MACROECONOMICS: (PCE, PCEF, ESP, FE, S+E)
Lecturer: Dr Yunus Aksoy
Course Aims
Macroeconomics is the part of economics that studies the behavior of the economic system as a whole. This
course aims to develop a macroeconomic framework, to provide microfoundations for macro relationships, to
emphasize interactions within economies, and to examine some topical issues in policy design.
Course Objectives
By the end of the course students will understand sources of business cycles, consumption and investment
dynamics, the demand for and supply of money, and the role of monetary and fiscal policy, and some aspects of
open economy macroeconomics. Students are encouraged not merely to learn theoretical models but to
appreciate their relevance in practice, including in the design of economic policy.
Learning Outcomes
By the end of the academic year, you are expected to:
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be able to form your own economic view on current macroeconomic problems;
understand the interrelationships between different macroeconomic policies;
be familiar with macroeconomic data and statistical relationships;
be able to present macroeconomic analysis both verbally and in written form;
be able to construct and write answers to macroeconomic analytical questions;
be able to undertake further study in the different areas of macroeconomics such as international
finance, monetary economics, growth theory, etc.
Organization:
During the course, there will be a weekly lecture combined with a class in which students present their solutions
to that week's problem set.
Assessment: Test (20%), Examination (80%)
Test: The test will take place during the lecture hour on the following date: Thursday, February 16, 2006 (Reading
Week). The test will follow the approach of the seminar class worksheets. It will count for 20% of your final grade in
this course, if this improves your overall average. If the mark in your final examination is higher than the mark in the
mid-term test, the marks for the mid-term test will be discarded, and your final grade will come entirely from the final
examination.
Examination: It counts for 80% of the final grade in the course. The examination tests your ability to construct
written answers to a variety of macroeconomic questions and your ability to coherently use the analytical tools
taught throughout the term.
Required reading (course text)
Stephen D. Williamson, Macroeconomics, 2nd edition, Addison Wesley,
Web site for Williamson book http://wps.aw.com/aw_williamson_macroecon_1
Recommended Reading
N. Gregory Mankiw, Macroeconomics, 5th edition, Worth Publishers
Web site for Mankiw book: http://www.worthpublishers.com/mankiw/
Krugman, Paul and Maurice Obstfeld, International Economics, 6th Edition, Addison Wesley
Website for Krugman-Obstfeld Book:
http://wps.aw.com/wps/media/access/Pearson_Default/279/285984/login.html
Additional handouts and journal articles will also be provided.
Week 1: Introduction and Measurement Issues
Measurement: Measuring GDP; Nominal and Real GDP and Price Indices; Savings, Wealth and Capital;
Labour Market Measurement
*Williamson Ch.’s 1, 2
Week 2: Business Cycle Measurement: Stylised Facts; Comovements
Consumer and Firm Behaviour: The Work-Leisure Decision and Profit Maximization
The representative consumer; The representative firm
*Williamson Ch. 3, 4
Williamson Mathematical Appendix Ch.4
Week 3: A Closed Economy One Period Macroeconomic Model
Government; Competitive Equilibrium; Optimality; Working with the Model
* Williamson Ch. 5
Williamson Mathematical Appendix Ch.5
Week 4: A Two-Period Model
The Consumption-Savings Decision and Ricardian Equivalence
* Williamson Ch. 8
Williamson Mathematical Appendix Ch.8
Week 5: A Real Intertemporal Model with Investment
Investment; Competitive Equilibrium; Optimality; Working with the Model
* Williamson Ch. 9
Williamson Mathematical Appendix Ch.9
Week 6: Test (Thursday, 16.02.2006; starts at 18:00)
Week 7: A Monetary Intertemporal Model
The Neutrality of Money, Long Run Inflation and Money Demand
What is Money?; A Monetary Intertemporal Model; Money Demand & Supply
* Williamson Ch. 10
Williamson Mathematical Appendix Ch.10
*Blinder, A., (1998), Central Banking in Theory and Practice, Cambridge: The MIT Press, chapters 1-2.
*McCandless G., W. Weber (1995) Some Monetary Facts, Federal Reserve Bank of Minneapolis Quarterly Review,
Vol. 19, No. 3, pp. 2–11
*Mishkin, F. (1995), “Symposium on the Monetary Transmission Mechanism,” Journal of Economic Perspectives
9, no. 4, 3-10.
Week 8: Keynesian Business Cycle Theory
* Mankiw Ch.’s 10, 11
* Williamson Ch. 12
Week 9: Keynesian Business Cycle Theory
Competing Explanations for Aggregate Supply
The Sticky Wage Model
The Sticky Price Model
Imperfect Information Model
* Mankiw Ch. 13
* Williamson Ch. 12
Week 10: Money in the Open Economy
PPP, Real Exchange Rate, Fixed Exchange Rates and Flexible Exchange Rates
* Williamson Ch. 14
* Krugman and Obstfeld Chs. 15,16,17.