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Econ 101b: Macroeconomic Theory Go-Faster Do-More: Spring 2018

Econ 101b Spring 2018 Topics and Assignments

  • TTh 8:00 am - 9:29 am: Cory 277
    • TTh 5:00 pm - 5:59 pm: Latimer 105
    • TTh 6:00 pm - 6:59 pm: LeConte 385
    • WM 3:00 pm - 3:59 pm: Cory 289
    • WM 4:00 pm - 4:59 pm: LeConte 385

Intro

  • 2018-01-16 Tu: Overview
  • 2016-01-18 Th: Logistics
    • PS 1: Python

Growth

  • 2018-01-23 Tu: The Solow Growth Model and Modern Economic Growth (In-class quiz)
  • 2018-01-25 Th: How Well Does the SGM Fit MEG?: Time Series
  • 2018-01-30 Tu: How Well Does the SGM Fit MEG?: Cross Sections (In-class quiz)
    • PS 2: SGM
  • 2018-02-01 Th: Where Do n, g, & s Come From?
  • 2018-02-06 Tu: The Long Reign of Thomas Malthus (In-class quiz)
    • PS 3: How Well Does the SGM Fit?
  • 2018-02-08 Th: Endogenous Growth: Two Heads Are Better than One
  • 2018-02-13 Tu: Why Was the Industrial Revolution so Long Delayed? Why Did the Industrial Revolution Come so Soon? (In-class quiz)
    • PS 4: Malthus and Two Heads Are Better than One
  • 2018-02-15 Th: The Demographic Transition and the Coming of MEG
  • 2018-02-20 Tu: The Combined and Uneven Diffusion of Frontier Technology and Institutions (In-class quiz)
    • PS 5: The Coming and Spread of MEG
  • 2018-02-22 Th: How Fast Is Economic Growth, Really?
  • 2018-02-27 Tu: Property Rights and Growth Today (In-class quiz)
    • PS 6: Information Growth Economics

Cycles

  • 2018-03-01 Th: What Is a "General Glut"? (In-class quiz)
  • 2018-03-06 Tu: No "General Gluts" in a Flex-Price Financial Distress-Free World
  • 2018-03-08 Th: Fixing the Price Level and Interest Rates: The Keynesian Cross (In-class quiz)
  • 2018-03-13 Tu: Fixing the Price Level: IS-LM
    • PS 7: The Flex-Price Distress-Free Economy
  • 2018-03-15 Th: Financial Distress: IS-LM with a Financial Wedge (In-class quiz)
  • 2018-03-20 Tu: The Phillips Curve and Supply Shocks
    • PS 8: Keynesian Cross and IS-LM
  • 2018-03-22 Th: Dynamics Under Static, Adaptive, and Rational Expectations (In-class quiz)
  • 2018-04-03 Tu: Monetary Policy Rules
    • PS 9: Phillips Curve and Inflation Dynamics
  • 2018-04-05 Th: The Zero Lower Bound (In-class quiz)
  • 2018-04-10 Tu: Proper Financial Regulation for Macroeconomic Stability
    • PS 10: Policy Rules
  • 2018-04-12 Th: "Hysteresis" (In-class quiz)
  • 2018-04-17 Tu: "Secular Stagnation"
    • PS 11: Pulling All of Cycles Together
  • 2018-04-19 Th: The Government Budget Constraint and Abba Lernerism (In-class quiz)
  • 2018-04-24 Tu: Demand Management as Near-Laissez Faire Utopia?
    • PS 12: Advanced Topics...

Review and Final

  • 2018-04-26 Th: Cycles: What You Need to Relearn for the Exam (In-class quiz)
    • PS 13: Exam Preparation
  • 2018-05-10 7:00 pm - 10 pm: FINAL EXAM

Grading Points:

  • 45 = final
  • 45 = 3 x 15 problem sets
    • When should problem sets be due? (My guess is that 2:00 pm Wednesday makes the most sense.)
  • 12 = clickers (24 opportunities to earn half a point)
  • 13 = once-a-week in-class quizzes

110 point total

Before Class Begins

Read:

  • 2017-01-21 Su 5 PM: Online Skidelsky Keynes Background quiz due
  • 2017-01-21 Su 5 PM: Online Introduction quiz due
  • 2017-01-21 Su 5 PM: Online Measuring" quizzes due
  • 2017-01-21 Su 5 PM: (1) Intro to Python/Math Review Problem Set out

