Course Catalogue

Module Title: Macroeconomics II

Programme: BA Economics +, BA (Hon) Economics

Module Code: MAC 202

Credit Value: 12

Module Tutor: Dr. Navin K. Jha

General Objectives:

This Module aims to provide sound knowledge of the core models used in macroeconomics, for both closed and open economy and to enhance the ability to understand real world issues involving macroeconomic policy.

Learning Outcomes

At the end of this module, the students are expected to be able to:

· Methodically present a wide variety of theoretical models commonly used in macroeconomics.

· Critically evaluate macroeconomic policies.

· Develop an understanding and ability to formulate arguments effectively in the realm of advanced macroeconomics and related policy issues;

· Discuss the popular debate in views of macroeconomics.

· Analyze how national and international policies and shocks cause exchange rates to change

· Explain how the policies taken by one country can have global effects in an increasingly open world economy

· Have comprehensive understanding of theories of Inflation and their policy Implications.

Learning and teaching approach:

Lectures (60 hours in 15 weeks)

Tutorials (15 hours in 15 weeks)

Discussions (10 hours in 15 weeks)

Assignments (20 hours in 15 weeks)

Video and ICT (5 hours in 15 weeks)

Seminars (10 hours in 15 weeks)

Assessment:

Semester end examination (60%)

Assignments and project Works (20%)

Seminars (20%)

Pre-requisite: Macroeconomics I

Subject Matter

1. Aggregate Supply: aggregate supply curve and the price adjustment mechanism, inflation and unemployment, stagflation-expected inflation and inflation expectations, augmented Phillips curve, the rational expectations revolution, the wage-unemployment relationship; why are wages sticky? Supply shocks.

Unemployment and Inflation: Phillips Curve-short run and long run; expectation; NAIRU. Rational Expectations; Inflation: Causes, money growth and inflation tax. Monetarist and structuralist debate; Inflation targeting; Natural rate hypothesis. (25 hours)

2. Policy Options : (10 hours)

Lags in monetary policy; Dynamic policy and Information feedback; Activist Policy; Dynamic Inconsistency and rules v/s Discretion;expectation and reactions; uncertainty and economic policy; Case Study-Rupee Crunch and Credit Crunch.

3. International Linkages (25 hours)

Balance of Payments and Exchange rates; exchange rate in long run; trade in goods and market equilibrium; balance of trade; capital mobility and flexible exchange rate. Adjustments under fixed exchange rates; Monetarist approach to Balance of Payments; Interest parity-covered and uncovered; Exchange rate overshooting; interest rate differential and exchange rate expectations; Exchange rate fluctuations and interdependence; Mundell Fleming Model; Internal and external balance.

Reading list

Essential Reading:

1. Dornbusch, R., Fischer, S. & Startz, R. (2010). Macroeconomics. (11^th Edition). Tata McGraw Hills Publication.

2. Mankiw, N. G. (2010). Macroeconomics (7^th edition), Worth Publishers.

3. Gartner, M. (2003). Macroeconomics, Prentice-Hall.