Professional Documents
Culture Documents
Stefan Niemann
I Contact time:
I Lecture: Thursday, 14:00-16:00
I Class: Friday, 13:00-14:00
I Email: sniem@essex.ac.uk
I Coursework:
I compulsory midterm test on Thursday 17th December,
17:00-19:00
I optional term paper, submission by Friday 22nd January, 12:00
I Exam:
I 2 hours, during the summer term
I Supplementary readings:
I Barro, R.J. and X. Sala-i-Martin (2004): Economic Growth,
2nd Edition, MIT Press.
I Blanchard, O. and S. Fischer (1989): Lectures on
Macroeconomics, MIT Press.
I Obstfeld, M. and K. Rogoff (1996): Foundations of
International Macroeconomics, MIT Press.
I Wickens, M. (2008): Macroeconomic Theory: A Dynamic
General Equilibrium Approach, Princeton University Press.
I Journal articles as indicated.
3. Investment
4. Unemployment
5. Economic Growth
12.499
800
11.499
400
index (1900=100)
10.499
200
100
9.499
50
8.499
1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000
year
Sources: Bureau of Economic Analysis, Bureau of Labor Statistics, Federal Reserve Bank of St. Louis.
Note: Based on quarterly data from 1947Q1 to 2003Q4. 24 end-point observations excluded. Sources: See Table 14.2 .
I Romer, chapter 5
1. Aggregate Demand
3. Output-Inflation Tradeoffs
E = E (Y , r , G , T ), (1)
often: E = C (Y − T ) + I (r ) + G
Planned
Expenditure
E=Y
45°
Output
IS
Output
I algebraically:
Y = E (Y , r , G , T )
dY dY
|IS = Ey |IS + Er
dr dr
dY Er
|IS = , (3)
dr 1 − EY
where 0 < EY < 1 and Er < 0
Interest
Rate
MP
IS
Output
Stefan Niemann EC 904 Macroeconomics - Lecture 1
Aggregate Demand and Aggregate Supply
Interest
Rate
MP1
MP0
IS
Output
πt, Inflation
Transit
LRAS
SRAS
• The
calle
tran
rium
π0
• Pro
get
AD
• Pers
y0 y yt, Output
to g
Unemployment, ŷ < 0
• Reca
Suppose there is some shock (unspecified) in cycle
I Romer (2006,
periodp.229) shows
t = 0 that how
shifts theto
ASdetermine
‘left’. We the
are slope of AD
algebraically
out of equilibrium. What happens in periods
t > 0?, i.e. how do we get back to equilibrium.
Stefan Niemann EC 904 Macroeconomics - Lecture 1
IS-MP Model
Effects of an Increase in Government Purchases
Interest
Rate
MP
IS1
IS0
Output
I implications:
I employment determined by labor demand only, there can be
involuntary unemployment
I AS upward-sloping
I countercyclical real wage in response to aggregate demand
shocks
W
I if µ(L) is sufficiently countercyclical, P becomes procyclical
I if labor supply is more than level of employment determined by
AD and AS, get unemployment
Source: Figure 1 of A.W. Phillips, ‘The Relation between Unemployment and the Rate of Change of Money Wage
Rates in the United Kingdom, 1861–1957’, Economica, New Series, 25 (100), Blackwell Publishing, (Nov., 1958),
pp. 283–299. Figure: The Phillips Curve in the UK, 1861-1913. Slide 1/1
©The McGraw-Hill Companies, 2005
Source: R.B. Mitchell, International Historical Statistics, Macmillian, 1998; and Bureau of Labor Statistics.
Figure: The Phillips Curve in the US, 1960s.
©The McGraw-Hill Companies, 2005 Slide 1/3
Source: R.B. Mitchell, International Historical Statistics, Macmillian, 1998; and Bureau of Labor Statistics.
Figure: The Phillips Curve in the US, 1961-1980. Slide 1/4
©The McGraw-Hill Companies, 2005
I version 3:
πt = φπte + (1 − φ)πt−1 + λ ln Yt − ln Ȳt + εSt ,
0≤φ≤1