Introduction

2017-01-17 We: Introduction Logistics, BIG IDEAS, Tools...; D&E ch. 4

  • 2017-01-21 Su 5 PM: (1) Intro to Python/Math Review Problem Set due
  • 2017-01-21 Su 5 PM: (2) Economic Growth Problem Set out

Long-Run Economic Growth

2017-01-22 Mo: Theories of Economic Growth; D&E ch. 4

2017-01-24 We: Malthusian Economies and the Great Transition; D&E ch. 5 (first third)

2017-01-29 Mo: Modern American Economic Growth; D&E ch. 5 (second third)

2017-01-31 We: Cross-Country Income Differentials; D&E ch. 5 (last third)

  • 2017-02-04 Su 5 PM: (2) Economic Growth Problem Set due
  • 2017-02-04 Su 5 PM: (2a) Sample Midterm One out

2017-02-05 Mo: Scenarios for the Future; D&E ch. 6

2017-02-07 We: Instructor Reality Check "Midterm"; (read D&E ch. 3)

  • 2017-02-11 Su 5 PM: (3) Flexible Price Economy Problem Set out

Short-Run Economic Fluctuations: Flexible-Price Macroeconomics

2017-02-12 Mo: General Gluts; D&E ch. 7

2017-02-14 We: The Full-Employment Long-Run Flexible-Price Macroeconomy: Behavioral Relationships; D&E ch. 8

2017-02-21 We: The Flexible-Price Economy; D&E ch. 9

  • 2017-02-25 Su 5 PM: (3) Flexible Price Economy Problem Set due
  • 2017-02-25 Su 5 PM: (4) Sticky Price Economy Problem Set out

2017-02-26 Mo: Inflation in the Flexible-Price Economy; D&E ch. 10

Short-Run Economic Fluctuations: Sticky-Price Macroeconomics

2017-02-28 We: The Sticky-Price Short-Run Macroeconomy: The Multiplier; D&E ch. 11

2017-02-05 Mo: The IS Curve; D&E ch. 12

2017-03-07 We: Financial Crises:; D&E ch. 13

  • 2017-03-11 Su 5 PM: (4) Sticky Price Economy Problem Set due
  • 2017-03-11 Su 5 PM: (5) Sample Second Midterm Problem Set out

2017-03-12 Mo: The Phillips Curve; D&E ch. 15

Macroeconomic Policy

2017-03-14 We: 5tabilization Policy D&E ch. 16

  • 2017-03-16 Fr 5 PM: (5) Sample Second Midterm Problem Set due

2017-03-19 Mo: Second Midterm (read D&E ch. 14)

2017-03-21 We: Life at the Zero Lower Bound; D&E ch. 17

  • 2017-04-01 Su 5 PM: (6) Sticky-Price Economy Advanced Problem Set out

2017-04-02 Mo: Fiscal Policy Dilemmas; D&E ch. 18

2017-04-04 We: Secular Stagnation; D&E ch. 19

2017-04-09 Mo: The Medium Run: Hysteresis; D&E ch. 20

2017-04-11 We: International Economic Policy; D&E ch. 21

  • 2017-04-15 Su 5 PM: (6) Sticky-Price Economy Advanced Problem Set due
  • 2017-04-15 Su 5 PM: (7) International Economy/Understanding/Forecasting Problem Set out

Perspectives

2017-04-16 Mo: Changes in the Macroeconomy; D&E ch. 22

2017-04-18 We: The History of Macroeconomics; D&E ch. 23 (first half)

2017-04-23 Mo: Understanding 2005-2018 and Forecasting 2018-?:

2017-04-25 We: The Future of Macroeconomics;D&E ch. 23 (second half)

  • 2017-04-29 Su 5 PM: (7) International Economy/Understanding/Forecasting Problem Set due
  • 2017-04-29 Su 5 PM: (7a) Sample Final Exam Out

2017-05-07 Mo – 2017-05-11 Fr: Exam:

+ + + +

DeLong and Olney: Macroeconomics 3rd Edition Planning

Sections, subsections, and non-example boxes

Preface

I. Orientation

(I) Introduction (REV)

(1) Introduction to Macroeconomics

  • What is Macroeconomics?

