Monetary policy and the credit
crunch
Components
Lecture 13: Monetary policy
and the credit crunch
Reading.
which interest rate does the central
bank control?
the mortgage markets
US sub-prime lending
Narrative
See course website
credit markets
polic
The roles of fiscal policy
- active stabilisation (discretionary policy)
Lecture 14: Fiscal policy
- automatic stabilisers
Reading.
- finance government expenditure in a
sustainable way
Core:
Carlin and Soskice Ch 6, section 1,2,3,5
Blanchard Ch 26
Option
Hyperinflations
Lecture 15: Hyperinflation
Reading.
Core:
Carlin and Soskice Ch 6, section 4
Blanchard Ch 23
Optional:
The realities of modern hyperinflations, Reinhart and
Savastano, IMF
Advanced:
Fischer, Sahay, Vegh, (2002), Modern Hyper- and High
Infl
Where we are
r
Lecture 16: Unemployment
rs
Reading.
Core:
Nickell, Stephen, (1997) Unemployment and Labor Market
Rigidities: Europe versus North. America. Journal of
Economic Perspectives, Summer, Vol. 11, No 3, p55-74
y
Carlin and Soskice Ch 18, section
Why unions?
When the union's inspiration through the workers blood shall run
There can be no power greater anywhere beneath the sun
Yet what force on earth is weaker than the feeble strength of one?
But the union makes us strong
Lecture 17: Unions
Solidar
ECON2004 Macroeconomic Theory and Policy
Lecture 4: The three equation model
Reading: see Moodle
Last lecture
The labour market under perfect
competition.
The labour market under imperfect
competition.
Price setting
Wage setting
Equilibrium output
Wag
ECON2004 Macroeconomic Theory and Policy
Lecture 10: The aftermath of the global financial crisis
Reading: see Moodle
This lecture
The aftermath of the crisis:
Balance sheet recessions
Government debt crises
ECON2004 Macroeconomic Theory and Policy. Lec
ECON2004 Macroeconomic Theory and Policy
Lecture 9: The global financial crisis
Reading: see Moodle
This lecture
The zero-lower bound on
nominal interest rates
Step by step through the crisis and
policy responses using the 3-equation
model.
Background
M
ECON2004 Macroeconomic Theory and Policy
Lecture 7: Fiscal policy
Reading: see Moodle
Demand side policy
Last lecture: monetary policy
This lecture: fiscal policy
The costs of inflation and deflation
automatic stabilisers
Disinflation: theory and pract
ECON2004 Macroeconomic Theory and Policy
Lecture 6: Monetary policy.
Reading: see Moodle
Last lecture
Expectations:
The effectiveness of policy:
Static
Theory
Adaptive
Bolthos test
Rational
Implications for policy
Forecasting in practice
ECON2004 M
Central banking
The number of central banks
Lecture 12: Modern
monetary policy
Reading.
The Great Inflation
Core:
Carlin and Soskice Ch 5, section 2; Ch 3, section 2
Optional:
Bank of Englands Framework for monetary policy
www.bankofengland.co.uk/monetary
The MR curve
r
Lecture 11: Inflation and
disinflation
Reading.
y
Core:
Carlin and Soskice Ch 3, section 1.6
Blanchard sections 9.3 9.5
Optional:
Follow the money, The Economist, Aug 6th
1998
Advanced:
http:/cepa.newschool.edu/het/essays/monetarism/mpolicy
PC
ECON2004 Macro Term 1, Lecture 10: Monetary policy
Advanced:
Carlin and Soskice Ch 5 (all of it!)
t
ye
ECON2004 Macro Term 1, Lecture 10: Monetary policy
MR
MR
PC
2
t
y
t = Et 1 t + Et t +1 + .
t = Et t +1 + ( yt ye )
1
Rational expectations
y
Option
This lecture
a reminder of what macro is all
about
Lecture 1: Introduction
Reading.
overview of the course
how the course is organised
how to use your macro forecasting
skills to win a bottle of champagne
Core:
Blanchard Ch 27
Carlin and Soskice Ch 2
Opti
Why are we doing this?
benchmark
modern modelling
Lecture 2: The Classical
Model
historical development of macro
enduring policy relevance
Reading.
Practical men [sic], who believe themselves to
be quite exempt from any intellectual influence,
are usually
Last lecture: the Classical
Model
Lecture 3: IS-LM
Reading.
Core:
Carlin and Soskice Ch 2, sect 1-4
Williamson Ch 12
Blanchard Ch 3,4,5
A microeconomic model of labour
supply
A microeconomic model of labour
demand
The assumption of flexible prices and
wag
The IS-LM model
Lecture 3a: Using IS-LM
AD
Reading.
Core:
Carlin and Soskice Ch 2, sect 1-4, Ch3 sect 2
Williamson Ch 12
Blanchard Ch 3,4,5
r
r
Y
Optional:
Advanced:
Leijonhufvud: What was the matter with ISLM
Krugman, Thinking about the liquidity
trap.
M
What was missing from IS-LM?
Reading.
what about expectations?
Lecture 4: Consumption
underlying relations are ad-hoc
how do prices adjust?
Core:
Carlin and Soskice 7.1
Blanchard 16.1
Optional:
Blanchard 16.1 How much do expectations matter?
Advanced:
Car
What was missing from IS-LM?
Reading.
what about expectations?
Lecture 5: Investment
underlying relations are ad-hoc
how do prices adjust
Core:
Carlin and Soskice Ch 7, section 2
Williamson Ch 9
Blanchard Ch 16.2
Optional:
Cliffhanger on Wall Street from
New classical economics
That the predictions of Keynesian economics were
wildly incorrect and that the doctrine on which they were
based was fundamentally flawed, are now simply matters
of fact, involving no subtleties of economic theory. The
task which f
ECON2004 Macroeconomic Theory and Policy
Lecture 8: Finance and the macroeconomy
Reading: see Moodle
Finance and the model
Demand:
ECON2004 Macroeconomic Theory and Policy. Lecture 8
Supply:
Slide 1
Finance and the model
Policy:
ECON2004 Macroeconomic The