Individual Assignment
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Percentage of final grade
20%
20%
10%
25%
25%
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