    • Why Macroeconomics Matters
      • Cultural literacy
      • Self interest
        • BOX: Data: Macroeconomic policy and your quality of life
      • Civic responsibility
        • BOX: Economic policy and political popularity
    • Macroeconomic Policy
      • Growth policy
      • Stabilization policy
    • Macroeconomics vs. Microeconomics

  • Tracking the Macroeconomy

    • Economic Statistics and Economic Activity
    • Six Key Variables
      • Real national product
        • BOX: Tools: Accounting definitions and statistical discrepancies
        • BOX: Data: Real national product per worker in the United States
      • The employment rate (REV)
        • BOX: Data: Employment, non-employment, and unemployment rates
      • The inflation rate
        • BOX: Data: U.S. inflation rates
      • The interest rate
        • BOX: Data: Real interest rates
      • The stock market
        • BOX: Data: The stock market
      • The exchange rate
        • BOX: Details: The exchange rate

  • The Current Macroeconomic Situation

    • The United States
    • Europe
    • Japan
    • China (NEW)
    • Emerging Markets (REV)

(2) Measuring the Macroeconomy

  • Macroeconomic Data

  • The Exchange Rate

    • Nominal vs. Real Exchange Rates
    • The Real Exchange Rate
      • Calculating the real exchange rate
        • Index numbers
          • BOX: Details: Chain, Lapeyres and Paasche index numbers

  • The Stock Market and the Interest Rates

    • The Stock Market
      • The usefulness of knowledge about the stock market
      • The stock market summarizes a lot of information
    • The Interest Rates

  • The Price Level and Inflation

    • The Consumer Price Index
      • The PCE deflator (NEW)
      • Kinds of index numbers (REV)
    • The Inflation Rate
      • Core inflation

  • The Employment Rate (REV)

    • Employment and Unemployment (NEW)
      • Assessing full employment (NEW)
      • Calculating the unemployment rate
      • Understanding the unemployment business cycle (NEW)
    • Okun's Law (REV)
      • BOX: Details: Forms of Okun's Law

  • Real National Product

    • Calculating Real National Product
    • Real and Nominal National Product
    • Intermediate Goods, Inventories, and Imputations
      • Intermediate goods
      • Inventories
      • Imputations
    • National Product and National Utility (NEW)
      • Value of production and human utility (NEW)
      • Inequality and human utility (NEW)
      • Utility and human well-being (NEW)
    • Components of National Product
    • What Is and Is Not in National Product
      • Gross output, depreciation, and net output
      • Government purchases
      • National product and national income
      • Things that are not in national product—but should be
        • Depreciation, pollution, and other "bads"

(3) Thinking Like an Economist

  • Economics: What Kind of Discipline Is It?

    • A Social Science
    • A Quantitative Social Science
    • An Abstract Social Science

  • The Rhetoric of Economics

    • Analogies and Metaphors
    • Markets
    • Equilibrium
    • Graphs and Equations

  • Model Building: Assumptions

    • Simplification
    • Representative Agents
    • Opportunity Cost
    • Expectations
      • Static
      • Adaptive
      • Rational
      • Other kinds—Panglossian and Eeyoreian (NEW)

  • "Solving" Models

    • Behavioral Relationships
      • BOX: Tools: Working with exponents
    • Equilibrium Conditions
    • Model Solutions
      • Arithmetic
      • Algebra
        • Coefficients
        • Parameters
          • BOX: Tools: Mathematical rules of thumb
      • Analytic geometry
    • The Advantages of Math (REV)

II. Long-Run Economic Growth

(I) Introduction

(4) Theories of Economic Growth

  • Theoretical Sources of Long-Run Growth

    • The Efficiency of Labor (REV)
      • The level of technology
      • The availability of natural resources (NEW)
    • Capital Intensity
    • Fitting the Two Together
    • Demography (NEW)

  • The Solow Growth Model (REV)

    • The Production Function (REV)
      • BOX: Details: Forms of the production function
    • Saving, Investment, and Capital Accumulation (REV)
    • Adding in Labor-Force and Labor-Efficiency Growth (REV)
    • The Balanced-Growth Capital-Output Ratio (REV)

  • Understanding the Solow Growth Model (REV)

