Year of entry: 2018
Course unit details:
|Unit level||Level 3|
|Teaching period(s)||Semester 1|
|Available as a free choice unit?||Yes|
See course Blackboard pages.
|Unit title||Unit code||Requirement type||Description|
In addition to ECON20401 and ECONN20401, students must have taken at least one of the following to be able to take this course unit (compulsory Pre-Requisite):
- ECON10001 or
- ECON10071 or
The course studies the scope and effectiveness of macroeconomic stabilization policy under the assumption of rational expectations. It also examines the set of incentives and constraints that policymakers face under alternative monetary policy regimes and assesses their relative merits and drawbacks.
On successful completion of the course, you will have a working knowledge of key macroeconomic models and understand their predictions about the effectiveness of macroeconomic stabilization policies.
Introduction to Expectations in Macroeconomics:
- Main concepts of expectations in Macroeconomics; Adaptive vs. Rational Expectations.
The Mathematics of Rational Expectations Models:
- Simple Macroeconomic models of lagged and forward expectations.
Rational Expectations and Policy Ineffectiveness:
- The Rational Expectations Hypothesis (REH) and policy neutrality.
Rational Expectations and New Keynesian Economics:
- Calvo contracts and the New Keynesian Phillips curve.
Dynamic Inconsistency and Credibility in Monetary Policy:
- Rules versus Discretion.
- Rules with Escape Clauses.
- Central Bank Independence.
Addressing the Inflation Bias Problem of Discretionary Monetary Policy:
- Reputation and Credibility; Optimal Preferences of a Central Banker.
Teaching and learning methods
Lectures and exercise classes.
- Final Exam Paper - 1.5 hours (90%).
- Mid-Term Test - multiple choice (10%).
- Past exam papers.
- Class feedback.
- Office hours.
- Revision sessions.
- Discussion boards.
- Romer, David (2006), Advanced Macroeconomics, (McGraw Hill, 3rd edition).
- Minford P. (1992), Rational Expectations Macroeconomics, Blackwell.
- Heijdra B. and F. Van Der Ploeg (2002) Foundations of Modern Macroeconomics (Oxford).
- Holden K., D.A. Peel & J.L. Thomson, Expectation Theory and Evidence. Macmillan.
- G.K. Shaw (1984), Rational Expectations, Harvester Press.
- Sheffrin S. (1983), Rational Expectations, Cambridge University Press.
- Stevenson, A., V.Muscatelli, M.Gregory. Macroeconomic Theory and Stabilization Policy.
- Walsh, C., Monetary Theory & Policy.
|Scheduled activity hours|
|Assessment written exam||1.5|
|Independent study hours|