An evolving online course on modern macroeconomics.
by George Alogoskoufis
Macroeconomics focuses on the analysis of economies in the aggregate. This book is addressed to students of economics, as well as trained economists, who wish to deepen and broaden their knowledge of macroeconomics. It presents the main theories of economic growth and aggregate fluctuations, through a sequence of dynamic general equilibrium models, which are based on inter-temporal optimization on the part of economic agents, such as households, firms and the government.
These models are treated as tools for understanding the main macroeconomic phenomena of long run economic growth, aggregate fluctuations, inflation and unemployment as well as studying the effects of monetary and fiscal policy. The book highlights both the potential of such dynamic models, as well as their limitations. Dynamic general equilibrium models, such as the ones utilized in this book are the essence of modern macroeconomics.
The book assumes introductory knowledge of economic theory and mathematics for economists, and is suitable for advanced undergraduates, graduate economists and students in the first year of post-graduate degrees leading to an M.Sc or a Ph.D in economics and related subjects. The book has emerged from my lectures over many years at Birkbeck College, University of London and the Athens University of Economics and Business, both at undergraduate and postgraduate levels.
Chapter 1 is an introductory chapter, providing a brief review of the evolution of macroeconomics, as well as key facts about long run economic growth and aggregate fluctuations.
The remainder of the book is divided into four main parts.
The first part consists of six (6) chapters, which present and analyze the process of economic growth. It presents the basic Solow model of savings, investment and economic growth (Ch. 2), the Ramsey model of the representative household (Ch. 3), overlapping generations models such as the models of Diamond and Blanchard and Weil (Ch. 4), models that highlight the inter-temporal effects of fiscal policy and the money supply (Ch. 5 and 6), and models of externalities, human capital accumulation, ideas and innovations and endogenous growth (Ch. 7).
The second part, which consists of three (3) additional chapters, analyses dynamic stochastic models of consumption (Ch. 8), investment (Ch. 9), as well as money demand, interest rates, the price level and inflation (Ch. 10).
The third part consists of six (6) additional chapters, which present and analyze dynamic stochastic general equilibrium models of aggregate fluctuations. We present the new classical view of aggregate fluctuations (Ch. 11), introduce the basic Keynesian model and the Phillips curve (Ch. 12), and then present a dynamic stochastic new keynesian model with periodic wage setting, (Ch. 13), an imperfectly competitive new keynesian model (Ch. 14), and a matching model of the determination of equilibrium unemployment (Ch. 15).
In the fourth and final part, which consists of four (4) additional chapters we analyze the role and the effectiveness of monetary (Ch. 16) and fiscal policy (Ch. 17), models of macroeconomics and politics (Ch, 18), as well as models of multiple equilibria and macroeconomic crises (Ch. 19).
Chapter 20 sums up on the state of macroeconomics and speculates about its likely future evolution.