    • Balanced-Growth Output per Worker (REV)
    • Off the Balanced-Growth Path (REV)
      • How fast the economy head for its balanced-growth path (REV)
    • Using the Solow Growth Model (REV)
      • The savings rate and the price of capital goods (REV)
      • The labor force growth rate (REV)
      • The growth rate of the efficiency of labor (REV)

  • The Malthusian Non-Growth Model (NEW)

    • Efficiency of Labor (NEW)
      • Resource scarcity (NEW)
      • Extremely low technological progress (NEW)
    • Prosperity and Population Growth (NEW)
      • The positive check (NEW)
      • The preventative check (NEW)
      • Malthusian equilibrium: life nasty, brutish, and short (NEW)
        • BOX: Details: Understanding the Malthusian economy

  • Determinants of Technological and Organizational Progress (NEW)

    • Two Heads Are Better than One (NEW)
    • Culture (NEW)
    • Institutions (NEW)
    • Incentives (NEW)

(5) The Reality of Economic Growth: History

  • After the Invention of Agriculture (REV)

    • Premodern Economies (REV)
    • Prosperity and Labor Force Growth (REV)
    • The Malthusian Trap (REV)
    • Why Was Technological and Organizational Progress so Slow? (REV)

  • The Industrial Revolution (REV)

    • The End of the Malthusian Age (REV)
      • The initial breakthrough (REV)
      • The demographic transition (REV)
      • Industrial Revolution (REV)

  • Modern American Economic Growth

    • American Growth, 1800-1870
    • American Growth, 1870-1973
      • The pace of economic growth
      • Structural change
      • America's edge
      • The Great Depression and World War II
    • The Productivity Slowdown, 1973-1995
      • BOX: Details: Did real standards of living decline during the productivity slowdown period?
    • American Economic Growth, 1995-2007 (REV)
      • The productivity growth slowdown (REV)
      • The Information Age speedup (REV)
    • American Economic Growth, 2007-Present (NEW)
      • Financial crisis and the Great Recession (NEW)
      • Low investment (NEW)
      • "Hysteresis" (NEW)

  • Modern Economic Growth Around the World

    • Divergence, Bigtime
      • BOX: Tools: Purchasing power parity and real exchange rate comparisons
      • The exception: the OECD
        • BOX: Policy: Why have these countries converged?
      • The rule: divergence behind the Iron Curtain
      • The rule: divergence in merging markets
    • China and the Pacific Rim (NEW)
      • The Pacific Rim (REV)
        • BOX: Policy: The Pacific Rim miracle
      • China (NEW)
        • BOX: Policy: The Chinese supermiracle
    • Sources of Divergence
      • Global patterns
        • Cause and effect, effect, and cause
          • BOX: Policy: Post-communism
    • Global and within-National Inequality (NEW)

(6) The Reality of Economic Growth: Prospect

  • Hopes for Convergence

    • Relative and Absolute Stagnation
    • Half Empty and Half Full

  • Policies for Saving, Investment, and Education

    • Saving and Investment
      • A high pressure economy
    • Education

  • Policies for Technological Advance and Organizational Improvement (REV)

    • invention and innovation (REV)
      • Rivalry and excludability (REV)
      • Patents and copyrights (REV)
    • Government failure (REV)

  • "Neoliberalism" (REV)

  • Future Growth and Inequality (NEW)

III. Flexible-Price Macroeconomics

Introduction

(7) Circular Flows and General Gluts (NEW)

  • The Circular Flow of Economic Activity (REV)

    • The Circular Flow Diagram (REV)
    • Different Measures of the Circular Flow: Demand, Sales, Production, Income, Spending (REV)
    • Walras's Law, Say's Law, and the Circular Flow (NEW)

  • Breaking the Automatic Equality of the Circular Flow (NEW)

    • Money Is a Special Commodity (NEW)
    • Excess Demand for Money: Depression and "General Glut" (NEW)
    • Excess Supply of Money: Inflation and "Too Much Money Chasing too Few Goods" (NEW)
    • What Is "Money" Here? (NEW)
      • Liquid assets (NEW)
      • Safe assets (NEW)
      • Savings vehicles (NEW)

