Description
Book SynopsisMacroeconomics is the application of economic theory to the study of the economy’s growth, cycle and price-level determination. Macroeconomics takes account of stylized facts observed in the real world and builds theoretical frameworks to explain such facts. Economic growth is a stylized fact of market economies, since England’s nineteenth-century industrial revolution. Until then, poverty was a common good for humanity. Economic growth consists in the persistent, smooth and sustained increase of per-capita income. A market economy shows periods of expanding and contracting economic activity. This phenomenon is the economic cycle. The price of money is the amount of goods bought with one unit of money, in other words, the inverse of the price level. Determination of the price level, or the value of money, is a fascinating subject in a fiat money economy.
Table of ContentsIntroduction.- 1. Macroeconomics.- 2. Mathematical Tool: Dynamical Systems.- 3. Book Layout.- Part I: Models with Flexible Prices.- Chapter 1 - The Representative Agent Model.- 1. Basic Model.- 2. Economy with a Government.- 3. Monetary Economy.- 3.1 Monetary Policy Rule: Money Stock Control.- 3.2 Monetary Policy Rule: Nominal Interest Rate Control.- 4. Real Business Cycles.- 5. Exercises.- Chapter 2 - The Open-Economy Representative Agent Model.- 1. Goods Aggregation.- 2. Constant Rate of Time Preference.- 3. Variable Rate of Time Preference.- 3. Interest Rate Risk Premium.- 4. The New Keynesian IS Curve.- 5. Exercises.- Chapter 3 - Overlapping Generations.- 1. Infinite-Live Overlapping Generations.- 2. Economy with a Government.- 3. Open Economy.- 4. Open Economy New Keynesian IS Curve.- 5. Finite-Lice Overlapping Generations.- 6. Exercises.- Chapter 4 - The Solow Growth Model.- 1. The Solow Model.- 2. The Solow Model with Human Capital.- 3. The Solow Model in the Small Open Economy.- 4. Growth Accounting.- 5. Exercises.- Chapter 5 - Economic Growth: Endogenous Savings and Growth.- 1. The Ramsey-Cass-Koopmans Model.- 2. Overlapping Generations Model.- 3. Endogenous Growth Models: An Introduction.- 4. The AK Model.- 5. The Acemoglu-Ventura AK Model of an Open Economy.- 6. The Lucas Human Capital Model.- 7. Romer’s Varieties of Inputs Model.- 8. Aghion and Howit’s Schumpeterian Model.- 9. Exercises.- Part II: Models with Sticky Prices.- Chapter 6 - Keynesian Models: The IS and LM Curves, the Taylor Rule, and the Phillips Curve.- 1. The Keynesian IS Curve.- 2. The New Keynesian IS Curve.- 2.1. Consumer Preferences.- 2.2. Consumer Equilibrium: The Euler Equation.- 2.3. The New Keynesian IS Curve: Discrete Variables.- 2.4. New Keynesian IS Curve: Continuous Variables.- 3. Natural Interest Rate.- 4. The LM Curve.- 5. The LM Curve: Microfoundations.- 5.1. Money in the Utility Function (MIU).- 5.2. Cash in Advance Constraint (CIA).- 5.3. Transaction Cost.- 6. The Taylor Rule.- 7. The Phillips Curve.- 8. The New Keynesian Phillips Curve.- 9. Exercises.- Chapter 7 - Economic Fluctuation and Stabilization.- 1. Keynesian Model: Inflation Inertia.- 2. Keynesian Model: No Inflation Inertia.- 3. New Keynesian Model.- 4. Encompassing Keynesian Model.- 5. Friedman’s Model.