The Macroeconomic Theory module aims to:

• provide students with a thorough understanding of the method, content and scope of macroeconomic analysis.
• stimulate students to appreciate the value of economic analysis in understanding the behaviour of the economy.
• give students a firm foundation of knowledge about the policy issues facing the UK and other governments in respect of monetary and fiscal affairs.
• encourage, through the study, teaching and learning of the module, a range of transferable subject-specific and core skills that will be of value to students in future education and in their subsequent careers.
• progress students’ intellectual development, through teaching and learning, beyond comprehension and application to analysis.

A    Knowledge and Understanding:

• understand models of the economy and the theoretical and empirical work that has led to their evolution.
• be familiar with the policy debates about monetary and fiscal stabilisation - ineffectiveness, time-inconsistency, and the Lucas Critique.

B    Intellectual Skills: 

• be aware of the various macroeconomic theories that have been held by economists.

C    Discipline Specific Skills: 

• be able to solve models and carry out simulation of shocks on them, using algebra and diagrams.
• understand how to integrate macroeconomic theories into the open economy and solve a basic open economy macro model.

D    Transferable Skills: 

• be able to solve models and carry out simulation of shocks on them, using algebra and diagrams.
• be familiar with the policy debates about monetary and fiscal stabilisation.

This is a double module consisting of 2 hours of lectures per week (20 hours per semester) and 5 tutorials per semester on alternate weeks. Total contact time 50 hours.  Approximate study requirement estimated at 10 hours per week for an average student.

This course requires mastery of diagrammatic and algebraic analysis of macroeconomic models of the economy in a simplified form. For this reason the students must spend a great deal of time practising these techniques both before and in class. During lectures they have to assimilate the methods as well as absorbing general information about the subject.  In the second semester students will also be expected to read around the subject and become well informed on contemporary policy issues relevant to the course.

 Indicative study hours:   200

The 2-hour exam is designed to test the ability to solve models covered in the first semester. The final examination (3 hours, 4 questions) will be in two sections: section A will cover topics covered in semester 1, section B topics covered in semester 2.  Students will be required to answer two questions from each section. 

In the first semester the course explores the microeconomic foundations of macroeconomics with a focus on elementary business cycle and growth theory. It starts with an overview of consumption theory and the main economics margins along which we will model behaviour. Then it develops the labour-leisure margin, the intertemporal substitution margin, and puts the two together in the standard dynamic model. Policy applications are developed along the way.  In the second semester, the course will examine empirical and theoretical models of monetary and fiscal policy with a particular emphasis on new Keynesian models.  It will explore the theoretical and empirical analysis of nominal rigidities, involuntary unemployment, fiscal policy issues (debt and sustainability, Ricardian equivalence, the operation of the Euro and resultant problems), and the application of time-consistency to monetary policy in theory and practice.

 In the first semester, the course will cover only chapters from M. Gillman, Advanced Modern Macroeconomics, 2011.

 In the second semester, the course reading will include chapters from H. Dixon, Surfing economics and a variety of journal articles.