ECON 403 Topics in Macroeconomics: Hyper-Crises/Major-Slumps
Fall 2012
MW 4 – 5:15 pm
BEH 108
Instructor
Bernard Malamud
Office: BEH 502 Phone: 895 – 3294 FAX: 895 – 1354
email: berrnard.malamud@unlv.edu
website: faculty.unlv.edu/bmalamud
Office Hours: MW 11:30 – 12:30; 2:30 – 3:30 pm...and by appointment
Please communicate with me via your Rebelmail account, by phone, or stop by my office.
General Nature of the Course
Extensions of macroeconomic analysis. Application of economic analysis to the study of
macroeconomic phenomena. Implications for inflation, unemployment, growth, and the
effectiveness of fiscal and monetary policy. Credits 3 Prerequisites: Admission to a business
major/junior standing, ECON 303 and MATH 124 or equivalent.
Course Objectives: In this course, we will apply and extend tools of economic analysis to major
events in modern economic history. We will concentrate on the hyperinflations and global
depression of the interwar years and the subprime-triggered financial crisis and ongoing slump of
today. Upon completion of this course you will be conversant with the history of macroinstability and tools of analysis developed to understand instability including: i) Minsky’s
financial instability hypothesis; ii) the Koo-Minsky-Fisher debt deflation hypothesis; iii)
Friedman’s revised quantity theory of money and narrative methodology; iv) the rational
expectations hypothesis, real business cycle theory and dynamic stochastic general equilibrium
modeling; v) asymmetric information and the behavioral roots of financial crises; and vi) the
roles of policy (and policy errors) in stabilizing and exacerbating crises and slumps.
Course Design: This is primarily a lecture course with a considerable amount of student
participation. Each student will prepare a paper and lead a discussion of a work that helps us
understand one of the episodes of instability covered in the course. Summaries, outlines, and/or
powerpoint slides will be distributed to members of the class before each scheduled presentation.
Major Sources (available in soft-cover editions)
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Robert Hall, ed., Inflation: Causes and Effects {internet access}
Hyman Minsky, either John Maynard Keynes or Stabilizing an Unstable Economy
Milton Friedman and Anna Schwartz, The Great Contraction
Peter Temin, Lessons from the Great Depression
Joseph Stiglitz, Freefall
Financial Crisis Inquiry Commission Report http://www.gpoaccess.gov/fcic/fcic.pdf
Supplementary Sources (available in soft-cover editions)
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Milton Friedman, ed., Studies in the Quantity Theory of Money
Charles Kindleberger, World in Depression: 1929 – 1939
George Akerlof and Robert Shiller, Animal Spirits
Richard Koo, The Holy Grail of Macroeconomics
Additional required and supplemental readings are called out in the course outline.
Examinations and Grading
A 100-point midterm exam and a 150-point comprehensive final exam will be given this
semester. In addition, you will prepare a paper and lead a discussion of a work that helps us
better understand one of the episodes covered in the course: i) the German hyperinflation and
slump, 1919 – 1933; ii) the U.S. Great Depression, 1929-1933; iii) the stalled U.S. recovery,
1933-1939; or iv) the housing bubble, subprime-triggered financial crisis and ongoing Long
Slump, 2004-present.
Grading:
Oct 15
Nov 17
- Dec 3
Dec 10
Classroom examination
Papers/ presentations
Term papers due Nov 17
Comprehensive Final examination
Maximum score
Approximate grade distribution:
Average Score out of 350 points
90 percent
80 percent
70 percent
60 percent
100 points
100 points
150 points
350 points
Final Grade
Borderline ABorderline BBorderline CBorderline D-
Attendance and class participation will very much affect your final grade.
Makeup Policy
Makeup exams may be arranged at mutual convenience if you have a compelling reason to miss
a scheduled classroom exam. A makeup exam must be taken before the missed exam is returned
to the class. There will be no makeup quizzes or final exam. However, a student missing a class
because of observance of a religious holiday and students who represent UNLV at any official
extracurricular activity shall also have the opportunity to make up assignments. Such students
must provide official written notification no less than one week prior to the missed class(es).