(8) Building Blocks of the Flexible-Price Model

  • Potential Output and Real Wages

    • The Production Function (REV)
    • The Invariance of Potential Output to the Cycle (NEW)
    • The Labor Market
      • Labor demand
      • Labor supply
      • Labor market equilibrium and real wages (REV)

  • Spending on Domestically-Produced Goods

    • Consumption Spending
      • Household decisions
      • The marginal propensity to consume
      • Baseline consumption
    • Investment Spending * BOX: Details: Kinds of investment
      • Why firms invest
        • Interest rates
        • Animal spirits
        • The role of expectations
      • The investment function
    • Government purchases
    • Net exports

  • The Role of International Trade

    • Gross exports
    • Imports
    • Net exports
    • The exchange rate
      • The role of interest rates and expectations
        • BOX: Details: The j-curve

  • Conclusion

(9) Equilibrium in the Flexible-Price Model

  • Full Employment Equilibrium

    • The Flow-of-Funds Approach
    • The Assumption of Wage and Price Flexibility
      • BOX: Details: If prices were truly flexible

  • Two Approaches, One Model

    • Using the Circular Flow Diagram
      • BOX: Details: Financial transactions and the flow of funds
    • Using Some Algebra
    • Unpacking the Flow-of-Funds Equation

  • The Real Interest Rate Is What Adjusts to Lead to Equilibrium

    • Graphing the Saving-Investment Relationship
      • BOX: Details: Deriving the equilibrium interest rate equation
    • The Adjustment to Equilibrium

  • Using the Model: What Makes the Real Interest Rate Change?

    • The Effect of a Change in Saving
    • The Effect of a Change in Investment Demand
    • The Effect of a Change in Government Purchases
    • The Effect of a Change in Demand for Exports

  • Calculating the Equilibrium Real Interest Rate: Some Algrebra

    • The Formula for the Equilibrium Real Interest Rate
    • Interpreting the Real Interest Rate Equation
    • Determining the Effect of a Change in Policy on the Components of Aggregate Demand
      • Government purchases
      • Saving and investment
      • Exports and imports
      • Consumption

  • Conclusion

(10) Money, Prices, and Inflation

  • Money

    • Liquid Wealth That Can Be Used to Buy Things
      • The usefulness of money
      • Units of account

  • The Quantity Theory of Money

    • The Demand for Money
    • The Quantity Equation
      • Say's Law again (NEW)
    • Money and Prices
      • The price level
      • The money stock
        • BOX: Details: Different definitions of the money stock
      • The rate of inflation
      • Inflation and the nominal interest rate

  • The Economic Costs of Inflation

    • The Costs of Moderate Expected Inflation
    • Hyperinflation and Its Costs

IV. Sticky-Price Macroeconomics

(I) Introduction

  1. The Sticky-Price Income-Expenditure Framework: Consumption and the Multiplier

    • Sticky Prices
    • Sticky Prices
    • Consequences of Sticky Prices
      • Breaking Say's Law (NEW)
      • Flexible-price logic
      • Sticky-price logic
      • Expectations and price stickiness

    • Why Are Prices Sticky?

    • Income and Spending

    • Building Up Planned Total Spending
      • The consumption function
      • Other components of total spending

    • Sticky-Price Equilibrium

    • The Multiplier

    • Determining the Size of the Multiplier

(12) Investment, Net Exports, and Interest Rates: The IS Curve

  • Interest Rates and Planned Total Spending

    • The Importance of Investment
      • The role of investment
      • Sources of fluctuations in investment
    • Investment and the Real Interest Rate
      • The long-term interest rate
      • The real interest rate
      • The risky interest rate
    • The Investment Accelerator (NEW)
      • BOX: Tools: The stock market as an indicator of future investment
    • Bankruptcy and Investment (NEW)
      • Would less sticky prices really be a help? (NEW)
    • Exports and Autonomous Spending

  • The IS Curve

    • Autonomous Spending and the Real Interest Rate
      • From the interest rate to investment to planned total spending
    • The Slope and Position of the IS Curve
      • The slope of the IS curve
      • The position of the IS curve
      • How the economy moves to the IS curve
        • BOX: Details: How fast does the economy move to equilibrium?
    • The "neutral" interest rate of Knut Wickse (NEW)

