Macroeconomics

Rationale and Purpose of the Module: The purpose of this course is to introduce the student to the principles underlying the Macro economy. This is the study of how aggregate economic variables (such as the real growth rate, inflation and unemployment) inter-act and how the policy-maker (Government and Central Bank) can influence their behaviour. Following an introduction to the key macroeconomic variables and globalization, a model of how the macro economy operates (the theory of income determination) is developed. This model is then expanded at various stages to include the money market and the foreign exchange market. The expanded model is used to discuss issues in macroeconomic theory and policy such as role and operations of the European Central Bank (ECB) and the relative importance of fiscal, monetary and exchange rate policies. The course concludes by discussing recent trends and economic issues relating to the Irish economy.

Syllabus: 
Topic 1. Introduction to Macroeconomics Irish macro economy, political economy, macroeconomic constraints, globalization, macroeconomic models and the time horizon, a brief history.
Topic 2. National Income and Economic Performance Aggregate production function, measuring the output of nations, the national income accounts, adjusting for inflation, the business cycle, the long-run performance of the Irish economy.
Topic 3. Inflation Measuring inflation, the Irish inflation record, the effects of inflation, deflation.
Topic 4. The Labour Market and Unemployment The labour market, the natural rate of unemployment, frictional and structural unemployment, cyclical unemployment, why doesn't the labour market clear?, the costs of unemployment, reducing unemployment, unemployment in Ireland, unemployment in the Euro area.
Topic 5. Introduction to the Theory of Income Determination Macroeconomic models, Keynes's General Theory, equilibrium in the goods and services market, aggregate demand, aggregate supply, equilibrium, adjusting to demand-side shocks, adjusting to supply-side shocks, real GNP and unemployment.
Topic 6. Consumer Theory and the Income Determination Income, consumption and savings, personal income, consumption and savings in Ireland, the Keynesian multiplier.
Topic 7. Introduction to the Theory of Fiscal Policy Fiscal policy, assessing the stance of fiscal policy, problems in implementing stabilization policy, taxation and the supply-side of the economy, the dynamics of debt stabilization.
Topic 8. Fiscal Policy and Economic Planning in Practice: The Irish Record Economic planning, Irish fiscal policy in historical perspective, is there such a thing as Expansionary Fiscal Contraction?, the end of history.
Topic 9. Money and Banking What is money?, types of money, functions of money, creation of money, the role and functions of a Central Bank, control of money, the credit-fuelled property bubble and the crash.
Topic 10. Money and Interest Rates in a Closed Economy The demand for money, money market equilibrium, nominal and real interest rates, aggregate demand and interest rates, monetary policy in a closed economy, crowding-out, government monetary financing.
Topic 11. The Balance of Payments and the Exchange Rate Balance of payments, the significance of the current account balance, the foreign exchange market, the exchange rate of the Irish pound and the euro, the determinants of exchange rates, factors influencing exchange rates in the medium term, exchange rate regimes.
Topic 12. Inflation and Interest Rates in Open Economies. Purchasing power parity (PPP), PPP and the real exchange rate, harmonized competitiveness indicators, relative PPP, uncovered interest rate parity theory.
Topic 13. The Long-Run Performance of the Irish economy. The growth of population, the standard of living, interpreting the record 1922-'61, the 1960s, the record since 1971, the property and construction bubble 2001-'07, the great recession and its aftermath.