Class Conduct
Your instructor and classmates deserve courtesy. If you must arrive late or leave early, do so
quietly. Inform me beforehand if you must leave a class early. Smoking and eating in class are
prohibited. Texting, talking to your neighbors, and reading newspapers and magazines in class is
rude, disruptive, and unacceptable. While this probably need not be said, anyone found engaging
in any act of academic dishonesty will be punished in accordance with UNLV policies.
Other Information
The Disability Resource Center (DRC) coordinates all academic accommodations for students
with documented disabilities. The DRC is the official office to review and house disability
documentation for students, and to provide them with an official Academic Accommodation
Plan to present to the faculty if an accommodation is warranted. Faculty should not provide
students accommodations without being in receipt of this plan.
UNLV complies with the provisions set forth in Section 504 of the Rehabilitation Act of 1973
and the Americans with Disabilities Act of 1990, offering reasonable accommodations to
qualified students with documented disabilities. If you have a documented disability that may
require accommodations, you will need to contact the DRC for the coordination of services. The
DRC is located in the Student Services Complex (SSC), Room 137, and the contact numbers are:
VOICE (702) 895-0866, TTY (702) 895-0652, FAX (702) 895-0651. For additional
information, please visit: <http://studentlife.unlv.edu/disability/>.
Course Schedule
Dates
Aug 27
Aug 29
Topic, Reading
Course Organization/The course outline—an overview of crises
- Richard Koo, Balance Sheet Recession http://ineteconomics.org/richard-koo
Stories of crises past
- Charles MacKay, Memoirs of Extraordinary Popular Delusions and the Madness of
Crowds. {internet access}
- Carmen Reinhardt and Kenneth Rogoff, This Time is Different. NBER W.P 13882
- Charles Kindleberger, R. Aliber, and R. Solow, 2011. Manias, Panics and Crashes.
Sep 3
Labor Day Recess
Sep 5 – 12
The Economic Trajectory of Weimar Germany: Hyperinflation
Required Readings
- Phillip Cagan, 1956. The Monetary Dynamics of Hyperinflation in Milton Friedman,
ed., Studies in the Quantity Theory of Money.
- Thomas Sargent, 1982. The Ends of Four Big Inflations, in Robert Hall, ed., Inflation:
Causes and Effects. {internet access}
- Joan Robinson, 1938. Review of Costantino Bresciani-Turroni, The Economics of
Inflation, Economic Journal (September).
Supplementary Readings
- Giusseppe Tullio, 1995. Inflation and Currency Depreciation in Germany, 1920-1923.
Journal of Money, Credit and Banking (May).
- Steven Webb, 1984. The Supply of Money and Reichsbank Financing of Government
and Corporate Debt in Germany, 1919-1923. Journal of Economic History (June).
- ___________, 1985. Government Debt and Inflationary Expectations as Determinants
of the Money Supply in Germany, 1919-1923. Journal of Money, Credit and Banking
(November).
- ___________, 1986. Fiscal News and Inflationary Expectations in Germany, 19191923. Journal of Economic History (September).
- Richard Burdekin and Paul Burkett, 1992. Money, Credit and Wages in Hyperinflation.
Economic Inquiry (July).
- Paul Burkett and Richard Burdekin, 1993. Real Wages and Distributional Conflict in
the German Hyperinflation. Australian Economic Papers (June).
Sep 17 – 19 The Economic Trajectory of Weimar Germany: Slump and Collapse
Required Readings
- Knut Borchardt, 1991. Constraints and Room for Manoeuvre in the the Great
Depression of the 1930s: Toward a Revision of the Received Historical Picture, in Knut
Borchardt, Perspectioves on Modern German Economic History and Policy.
- __________and Albrecht Ritchl, 1992. Could Brüning Have Done It? European
Economic Review, 695-701.
Supplementary Readings
- Peter Temin, 1971. The Beginning of the Depression in Germany, Economic History
Review (May).