  • Using the IS Curve to Understand the Economy

    • BOX: Policy: Costs of low employment
    • Shifting the IS Curve
    • Moving Along the IS Curve
      • Difficulties
    • Economic Fluctuations in the United States: Using the IS Curve as a Lens
      • The 1960s
      • The 1980s
      • The 1990s
      • The early 2000s
      • The Great Recession (NEW)
      • The Longer Depression (NEW)

(13) Financial Crisis: Asset Prices, Leverage, Bankruptcies (NEW)

  • Asset Prices and Returns (NEW)

    • The Equity Return Premium (NEW)
    • "Convexity" in Financial Rewards (NEW)

  • Manias (NEW)

    • Credit Expansion (NEW)
    • Euphoria and Leverage (NEW)
    • Policy Responses (NEW)

  • Panics and Crises (NEW)

    • Greater Fools (NEW)
    • Positive Feedback (NEW)
    • Liquidation (NEW)
    • Contagion (NEW)
    • The Bagehot Rule, and the Lender of Last Resort (NEW)

  • Consequences (NEW)

    • The Credit Channel and Investment (NEW)
    • Liquidation and Confidence (NEW)
    • Recovery? (NEW)

  • 2007-2009 (NEW)

(14) The Money Market and the LM Curve

  • The Money Market and the Money Stock

    • Wealth, Bonds, and the Demand for Money
      • BOX: Details: Money demand and the quantity theory
      • BOX: Details: Bond prices and interest rates
    • Money Supply and Money Demand
    • Adjustment to Equilibrium

  • The LM Curve

    • Interest Rates and Total Income
    • Drawing the LM Curve
    • The Zero Lower Bound on Interest Rates (NEW)

  • The IS-LM Framework

    • The IS-LM Diagram
    • IS Shocks
    • LM Shocks
    • "Spread" Shocks
    • At the Zero Lower Bound (NEW)
    • Classifying Economic Disturbance
      • Changes that affect the IS curve
      • Changes that affect the LM curve
      • Changes that affect the spread

  • Aggregate Demand and Aggregate Supply

    • The Price Level and Aggregate Demand
    • The Price Level and Aggregate Supply
    • The AS-AD Diagram
      • BOX: Details: A shock to aggregate demand

(15) The Phillips Curve, Expectations, and Monetary Policy

  • Aggregate Supply and the Phillips Curve

    • Employment, Full Employment, and Unemployment
    • Aggregate Supply
    • The Phillips Curve Examined BOX: Details: Forms of Okun's Law

  • Monetary Policy, Aggregate Demand, and Inflation

    • The Reaction of Monetary Policy to Inflation
      • BOX: Details: From income-spending to the MPRF
    • Equilibrium: The MPRF and the Phillips Curve
    • Using the MPRF-Phillips Curve Model

  • The Natural Rate of Employment and Unemployment (REV)

    • Demography (REV)
    • Institutions (REV)
    • Productivity Growth (REV)
    • The Past (REV)
    • The Fluctuating Natural Rate (REV)

  • "Expected" Inflation

    • The Phillips Curve under Static Expectations
    • The Phillips Curve under Adaptive Expectations
      • BOX: Policy: Adaptive expectations and the Volcker disinflation
    • The Phillips Curve under Rational Expectations
      • BOX: Details: The structure of the economy and the Lucas critique
      • Economic policy under rational expectations
    • What Kind of Expectations Do We Have?
      • Persistent contracts
      • Sticky mental models

  • From the Short Run to the Long Run

    • Under Rational Expectations
    • Under Adaptive Expectations
    • Under Static Expectations

V. Macroeconomic Policy

(I) Introduction

  1. Stabilization Policy

    • Monetary Policy Institutions (REV)
    • BOX: Details: Leading indicators
    • The Federal Reserve Board (REV)
    • The Federal Open Market Committee (REV)
    • The History of the Federal Reserve (REV)

    • How the Federal Reserve Operates (REV)

      • BOX: Details: The money multiplier

    • Fiscal Policy Institutions (REV)

    • The Budget Cycle in Theory (REV)

    • The Budget Cycle in Practice (REV)

    • The History of Stabilization Policy

    • The Employment Act of 1946
    • Keynesian Overoptimism and the Monetarist Correction
    • Monetary Management in the 1980s and 1990s
    • The "Great Moderation" Overoptimism and Its Correction (NEW)
      • Financial deregulation and "Greenspanism" (NEW)

    • The Great Recession and the Longer Depression (NEW)

      • Monetary caution (NEW)
      • Fiscal austerity (NEW)

    • The Power and Limits of Stabilization Policy

    • Economists' Disagreements (REV)
    • The Implications of Uncertainty
    • The Money Supply as a Leading Indicator

    • Long Lags and Variable Effects

      • BOX: Policy: The limits of stabilization policy
      • BOX: Details: When is there a political business cycle?

