September 2001        W.M. Scarth
          KTH - 436, Ext. 23807
          scarth@mcmaster.ca

The Topic Outline (given below) is divided into 12 parts to correspond to the 12 weeks of term. The text  page numbers refer to the required reading from my book Macroeconomics: An Introduction to Advanced Methods (Second Edition - 1996). The additional numbered readings are listed on the second page. An answer booklet for the questions in my text, and a set of past tests and exams (with answers) is avaialable.

We meet for four hours each week: 9:30-11:30 on Mondays and Wednesdays. The Monday session and the first half of the Wednesday meeting will be used for lectures; the second half of each Wednesday meeting will be a tutorial (to discuss practice questions and difficulties). Because I will be away at a conference for two class times in late October, these two sessions (October 24 and 29) have been rescheduled. These sessions will occur on Tuesday September 25 and Tuesday October 16 (3:30-5:00).
I will be available for office hours without a previous appointment each week at the following times: Mondays (12:30-2:00) and Wednesdays (1:30-3:00). If these times are inconvenient and/or if you need additional times, please feel free to make appointments.

There will be two in-class tests (90 minutes each) and the final exam (3 hours). The term tests will occur on Wednesday October 3 (covering Topics 1-4) and Wednesday November 7 (covering Topics 5-8). The final exam will give some extra weight to Topics 9-12. The final mark will be calculated as follows: better term test - 25%; poorer term test - 15%; final exam - 60%.
 

Topic Outline

1. Aggregate Demand/Supply Analysis and Stability (text chap 1 pp. 1-5; chap 2) - Sept 10, 12

2. Keynesian and Classical Perspectives (text chap 3) - Sept 17, 19

3. Micro-Foundations (text chap 1 pp. 5-22, 28-30) - Sept 24-25

4. Expectations (text chap 4) - Sept 26, Oct 1

5. The Lucas Critique and Policy Credibility (text chap 5, chap 6 pp. 108-117; Reading 1) - Oct 3, 10

6. The New Neoclassical Synthesis (text chap 6 pp.121-33, 135-9; Reading 2) - Oct 15, 16

7. The Open Economy - Basic Analysis (text chap 8) - Oct 17

8. The Open Economy - Extensions (text chap 9) - Oct 22, 31

9. New Keynesian Economics: Sticky Wages/Unemployment (text chap 10 pp. 193-208) - Nov 5, 7

10. New Keynesian Economics: Sticky Prices/Imperfect Competition (text chap 10 pp. 209-19; Reading 3)
          Nov 12, 14

11. Real Business Cycle Theory (text chap 11 pp. 220-234; Readings 4-6) - Nov 19, 21

12. Growth Theory and Fiscal Policy (text chap 11 pp. 234-249; chap 7 pp. 140-5, 161-4; Readings 7-8)
          Nov 26, 28, Dec 3
 
 
 

Additional Required Readings

1. Chari, “Nobel Laureate Robert E Lucas, Jr.: Architect of Modern Macroeconomics,” Journal of Economic Perspectives 1998, 171-186.
2. King, R., “The New IS-LM Model: Language, Logic, and Limits,” Federal Reserve Bank of Richmond, Economic Quarterly, 86, 3 (Summer, 2000), 45-103.      This article is available at http://patriot.net~bernkopf/    Click on central banks, then United States, then Fed Res B of Richmond, then publications, then Ec Qtly.
3. Romer, D., Advanced Macroeconomics (McGraw-Hill 1996) 241-263; 273-302.
4. Eichenbaum, M, “Modern Approaches to Stabilization Policy,” Canadian Business Econ’cs, 1997, 3-11.
5. Cooper, R., “Business Cycles: Theory, Evidence and Policy Implications,” Scandinavian Journal of Economics, 1998, 213-237 (and comments by Danthine and Gottfries).
6. Woodford, M., “Revolution and Evolution in Twentieth Century Macroeconomics,” available at http://www.princeton.edu~woodford/
7. Romer, “The Origins of Endogenous Growth,” Journal of Economic Perspectives 1994, 3-22.
8. Solow, R., “Perspectives on Growth Theory,” Journal of Economic Perspectives 1994, 45-54.
 

Preparation for Comprehensive Exams in Macroeconomics

Preparation should involve your integrating three things: Economics 723 methods and topics, Economics 724 material, and knowledge that can be had by reading items such as those listed below. Comprehensive questions will test both your skill on specific models covered in macro classes as well as your wider understanding about the state of macroeconomics. Preparation requires a two-step approach:

(i) For the first type of (more specific) questions, consolidate your understanding. Know the core material well, rather than have a passing awareness of a wider set of models. You should be quite familiar with material in books such as  Blanchard/Fischer, Romer, Scarth and Smith.
(ii) For the second (more general) questions, read survey articles to widen your sense of the major issues in macroeconomics and the directions in which the discipline is moving. Think through your own reactions to any strong statements on perspective made by “big guns” in survey articles (and discuss them (and past exam questions) with other students and your macro instructors). A convenient list of some articles of this sort is given on page 234 in Scarth’s book. A number of such articles are collected in A Macroeconomics Reader, edited by Snowdon and Vane. Another useful source is Conversations with Leading Economists: Interpreting Modern Macroeconomics, edited by Snowdon and Vane (Edward Elgar, 2000). By way of illustration, some additional items are:

Christiano, L. “Interview,” item 20 at: http://www.faculty.econ.nwu.edu/faculty/christiano/research.htm
Blanchard, O., “What Do We Know about Macroeconomics that Fisher and Wicksell Did Not? Quarterly Journal of Economics (Nov, 2000) 1375-1410.
Sargent, T., The Conquest of American Inflation (Princeton U Press) 1999.
Saint-Paul, "The Rise and Persistence of Rigidities," AER Papers, 1997, 290-294.
Samuelson/Basu/Bils/Cooley contributions in Beyond Shocks: What Causes Business Cycles? Federal Reserve Bank of Boston, 1998.
Hartley, James E., The Representative Agent in Macroeconomics (Routledge) 1997.
Solow, R., Monopolistic Competition and Macroeconomic Theory (Cambridge U Press) 1998.
Hahn, F., and R. Solow, A Critical Essay on Modern Macroeconomic Theory (MIT Press) 1995.
Ball and Mankiw, "A Sticky Price Manifesto," Carnegie-Rochester Conference Series on Public Policy 41, 1994, 127-151, and Robert Lucas’ comment, 153-155.
Solow/Taylor/Eichenbaum/Blinder/Blanchard “Is There a Core of Practical Macroeconomics That We Should All Believe?” AER Papers 1997, 230-246.
Parkin, M., “Unemployment, Inflation, and Monetary Policy,” CJE, 1998, 1003-1032.