- Harold James, 1986. The German Slump.
- Jonas Fisher and Andreas Hornstein, 2001. The Role of Real Wages, Productivity and
Fiscal Policy in Germany’s Great Depression. Federal Reserve Bank of Richmond W.P.
01-07 (also Review of Economic Dynamics, 2002).
- Hans-Joachim Voth, 1995. Did High Wages or High Interest Bring Down the Weimar
Republic? Journal of Economic History (December).
Sep 24 –
Oct 8
America’s Great Depression: The Sickening Slide
Required Readings
- Milton Friedman and Anna Schwartz, 1963. The Great Contraction.
- Peter Temin, 1989. Lessons from the Great Depression.
- Ben Bernanke, 1993. World on a Cross of Gold: A Review of Golden Fetters. Journal
of Monetary Economics, 251 – 267.
Supplementary Readings
- Christina Romer, 1988. The Great Crash and the Onset of the Great Depression. NBER
W.P. 2639.
- Irving Fisher, 1933. Debt Deflation Theory of Great Depressions. Econometrica (Oct)
- Richard Koo, 2008. The Holy Grail of Macroeconomics.
- Ben Bernanke, 1983. Non-Monetary Effects of the Financial Crisis in the Propagation
of the Great Depression. American Economic Review (June).
- __________, 1994. The Macroeconomics of the Great Depression. NBER W.P. 4814
- __________ and Mark Gertler, 1989. Agency Costs, Net Worth and Business
Fluctuations. American Economic Review (March).
- __________ and Martin Parkinson, 1989. Unemployment, Inflation and Wages in the
American Depression. American Economic Review (May).
- __________ and Harold James, 1990. The Gold Standard, Deflation and the Financial
Crisis in the Great Depression. NBER W.P. 3488.
- Barry Eichengreen, 1992. Golden Fetters: The Gold Standard and the Great Depression,
1919 – 1939.
- __________ and Peter Temin, 1997. The Gold Standard and the Great Depression.
NBER W.P. 6060.
- Gerald Epstein and Thomas Ferguson, 1984. Monetary Policy, Loan Liquidation and
Industrial Conflict: The Federal Reserve and the Open Market Operations of 1932.
Journal of Economic History (December).
- __________, 1991. Answers to Stock Questions: Fed Targets, Stock Prices and the
Gold Standard in the Great Depression. Journal of Economic History (March).
Oct 10
Catch-up and review
Oct 15
Classroom examination, 100 points
Oct 17 – 24
America’s Great Depression: Regime Change and Recovery
Required Readings
- Christina Romer, 1991. What Ended the Great Depression? NBER W.P. 3829.
- Peter Temin and Barrie Wigmore, 1990. The End of One Big Deflation. Explorations in
Economic History, 483 -502.
-Gauti Eggertsson and Benjamin Pugsley, 2006. The Mistake of 1937. Monetary and
Economic Studies, Special Edition (December).
Supplementary Readings
- Harold Cole and Lee Ohanian, 1999. The Great Depression in the United States from a
Neoclassical Perspective. FRBM Quarterly Review (Winter).
- __________, 2004. New Deal Policies and the Persistence of the Great Depression: A
General Equilibrium Analysis. Journal of Political Economy (August).
- Gauti Eggertsson, 2006. Was the New Deal Contractionary? Federal Reserve Bank of
New York Staff Report No. 264.
- __________, 2008. Great Expectations and the End of the Depression. American
Economic Review (September).
- Peter Temin, 2008. Real Business Cycle Views of the Great Depression and Recent
Events: A Review of Kehoe and Prescott, eds., Great Depressions of the Twentieth
Century. Journal of Economic Literature (September).
Oct 29
America’s Great Depression: Overview
- Charles Kindleberger, 1973. The World in Depression, 1929 -1939.
- Brad de Long, 1990. “Liquidation” Cycles: Old Fashioned Real Business Cycle Theory
and the Great Depression. NBER W.P. 3546.
- Peter Temin, 1994. The Great Depression. NBER Historical Paper No. 62.
