Intermediate macroeconomics: Business Cycles and International Money

Course goals

Learning objectives
At the end of the course the student is able to:

• Understand current macroeconomics issues, as well as it causes and consequences.
• Identify underlying markets of aggregate demand and aggregate supply and how changes in these markets affect aggregate  demand and supply.
• Understand Balance of Payments (BoP) and international financial linkages, within the context of exchange rate regimes
• Use the Mundell-Fleming framework to analyze the effects of fiscal and monetary policy
• Use the AS-AD and SAS-DAD models to characterize short-run and long-run macroeconomic equilibrium
• Assess the effectiveness of fiscal and monetary policy under different exchange rate regimes and different assumptions about agent behavior
• Explain how policies and shocks in one part of the world affect the other part of the world
• Provide a well-reasoned stand on the effectiveness of demand and supply side macroeconomic policies

Content

This course deals with the workings of the economy in the short run. Fundamental questions we address in this course are: “why do economies experience cycles of booms and recessions?” and “what policies can address such shocks?”. Building on fundamentals learned in Macroeconomics: European perspective (ECB1MACR), we deepen the knowledge on short run economic dynamics.
We live in an interdependent world where policies (monetary and fiscal) and shocks (such as Russia-Ukraine war) in one part of the world affect other parts of the world. In this course, we discuss the importance of such international linkages in money and goods markets and explain the transmission mechanisms of policies and shocks. Specifically, we address how international money markets are connected through financial trade and exchange rate policies. 
The course starts by explaining the underlying markets of aggregate demand, i.e., goods, money and foreign exchange markets. Our primary focus will be on deriving the Mundell-Fleming framework and aggregate demand curve. Second, we tackle the supply side of the economy, beginning with the underlying labor market. Third, we put together demand and supply side of the economy to arrive at both static and dynamic aggregate demand and aggregate supply framework for the analysis of short- and medium-run macroeconomic issues of production and inflation. We emphasize different policy scenarios and effectiveness.  The course will conclude with a real-world application on how geopolitical events such as the Russia-Ukraine war has affected output and inflation around the world through supply chain disruptions.

Academic skills
This course focuses on the following academic skills:

Communication and social skills: ability to

• explain complex and abstract issues and the underlying mechanisms to a broad audience.
• write a report on a specific subject
• communicate research results in a presentation
• work effectively in a team for a specific project
• provide constructive and effective feedback to peers

Analytical skills: ability to

• use algebra and graphical methods to analyse macroeconomic issues
• solve problems (identifying the problem, devising a path towards the solution, following this path, verifying the outcome) for more complex assignments.
• identify, interpret and critically evaluate the main line of reasoning, for more complex problems.

Academic reasoning: ability to

• think conceptually and use a theoretical framework
• identify how different economic variables relate to each other

Effort requirements
Attendance in at least 6 out of 8 of the tutorials.

Courses that build on this course

• Advanced Mathematics (ECB3VWIS)
• Financial Markets and Institutions (ECB3FMI)

In case online access is required for this course and you are not in the position to buy the access code, you are advised to contact the course coordinator for an alternative solution. Please note that access codes are not reusable meaning that codes from second hand books do not work, as well as access codes from books with a different ISBN. Separate or spare codes are usually not available.