    • Monetary vs. Fiscal Policy (REV)

    • Relative Power (REV)
    • Fiscal Policy: Automatic Stabilizers
      • BOX: Policy: Tax cuts and economic stimulus

    • How Monetary Policy Works

      • BOX: Policy: Standard monetary policy instruments
      • At the zero lower bound (NEW)

    • Making Good Stabilization Policy: Rules vs. Authorities

    • Competence and Objectives
      • BOX: Policy: The political business cycle and Richard Nixon
    • Credibility and Commitment

    • Modern Monetary Policy (REV)

    • Financial Crises (NEW)

    • Lenders of Last Resort (NEW)
    • Deposit Insurance and Moral Hazard (NEW)

(17) Monetary Policy and the Lower Bound on Interest Rates (NEW)

  • How Does the Central Bank Affect Interest Rates? (NEW)

    • Open Market Operations in Short-Term Government Securities (NEW)
    • What Happens When They and Money Become Perfect Substitutes? (NEW)

  • Non-Standard Monetary Policies (NEW)

    • Forward Guidance (NEW)
    • Quantitative Easing (NEW)
    • Other Expedients (NEW)

  • Optimal Policy Near the Zero Lower Bound (NEW)

    • Optimal Control (NEW)
    • The Value of Not Having to Worry (NEW)
    • Can We Understand Federal Reserve, ECB, and BoJ Policy? (NEW)

(18) Budget Balance, National Debt, and Investment

  • The Budget Deficit and Stabilization Policy

    • The Budget Deficit and the IS Curve
    • Measuring the Budget Balance

  • Measuring the Debt and the Deficit

    • Inflation
    • Public Investment
    • Future Government Liabilities
    • Generational Accounting

  • Analyzing the Debt and the Deficit (REV)

    • BOX: Data: The U.S. debt-to-national-product ratio
    • Sustainability (REV)
      • The equilibrium debt-to-national-product ratio (REV)
      • Is the equilibrium debt-to-national-product ratio possible? (REV)
      • Risks (NEW)
    • Economic Effects of Deficits and Debt (REV)
    • Political Effects of Deficits (REV)
    • Deficits and Planned Spending (REV)
    • International Effects of Deficits (REV)
    • Deficits and Long-Run Growth (REV)
    • Debt Service, Taxation, and Real National Product

(19) Secular Stagnation (NEW)

  • Ideas of Secular Stagnation in History (NEW)

    • John A. Hobson (NEW)
    • Alvin Hansen (NEW)
    • Larry Summers (NEW)

  • Causes of Secular Stagnation (NEW)

    • Supply of Savings (NEW)
    • Demands for Investment Projects (NEW)
    • Outsized Risk Premiums (NEW)

  • Cures for Secular Stagnation (NEW)

    • Higher Inflation Targets (NEW)
    • Higher Government Debt Levels (NEW)
    • Mobilizing Risk Bearing Capacity (NEW)
    • Raising the Profitability of Investment (NEW)

(20) From the Short Run to the Long Run: Hysteresis (NEW)

  • Short-Run Performance of Potential Output Growth (NEW)

    • Investment (NEW)
    • Business Models (NEW)
    • Technological Advance (NEW)
    • Labor Attachment (NEW)

  • Changing the Policy Calculus (NEW)

    • Externalities from a High Pressure Economy (NEW)
    • The True Long-Run Cost of Expansionary Policies (NEW)

  • How Important Is This "Hysteresis"? (NEW)

    • Europe in the 1980s (REV)
    • The North Atlantic After 2009 (NEW)
    • The Broader Historical Record (NEW)