Oct 31 –
Nov 7
America’s Great Recession and Slump
Required Readings
- Hyman Minsky, 1975. John Maynard Keynes.
- Joseph Stiglitz, 2010. Freefall.
- Raghuram Rajan, 2005. Has Financial Development Made the World Riskier? NBER
W.P. 11728.
- Barry Eichengreen and Peter Temin, 2010. Fetters of Gold and Paper. NBER W.P.
16202.
- Robert Hall, 2011. The Long Slump. American Economic Review (March).
Supplementary Readings
- Markus Brunnermeier, 2009. Deciphering the Liquidity and Credit Crunch 2007-2008.
Journal of Economic Perspectives (Winter).
- Stefano Battison, et.al., 2009. Liaisons Dangereuses: Increasing Connectivity, Risk
Sharing, and Systemic Risk. NBER W.P. 15611.
- Gauti Eggertsson and Paul Krugman, 2010. Debt, Deleveraging, and the Liquidity
Trap. http://www.princeton.edu/~pkrugman/debt_deleveraging_ge_pk.pdf (also
Quarterly Journal of Economics, 2012, 1469-1513).
Suggested Further Readings
- Perry Mehrling, The New Lombard Street.
- George Akerlof and Robert Shiller, Animal Spirits
- Raghuram G. Rajan, Fault Lines
- Simon Johnson and James Kwak, 13 Bankers
- Gillian Tett, Fool’s Gold
-David Wessel, In Fed We Trust
- Michael Lewis, The Big Short
- Andrew Ross Sorkin, Too Big to Fail
- Neil Barofsky, Bailout
- Paul Krugman, End This Depression Now!
- Stephen Cecchetti, 2009. Crisis and Response: The Federal Reserve in the Early Stages
of the Financial Crisis. Journal of Economic Perspectives (Winter).
- Rene Stulz, 2010. Credit Default Swaps and the Credit Crisis. Journal of Economic
Perspectives (Winter).
- Thomas Ferguson and Robert Johnson, 2009. Too Big to Bail: The Paulson Put,
Presidential Politics and the Global Financial Meltdown. International Journal of
Political Economy (Part I, Spring; Part II, Summer)
- Atif Mian and Amir Sufi, 2010. The Great Recession: Lessons from Microdata.
American Economic Review (May).
- Alan Blinder and Mark Zandi, 2010. How the Great Recession Was Brought to an End.
http://www.economy.com/mark-zandi/documents/End-of-Great-Recession.pdf
- John Cochrane, 2009. Fiscal Stimulus, Fiscal Inflation or Fiscal Fallacies.
http://faculty.chicagobooth.edu/john.cochrane/research/papers/fiscal2.htm
- Financial Crisis Inquiry Commission Report http://www.gpoaccess.gov/fcic/fcic.pdf
Nov 12
Veterans Day Recess
Presentation of student papers
Nov 14
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Costantino Bresciani-Turroni, The Economics of Inflation, Chapters 2 and 8.
Harold James, The German Slump, selected chapters.
Nov 19
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J. K. Galbraith, Jr., The Great Crash
Garet Garrett, A Bubble the Broke the World (skip final two chapters)
Nov 21
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J. M. Keynes, selected essays and lectures
Lionel Robbins, The Great Depression
Nov 26
Lester Chandler, America’s Greatest Depression
 The financial sphere: Chapters, 1,2,5,9,10
 The real sphere: Chapters 3,7,8,11,13
Nov 28
Allan Meltzer, A History of the Federal Reserve, vol. 1 (library book and internet access)
 New Procedures, New Problems, 1923 – 1929, Chapter 4
 Why Did Monetary Policy Fail? (1929-1933) Chapter 5
Dec 3
Liaquat Ahamed, The Lords of Finance: The Bankers Who Broke the World
 U.S. concerns: Chapters 4,8,16,17,18,23
 International concerns: Chapters 6,7,9,11,19,20,22,23
Dec 5
Catch up and review
Dec 10
Comprehensive Final Examination, 4 – 6 pm