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Grasping Reality on TypePad, by Brad DeLong
Archives Highlighted Previous Edit COVID Market for Man Slavery 20th C. Reading 'Chicago'

Grasping Reality on TypePad, by Brad DeLong

The current place where I am posting material is over on the SubStack: http://braddelong.substack.com

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

Econ 101b Spring 2018 Topics and Assignments

  • Sanjay Chu: Modern Macroeconomics http://skchugh.com/teachingfall2013/ec20205bc.html
  • Blanchard: Macroeconomics https://bookshelf.vitalsource.com/#/books/9780133839395/cfi/6/214!/4@0.00:0
  • Jones: Macroeconomics http://amzn.to/2yswxoD
  • 2017-08-13 Introduction to Technology in Coursework....ipynb https://www.icloud.com/keynote/0yKJfOMN5SvDtK_K7tjWAstcA

  • 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


  • Diana Arce Rayna... diana_arce@berkeley.edu (first half)
  • Zhimin Li... zhimin.li@berkeley.edu (second half)



Before Class Begins

Read:

  • Robert Skidelsky: Keynes: A Very Short Introduction http://amzn.to/2fTAMiJ. Start with the first paragraph of chapter 1, then skip forward to chapters 3-5, then read the Epilogue. After that, go back to read the Introduction, chapters 1 and 2, and then chapter 6.
  • DeLong and Olney 3rd ed., chs 1-2. Take the "Introduction" and the "Measuring" quizzes.
  • Brad DeLong: What Do Econ Students Need to Remember Most from the Course? http://delong.typepad.com/sdj/2010/12/what-do-econ-1-students-need-to-remember-most-from-the-course.html

  • 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


+ + + +

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