- 6. Exercises.- Chapter 8 - Open Economy Macroeconomics.- 1. Arbitrage Pricing of Goods and Services.- 1.1. Absolute Purchasing Power Parity.- 1.2. Relative Purchasing Power Parity.- 1.3. Tradable and Non-Tradable Goods.- 1.4. Terms of Trade and Real Exchange Rate.- 2. Interest Rate Arbitrage.- 2.1. Uncovered Interest Rate Parity.- 2.2. Exchange Rate Determination.- 2.3 Covered Interest Rate Parity.- 2. 4. Uncovered Real Interest Rate Parity.- 3. The Marshall-Lerner Condition.- 4. Open Economy IS Curve.- 4.1 Keynesian IS Curve.- 4.2. New Keynesian IS Curve.- 5. Natural Exchange Rate.- 6. Open Economy Taylor Rule.- 7. Open Economy Phillips Curve.- 7.1 Keynesian Phillips Curve.- 7.2 New Keynesian Phillips Curve.- 8. Exercises.- Chapter 9 - Economic Fluctuation and Stabilization in an Open Economy.- 1. Mundell-Fleming-Dornbusch Model: Fixed Exchange Rate.- 2. Extended Mundell-Fleming-Dornbusch Model: Fixed Exchange Rate.- 3. New Keynesian Model: Fixed Exchange Rate.- 4. Mundell-Fleming-Dornbusch Model: Flexible Exchange Rate.- 5. Extended Mundell-Fleming-Dornbusch Model: Flexible Exchange Rate.- 6. New Keynesian Model: Flexible Exchange Rate.- 7. Exercises.- Part III: Models of Monetary and Fiscal Policies.- Chapter 10 - The Government Budget Constraint.- 1. Treasury and Central Bank Accounts Consolidation.- 2. 2. Public Debt Sustainability.- 2.1. Constant Primary Deficit (Surplus).- 2.2. Variable Primary Deficit (Surplus).- 3. Inflation Tax.- 4. Hyperinflation.- 4.1. Bubble.- 4.2. Multiple Equilibria.- 4.3. Fiscal Crisis and Rigidity.- 4.4. Intertemporal Approach: Fiscal Crisis and Rational Expectations.- 5. Ricardian Equivalence.- 6. Fiscal Theory of the Price Level.- 7. Sustainable Monetary Regime.- 8. Exercises.- Chapter 11 - Monetary Theory and Policy.- 1. Price of Money.- 1.1 Bubbles vs. Fundamentals.- 1.2 Multiple Equilibria.- 1.3 Indeterminacy.- 2. Optimum Quantity of Money.- 3. Zero Lower-Bound Nominal Interest Rate.- 4. Dynamic Inconsistency.- 5. Interest Rate Smoothing.- 5.1 Keynesian Model.- 7.2 New Keynesian Model.- 6. Inflation Targeting.- 7. Operational Monetary Policy Procedures.- 8. The Term Structure of Interest Rates.- 9. Exercises.- Part IV: Mathematical Appendix.- Appendix A - Differential Equations.- 1. First-Order Linear Differential Equation.- 2. Second-Order Linear Differential Equation.- 3. First-Order Linear Differential Equations System.- 4. Linear System of n First-Order Differential Equations.- 5. Initial and Terminal Conditions of the Differential Equations System’s Solution.- 6. Hysteresis.- 7. Exercises.- Appendix B - Optimal Control Theory.- 1. Optimal Control: Basic Problem.- 2. Hamiltonian and Transversality Condition.- 3. Optimal Control with a Discount Rate and Infinite Horizon.- 4. Linear Optimal Control.- 5. Comparative Dynamics.- 5.1 Permanent Change: Unanticipated vs. Anticipated.- 5.2 Transitory Change: Unanticipated vs. Anticipated.- 6. Exercises.- Appendix C - Finite Differences Equations.- 1. First-Order Finite Differences Equation.- 2. Forward- and Backward-Looking Models.- 3. Keynesian Model.- 4. New Keynesian Model.- 5. Encompassing Keynesian Model.- 6. Hybrid Models.- 7. Hybrid New Keynesian Model.- 8 Exercises
