| CODE | ECN5211 | ||||||||
| TITLE | Advanced Macroeconomics | ||||||||
| UM LEVEL | 05 - Postgraduate Modular Diploma or Degree Course | ||||||||
| MQF LEVEL | 7 | ||||||||
| ECTS CREDITS | 5 | ||||||||
| DEPARTMENT | Economics | ||||||||
| DESCRIPTION | The financial crisis of 2008/9 made many Economists aware that the teaching of mainstream macroeconomics did not take sufficient account of the role of the financial system in macroeconomic fluctuations. More modern approaches seek to integrate the financial system into the standard 3-equation model which comprises an IS curve, a Philips Curve and a policy reaction function. This is the New Keynesian system allowing for prolonged departures of output from its optimal level as a consequence of instability of aggregate spending. The use of the mainstream monetary macroeconomic model with inflation targeting suggested that we could largely protect the real economy from financial instability by the judicious use of monetary policy. This proved not to be the case. We need to integrate a model of the financial system into the 3-equation model. Part I: Micro-foundations of the demand and supply side; the 3 equation model and macroeconomic policy; the role of expectations; supply side policy, institutions and unemployment; money and the financial sector in the 3-equation model; the open economy demand and supply system; Solow Growth Model; the Real Business Cycle and New Keynesian Models; Endogenous Growth and DSGE Models Part II: Monetary and Fiscal Policy; 3 equation model: Formal optimisation; trade-offs; the Efficient Policy Frontier; choice of policy instrument; optimal rate of inflation; the role of uncertainty; transparency in monetary policy; the role of forward guidance; the global financial crisis; the Eurozone; fiscal policy. Study-unit Aims: The study-unit aims to assist students in achieving an understanding of modern macroeconomic thinking and its consequences for macroeconomic policymaking especially in the light of the international financial crisis. It also aims to provide an understanding of the way in which the Eurozone economy works with a centralised monetary policy and decentralised fiscal policy. A more detailed three equation open-economy model and the consequent Monetary Policy options will be covered in the unit ECN5220 Monetary Policy and Financial Markets in Semester 2. Finally, the study-unit aims to provide an understanding of the role of the financial system in macroeconomic fluctuations. Learning Outcomes: 1. Knowledge & Understanding By the end of the study-unit the student will be able to: a. Reproduce the way in which macroeconomic policy works and how it is underpinned by modern macroeconomic thinking; b. Recognise the importance of expectations for understanding economic policy; c. Match theoretical underpinnings with the empirical findings and their influence on current policy; d. Recognise main drivers of economic growth; e. Define interaction between real and financial variables; f. Recognise changing business cycle patterns and labour market evolution; g. Reproduce dynamic techniques required to understand modern macroeconomic literature, and review recent econometric developments in time series. 2. Skills By the end of the study-unit the student will be able to: a. Apply the role of uncertainty in policy making and the importance of data revisions; b. Apply recent advances in macroeconomic thinking; c. Learn to make impactful, ethical and profitable decisions in the local and global economy; d. Acquire the mathematical skills to solve economic models; e. Grow in a curriculum that emphasizes applied economics and policy analysis; f. Utilize economic models to predict the changes in various economic indicators (such as price, output, growth, employment, inflation, and welfare) and the consequential impacts to the economy. Main Text/s and any supplementary readings: Main Texts: - Carlin W & Soskice D, (2015) Macroeconomics: Institutions, Instability and the Financial System. Oxford University Press. - Romer D, (2019) Advanced Macroeconomics. 5th Edition. McGraw-Hill, Irwin. Supplementary texts/readings: - Blanchard, Olivier. (2019). "Public Debt and Low Interest Rates." American Economic Review, 109 (4): 1197-1229. - Carlin, S D, (2006) Macroeconomics: Imperfections, Institutions and Policies. Oxford University Press. |
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| STUDY-UNIT TYPE | Lecture and Tutorial | ||||||||
| METHOD OF ASSESSMENT |
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| LECTURER/S | Josef Bonnici Brian Micallef |
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The University makes every effort to ensure that the published Courses Plans, Programmes of Study and Study-Unit information are complete and up-to-date at the time of publication. The University reserves the right to make changes in case errors are detected after publication.
The availability of optional units may be subject to timetabling constraints. Units not attracting a sufficient number of registrations may be withdrawn without notice. It should be noted that all the information in the description above applies to study-units available during the academic year 2025/6. It may be subject to change in subsequent years. |
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