POST GRADUATE PROGRAMME IN MANAGEMENT COURSE OUTLINE COVER PAGE AY 2023-2024 TERM: II TITLE OF THE COURSE: MACROECONOMICS CREDITS: 4 Name of the Faculty Faculty Block/ Email Room No. Telephone Number Prof. Dipayan D. Chaudhuri A 101 dipayan@iimidr.ac.in +91-731-2439511 Prof.Rayees Ahmad Sheikh B-213 rayeess@iimidr.ac.in +91-731-2439870 Prof. Deepak Sethia C203 sethiad@iimidr.ac.in +91-731-2439579 Prof.Subhasankar Chattopadhyay B 205 subhasankarc@iimidr.ac.in +91-731-2439549 Course Pre-requisite (if any):NIL Remarks for Participants (if any):NIL Resource details to be purchased (Text Book/Software/License/Simulation/Resource): (AS METNIONED IN THE OUTLINE) TEXT BOOK: Dornbush, R., Fischer, S. & Startz, R. (2018), Macroeconomics, 12 th Edition. New Delhi: Tata McGraw-Hill. (Hereafter referred to as Dornbush (2018).) Students should own this book. Purchase of resources only for the exam(s) purpose when the same is not used and debriefed in any of the classes in that course is not allowed. Please indicate the changes made in the course outline based on the measurement of assurance of learning (closing the loop)/student feedback: 1. nil Following detail is to be filled by Visiting Faculty (VF) Instructor only: Please provide feedback, in case the same course was taught earlier in the Programme: S. No. Instructor’s name Course Name 1 2 Note (from PGP Office regarding reading materials): Course feedback Instructor’s feedback 1. Only those cases/readings/articles will be procured that are available in HBSP/ Darden Pub./IIMA case unit websites. 2. If Instructors (Internal faculty or visiting faculty) plan to use their own cases / articles, they are expected to provide the same for classroom use. These cases will not be procured by PGP Office. Signature: Course Instructor/Area Chair POST GRADUATE PROGRAMME IN MANAGEMENT AY 2023-24 TERM: II TITLE OF THE COURSE: MACROECONOMICS CREDITS: 4 Name of the Faculty Faculty Block/ Email Room No. Telephone Number Prof. Dipayan D. Chaudhuri A 101 dipayan@iimidr.ac.in +91-731-2439511 Prof.Rayees Ahmad Sheikh B-213 rayeess@iimidr.ac.in +91-731-2439870 Prof. Deepak Sethia C 203 sethiad@iimidr.ac.in +91-731-2439579 Prof.Subhasankar Chattopadhyay B 205 subhasankarc@iimidr.ac.in +91-731-2439549 CONSULTATION TIME FOR STUDENTS Name of the Faculty Timing Prof. Dipayan D. Chaudhuri 3.00 p.m. to 4.00 p.m. on the day of the classes or by appointment on other days Prof.Rayees Ahmad Sheikh Prof. Deepak Sethia Prof.Subhasankar Chattopadhyay COURSE DESCRIPTION The course covers macroeconomic theory and its applications particularly in the Indian context. The main theoretical framework for the course will be IS-LM and Aggregate Demand - Aggregate Supply. We begin the course with understanding national income accounts. We then set up with simple models of national income determination and relax the assumptions to set up more complex models. These models are necessary to understand and analyze the effects of fiscal and monetary policy on the economy. The course will help participants to develop analytical skills to understand the monetary policy announcements of the central banks and broad fiscal policies of the government and their impact on the economy. In the context of globalization of economies, we will discuss the linkages of national economy with global economy and explore interdependencies among countries. We have allocated 5 out of the total 20 sessions for international linkages of national economy. COURSE OBJECTIVES The course aims at helping participants understand the complex macroeconomic environment, which confronts business. The participants will be able to understand the rationale behind the economic policy announcements and anticipate policy changes. The course will equip participants with analytical tools to decipher the effects of economic policy announcements, particularly Monetary and Fiscal policy, on crucial macroeconomic factors such as interest rate, income, inflation etc. PEDAGOGY/TEACHING METHOD: The pedagogy will be predominantly lectures and classroom discussions. Applications of macroeconomic theory and case studies are discussed to reinforce understanding of concepts. TEXT BOOK: Dornbush, R., Fischer, S. & Startz, R. (2018), Macroeconomics, 12th Edition. New Delhi: Tata McGraw-Hill. (Hereafter referred to as Dornbush (2018).) Students should own this book. LEARNING OUTCOMES Expected Learning Outcomes and Associated Measures At the end of the course student is expected to accomplish the following learning outcomes (CLO). Alignment of CLO with the Programme Level Goals & Objectives and Assessment of the learning outcomes of the course is presented below. Course Learning Outcome Program Level Goals/ Outcome Assessment Tool(s) 1. Will be able to understand 1.2 Identify the decision problem Already Mapped along with sources. macroeconomic environment 2. Will be able to appreciate linkages between domestic and world economy 3. Will be able to understand rationale behind macroeconomic policies 4. Apply tools of IS-LM and or AS-AD to understand the impact of macroeconomic policies NA Already Mapped 1.3 Identifies and presents appropriate evidence supporting the analysis of alternatives 1.4 Evolves one’s own perspective or takes a position / makes judgement Already Mapped Already Mapped EVALUATION Individual Component Group Component Weightage Quizzes 20 Mid Term 35 End Term 35 Class Participation 10 Total 100% ACADEMIC DISHONESTY IIM Indore believes in Academic honesty. Academic dishonesty or misconduct is cheating that relates to an academic activity. It is a violation of trust between the Institute and its stakeholders. Plagiarism, fabrication, deception, cheating and sabotage are examples of unacceptable academic conduct. Please consult the Programme manual for the section on academic dishonesty. SCHEDULE OF SESSIONS MODULE I: Overview of Macroeconomics Module Objective: To discuss dynamics of price- output determination for an economy in different time horizons and to understand basic concepts in national income accounting Sessions 1 &2 Introduction and National Income Accounting Objective: To discuss dynamics of price- output determination for an economy in different time horizons and to understand basic concepts in national income accounting Chap. 1, pp.1-17; Chap 2 pp. 22-47, Dornbush (2018). Reading: MODULE II Economy in the Short Run Module Objective: To discuss the behaviour of goods market and money market and to understand the impact of monetary and fiscal policy in a closed as well as in an open economy in the short run Session 3 The Goods Market: Models of National Income Determination - I: Consumption and Investment Objective: To understand the process of determination of national income in a market driven economy Chap. 10, pp.197-209, Dornbush (2018). Reading: Session 4 The Goods Market: Models of National Income Determination - II: Consumption, Investment and Government Objective: Reading: To understand the role of government in determining the national income Chap. 10, pp. 209-219, Dornbush (2018) Session 5 Models of National Income Determination - III: Goods Market (IS Curve) Objective: Reading: To derive IS- curve from the goods market Chap.11 pp. 223-236, Dornbush (2018). Session 6 The Money Market: Demand for Money Objective: Reading: To discuss the components of money stock and motives for holding money Chap. 16, 381-397, Dornbush (2018). Session 7&8 The Money Market: Central Bank, Money Supply and Credit: Money Stock Determination and Money Multiplier Objective: Readings: To discuss money multiplier and different instruments of monetary control 1) Chap. 17 pp. 402-416, Dornbush (2018). 2) Samuelson, P. A., Nordhaus, W.D., & Chaudhuri, S. (2012). Monetary Policy and the Economy in Macroeconomics (pp. 297-301). New Delhi: Tata McGraw Hill. 3) Nidugala, G.K. & Shukla, R. (2015). The 2008 Subprime Crisis and the Indian Economy [Class handout]. IIM Indore, Indore, India. 4) Chattopadhyay, S. (2015). Monetary policy framework in India [Class handout]. IIM Indore, Indore, India. Session 9 Models of National Income Determination - III: Goods & Money Markets (IS-LM Model) Objective: To derive LM curve and to discuss equilibrium condition for goods and money markets 1) Chap. 11 pp. 236-247 in Dornbush (2018). 2) D'Souza, E. (2014). IS-LM in India in Macroeconomics (pp. 223-225). New Delhi: Pearson Education. Readings: Session 10 Stabilisation Policies in a Closed Economy: Monetary Policy Objective: To understand the transmission mechanism in monetary policy in a closed economy 1) Chap. 12 pp. 252-268 in Dornbush (2018). 2) Economist (2016). When 2% is not enough. http://www.economist.com/news/leaders/21705826-rich-worldscentralbanks-need-new-target-when-2-not-enough?frsc=dg%7Cd (to be read online) Readings: Session 11 Objective: Readings: MODULE Stabilisation Policies in a Closed Economy: Fiscal Policy To understand the impact of fiscal policy in a closed economy 1) Chap. 12 pp. 268-286 in Dornbush (2018). 2) Chattopadhyay, S. (2015). Meeting budget deficit target in India [Class handout]. IIM Indore, Indore, India. III Economy in the Medium / Long Run Module Objective: To discuss the relationship between inflation and unemployment and to understand the impact of monetary and fiscal policy in a closed economy in the medium and long run. Session 12 Aggregate Demand and Supply Objective: Readings: To derive the aggregate demand curve and to show how shifts in aggregate demand can change output in the short run and prices in the long run Chap. 11, pp.245-246, Chap. 5 pp. 97- 115, Dornbush (2018). Session 13 Phillips curve Objective: To understand the relationship between inflation and unemployment in the short-run and long-run . Chap. 6 pp. 118-128, Dornbush (2018). Reading: Module IV. Short Run and Long run models with open economy In this module we discuss short and long run models in an open economy framework. The module will consider external sector – trade and capital flows, in the models of national income determination with fixed and flexible prices, public debt and inflation. Session 14 Objective: Readings: International Linkages: Extensions of IS-LM in the Context of International Mobility of Goods To understand the concepts of balance of payment, fixed and flexible exchange rates 1) Chap.13, pp. 287-304, Dornbush (2018). Economic Survey (2014-15). Impact of Falling Global Crude Prices and Fuel Policy Reforms (Box 2.3) & Implications of Global Crude Oil Price Movements (Box 4.1) in Economic Survey, 2014-15. New Delhi: Govt. of India. Session 15&16 International Linkages: Extensions of IS-LM in the Context of International Mobility of Capital Objective: To discuss the impact of monetary and fiscal policies in an open economy with free mobility of capital Chap. 13 pp. 305-319, Dornbush (2018). Readings: Sessions 17&18 International Adjustments and Interdependence: Adjustments under Flexible Exchange Rates; Inflation Differentials, Interest Differentials and Exchange Rate; Exchange Rate Fluctuations and Interdependencies Objective: To discuss the impact of monetary and fiscal policies in an open economy with flexible exchange rates in the long run Chap. 23, pp. 550-566, Dornbush (2018). Readings: Sessions 19 &20 Objective: Readings: Public Debt and Inflation To understand the consequences of the government financing large amounts of debt and its probable impact on inflation. Chap.20 pp.470-490, Chap.22pp.508-527, Chap.8 pp.175-185, Dornbusch (2018) Please indicate the changes made in the course outline based on the measurement of assurance of learning (closing the loop)/student feedback: Included a topic on Public Debt and Inflation instead of Derivation of Aggregate Supply Curve Please give the details of the book if students need to buy the book Author Title Publisher Edition Remarks, if any Dornbush, R., Fischer, S. & Startz, R. Macroeconomics New Delhi: Tata McGraw-Hill 12th Edition 2018 Additional Readings (This book need not be purchased) D'Souza, E. (2014). “IS-LM in India” in Macroeconomics (pp. 223-225). New Delhi: Pearson Education. ******