(21) International Economic Policy

  • The History of Exchange Rates

    • The Classical Gold Standard
      • What is the gold standard?
      • A gold standard tends to produce contractionary policies
    • The Collapse of the Gold Standard
    • The Bretton Woods System
    • Our Current Floating Rate System (REV)

  • How a Fixed Exchange Rate System Works

    • High Capital Mobility
    • Barriers to Capital Mobility

  • The Choice of Exchange Rate Systems (REV)

    • Benefits of Fixed Exchange Rates (REV)
    • Costs of Fixed Exchange Rates (REV)

  • Currency Crises

    • The European Crisis of 1992
    • The Mexican Crisis of 1994-95
    • The East Asian Crisis of 1997-98
    • The Dollar in the 2000s (REV)
    • Managing Crises (REV)

VI. Perspective

(I) Introduction

(22) Changes in the Macroeconomy and Changes in Macroeconomic Policy

  • Changes in the Macroeconomy

    • The Past
    • The Future (REV)
      • Consumption (REV)
      • Globalization (REV)
      • Monetary policy (REV)
      • Inventories (REV)

  • The History of Macroeconomic Fluctuations

    • Estimating Long-Run Changes in Cyclical Volatility
    • Economic Policy
      • How economic policy has worked (REV)
      • How economic policy has not worked (REV)
        • BOX: Policy: The Bush 2001 tax cut

  • Understanding the Great Depression of the 1930s

    • The Magnitude of the Great Depression
    • Deflation, High Real Interest Rates, and Bankruptcies

  • Understanding the Moderate Inflation of the 1970s (NEW)

    • The Deanchoring of Expectations (NEW)
    • Supply Shocks (NEW)
    • Macroeconomic Policy from Late Martin to Volcker (NEW)

  • Understanding 2005-2018 (NEW)

    • The Global Savings Glut (NEW)
    • The Housing Bubble and the Deregulatory Mania (NEW)
    • The Crash (NEW)
    • Policy Response (NEW)
    • The Longer Depression (NEW)

  • Macroeconomic Policy: Lessons Learned (REV)

    • Stabilization (REV)
    • Learning (REV)
    • Prospects (REV)

  • Macroeconomic Policy: Lessons Un- or Half-Learned (REV)

    • Hysteresis: From High European Unemployment in the 1980s to Today (REV)
      • Grand bargains? (REV)
    • The Zero Lower Bound: From Japan in the 1990s to Today (REV)
      • The end of the bubble economy (REV)
      • Deflation (NEW)
      • Debt expansion (NEW)
    • Moral Hazard in Finance (REV)
    • The Utility of Stabilization Policy (REV)
      • BOX: Policy: Central bank independence
    • The Ultimate Lesson (REV)

(23) The Past and Future of Macroeconomics

  • The Past of Macroeconomics (REV)

    • Jean-Baptiste Say, Thomas Robert Malthus, and John Stuart Mill (NEW)
    • Walter Bagehot and Robert Peel (NEW)
    • Knut Wicksell and Irving Fisher (NEW)
    • The Age of John Maynard Keynes
    • The Age of Milton Friedman (REV)

  • The Present of Macroeconomics (NEW)

    • The Influence of Robert Lucas (NEW)
      • Rational expectations as a requirement (NEW)
      • Fiscal policy pessimism (NEW)
      • The turn to real factors (NEW)
    • The Influence of Edward Prescott (REV)
      • Supply shocks (REV)
      • The unevenness of economic growth (REV)
        • Investment responses to productivity shocks (REV)
      • Bad RBC theories (NEW)
        • Full employment (NEW)
        • Technological regress (NEW)
        • Money and real business cycles (NEW)
    • The New Keynesian Approach (REV)
    • The Central Banking Analysis and Private Forecasting Tradition (NEW)
    • Debts and Deficits (REV)
      • Ricardian equivalence (REV)
        • Counterarguments (REV)
      • Consumption and saving (REV)

  • The Future of Macroeconomics (REV)

    • Beyond "New Keynesianism" (REV)
      • Menu costs and sticky beliefs (REV)
        • Real expectational modeling (REV)
      • Coordination failures (NEW)
    • The Microeconomic Turn (NEW)
      • What are the emergent macroeconomic properties given how economic agents really behave? (NEW)
    • How Does Monetary Policy Really Work, Anyway? (NEW)

Glossary

Index

+ + + +

Housekeeping: