ECON 503 Applied
Macroeconomics
COURSE POLICIES
Contact Information
Dr. Brian Goff/414 Grise
Hall
Phone: 745-3855 / Email: brian.goff@wku.edu
Office
Hours:
(I am in my office or on campus most days from around 8-4
except around noon)
Materials
See posted links to readings in Course Outline
Economics
Internet Library;
Gretl
(econometric software available in both Windows & Mac formats)
(There
is no required text; If you would like a reference book, here are two
suggestions: Macroeconomics:
A Modern Approach by Barro is an up-to-date, upper or masters level book
that is very useful but expensive; Schaum's
Outline in Macroeconomics is straightforward and inexpensive but is
somewhat antiquated in its approach and topical coverage).
Grading
Reading
Quizzes
10%
Brief Reports/Empirical
Assignments
20%
Presentation 20%
Exam 1
25%
Exam 2
25%
(A >= 90%; B= 80-89; C=70-79; D=60-69; F < 60)
Reading
Quizzes: Short answer or multiple choice quizzes at the beginning
of each class over assigned radings
Emprical Assignments: Completing
macroeconometric tasks using Gretl
Presentation: 10-minute power-point presentation on key
topic in supplemental readings or preliminary empirical
investigation
Exams: These will be a midterm and final
exam that are comprised of short answer and mutliple choice questions on key
points.
Miscellaneous
Last day
to drop course with a "W" or change from credit to audit is listed on WKU's
Academic Calendar. Any students requiring special consideration under
the provisions of the ADA should register with the ADA Compliance Office first
and then consult with me as soon as possible. If you are not fluent in
English or are weak in your writing abilities, you should utilize a writing
"consultant" to examine your written reports before turning them in. The
WKU Writing Center is one option. Undergraduate students willing to offer
tutorial services (for a fee or free) are another.
Attendance/Missed Assignments
The
combination of students with job responsibilities and a course which only meets
once per week can present problems. The policy below attempts to strike a
balance of accommodation while maintaining legitimate standards. Under special
circumstances and my approval discussed in advance, one assignment may be missed
and the other assignments/final weighted more heavily contingent upon my
approval of the reason. Failure to complete more than two assignments or absence
from more than 2 full sessions (or equivalent) will result in a student being
dropped from the course regardless of the reason.
Data Resources:
US Data
International Data
Informative Macro Blogs
COURSE
OUTLINE & LINKS
Objectives
1. Awareness of about
current/past macro measures
2. Understanding of macro outlooks/forecasting
3. Understanding of analytical models in macro and their
development/debates
4. Understanding of computational/statistical methods in
macro
Macroeconomics is an eclectic subject. It is partly about
trying to measure where the economy has been, currently is, and maybe
going. It is also partly about coming up with explanations of aggregate
outcomes and testing these explanations. Part of macro is almost purely
statistical in nature with little theory. Part of it is application of
theoretical ideas from microeconomics. Part of it is deals more with
aggregate level explanations not directly tied to microeconomic models.
Part of it is explaining outcomes in particular sectors. My objective this
semester is to provide you with some exposure to various aspects of macro.
Week 1 (Sept 1) Macro
Overview: Current Conditions, Data Sources, & Measurement
Empirical Assignment
1: Manipulating Basic Macro Data (Data file = macroqtr)
For
Next Week:
Brief Report 1: Measaurement
Issues (Summarize one of the following articles in one
single-spaced page or less)
Declines
in the U.S. Personal Saving Rate: Is it Real and Is it a Puzzle (STL
Fed, Nov 2007); Housing and
Inflation Measurement (Vox-Cecchitti);
An
Alternative Measure of Inflation (Chicago Fed Q1, 2006) A Guide to
Aggregate Measures of Housing Prices (KC Fed Q2, 2007)
Survey
Measures of Expected Inflation (Richmond Fed Summer, 2002); Personal
Saving Behavior and Real Economic Activity (Richmond Fed, Spring 1993)
The Relationship
Between Capacity Utilization and Inflation -- (Philadelphia Fed Q2,
2005); Macro Saving Calcualtions Excel
File;
Financial
Stress: What is Is, How it can be measured, and Why does it matter?
(KC Fed 2nd QTR 2009);
Two
Approaches to Macroeconomic Forecasting (Richmond Fed Summer,
1999)
Supplements: The
Macroeconomist as Scientist and Engineer (Mankiw JEP Fall, 2006
-- Draft
Version);
Macro and
Macro-Finance Nobel Laureates (Hicks; Friedman; Tobin; Modigliani,
Solow, Lucas, Mundell, Kydland-Prescott,
Phelps)
Marginal
Revolution: Common Mistakes by Economists
Week 2
(Sept 8) Basic Long Run Growth Models
& Applications
Reading Quiz: Why Do Americans
Work So Much More than Europeans -- (Minneapolis Fed July,
2004);
For Next Week:
Empirical Assignment 2
-- Manipulating the Prescott Model (Gretl Script file
= prescott
growth.inp)
Brief
Report 2: Blog topic (Summarize an article from one of the
blogs listed above in one, single-spaced page or less)
Supplements: Solow Model
Interactive Tutor; Gapminder
Econ Graphics; IMF
World GDP Map; GDP
per Capita by Country;
Week 3
(Sept 15) Long Run Growth Topics &
Empirics
Reading Quiz: Determinants of Growth (Barro
NBER 1996)
For Next Week:
Brief
Report 3: U.S. Business Cycle Facts (Using the following links,
summarize the history of U.S. recessions and expansions NBER Dating Committee & NBER Business Cycle
Contractions & Expansions)
Supplements: Unbundling
Institutions (Acemoglu JPE early version); Reversal of Fortunes (Acemoglu
NBER); Business
Cycles v. Long Term Growth (Minneapolis Fed June, 2003);
Productivity
of Nations (Richmond Fed, Summer 2006); Democracy
and Growth (Barro J of Econ Growth 1996); Institutions and
Growth (Acemoglu NBER 2004); Pop Changes and Stock
Markets:
Siegel; Milken;
Fraser Institute Index of
Econ Freedom;
Week 4
(Sept 22) Short Run Models
Reading Quiz: Robert Lucas:
Architect of Modern Macroeconomics (Minn Fed Spring, 1999)
For
Next Week:
Empirical Assignment 3
-- Trends, Cycles, and Random Walks (Data file = macroqtr)
Supplementals: Summary of Macro
Models; What
are Business Cycles? (STL Fed July-Aug 2005); From
Cycles to Shocks (Phil Fed 2000); Monetary
Policy in the New Neoclassical Synthesis (Richmond Fed 2004, pp.
21-36)
Theory
Ahead of Business Cycle Measurement and Response
to a Skeptic (Minn Fed 1986); FRB/US
Model Summary; ISLM Interactive
Tutor;
Mudell
Fleming ISLM Version or Tutor; RBC
Interactive Tutor;
Week 5 (Sept 29) Short Run
Topics
Reading
Quiz: Macro
Effects of Government Purchases and Taxes (Barro Feb
2010);
Supplements: Simple Analytics and Empirics of GS
Multipliers (Mulligan NBER 2010); Barro Macro Data Sets ; Housing
and the Great Recession (Richmond Fed
2011);
What
a New Set of Indexes Tell Us about State and National Business Cycles 14
(Philadelphia Fed Q1, 2006); Oil
Price Volatility and U.S. Macroeconomic Activity (StL Fed Nov
2005)
Oil:
It's Still the One (Foreign Policy); Econ
Effects of Energy Price Shocks (VARs for Oil Shocks JEL Dec
2008);
VARs
for Home Price Effects (StL Fed 2007); House
Price Impulse Response Functions (STL fed conference); Modern
Macro in Practice
(Minn Fed 2006)
Example of Shock VARs (Excel
File) ; John
Taylor Stimulus History;
Week 6 (Oct 6)
FALL BREAK
Week 7 (Oct 13) EXAM 1
Week 8 (Oct 20) Fed/Monetary Policy --
Phillips Curve & Taylor Rule
Reading Quiz: Layperson's
Guide to Phillips Curve (Richmond Fed, Summer 2007); The
Taylor Rule: Is It a Useful Guide for Understanding Monetary Policy
(Richmond Fed Spring, 2000);
For Next Week:
Brief
Report 4: Wiki Entry on Quantity
Theory of Money
Empirical Assignment
4: Taylor Rule Estimates (Data file = macroannual
and Irates Monthly
) you have 2 weeks to do this
Supplements: (32nd
Annual St. Louis Fed Conference) Inflation
Measure & Taylor Rule (Richmond Fed Fall 2010); Phillips
Curve and Macro Policy Snapshots, 1958-1996 (Richmond Fed, Fall 2008)
Monetary
Policy in Volker-Greenspan Era (Richmond Fed, Spring 2008)
; Taylor Rule Estimates; Friedman
and Taylor on Monetary Policy Rules (STL Fed March
2008);
Are Phillips
Curves Useful for Forecasting Inflations (Minn Fed 2001);
Week 9 (Oct 27) New Issues in Monetary (& Fiscal)
Policy
Reading Quiz: Monetary
& Fiscal Policy in Current Crisis (Cochrane Chicago
Business School - Princeton Presentation); Simplified,
Newspaper Length Version;
For Next Week:
Brief Report 5:
Predicting Debt Crisis (Manassee
& Roubini)
Supplements: Cochrane
on Fiscal Fallacies;
Week 10 (Nov 3) Debt/Deficits
Reading Quiz: Ricardian
Approach to Budget Deficits (Barro JEP 1989)
For Next Week:
Empirical
Assignment 5: Interest Rate
VARs (Data file = Irates
Monthly )
Supplements: Debt,
Deficits, and Looming Disaster (STL Fed 2009);
On the
Needed Qty Govt Debt (MN Fed 2007); Deficits (Journal of Economic Literature 1993 go
through WKU EJournals);
Do Countries Default in Bad Times (SF Fed 2007); CMA Sovreign
Risk Reports ; Sustainability of U.S. Debt (Goff
&
Kim)
Economics
of Sovereign Defaults (Richmond Fed 2007) ;
Fed Debt Simulations;
Week 11 (Nov
10) Interest Rates
Reading Quiz: Interest Rates; Rate basics
ppt; Rate
influences ppt; Understanding the Term Structure of Interest
Rates (William Poole StL Fed Sept-Oct,
2005)
Supplements: STL Monetary Trends;
Excel File on Interest Rate graphs,
regressions, data ; Fed & Rates ppt; Offsetting
& Predicting Rates ppt;
Excel File on Forward Rates & Yield
Curve The
Effectiveness of Monetary Policy Bankrate.com
Fedwatch
Using
Fed Fund Futures to Predict Monetary Policy -- 9
(Richmond Fed Spring, 2001); Macroeconomic
News and Real Interest Rates (StL Fed March-April,
2006)
The
Rise in Personal Bankruptcies -- (StL Fed Jan-Feb,
2007)
Week 12 (Nov17) Asset Prices
& Macroeconomy
Reading Quiz: Stock Market Crashes and Depressions (Barro 2009) : Rare Disasters and Stock Crashes
(Barro 2005)
Supplements: JEP Symposium on
Financial Crisis; Financial Crisis
Timeline; Goff PowerPoint on 2008 Financial Crisis; Financial Markets & The Real Economy (Cochrane sweeping background but technical);
Too Big To
Fail Conundrum (City Journal)
Financial Stress: What is Is, How it can be measured, and Why does it
matter? (KC Fed 2nd QTR
2009)
Financial Crisis and Fed's Actions as Lender of Last
Resort (Dallas Fed, March
2009)
Week 13 (Nov 24) THANKSGIVING BREAK
Week 14 (Dec 2) Student
Presentations: Conduct a basic empirical research project (I have listed some
ideas below but you may pick one of your own choosing). Prepare a 5-10
minute powerpoint presentation (2-5 slides) to summarize your project. You
may do this alone or in a team with 1 other student.
-- Yield curve slope as predictor of GDP; What explains "jumps" in sovereign debt risk? What explains default risk probability? Did the Fed diverge from a Taylor-type rule during 2002-2005? Based on historical data, what would be relatively high (and low) growth for GDP for a decade and what impact would this have on projected deficits?
Week 16
Exam 2
Misc
Overview of Macro
Forecasts
(For Class; no prior reading necessary) Ray Fair Macro Model
(Site Index & Model
Solving Links; Model
Explanation; U.S. Model
Equations/Variables Appendix; Forecast Record (pick
variable);
Supplemental Reading and Data: ; Simple
VAR Example; Excel File on Interest Rate graphs, regressions,
data
Using
Fed Fund Futures to Predict Monetary Policy -- 9 (Richmond Fed Spring, 2001)
Excel File on Forward
Rates & Yield Curve;
How
Did Leading Indicators Perform During 2001 Recession? (Richmond Fed, Summer
2003);
International Trade &
FX
Why are FX Rates So
Hard to Predict? Dallas Fed Econ Letter June 2008 or FX
Rate Conundrum -- Richmond Fed Fed Region Focus Winter
2006
Supplemental Reading: FX Graphs; International
Pricing in New Open-Economy Models (Richmond Fed 2001);
NY Fed on Foreign
Exchange Market
Rational
Speculation and FX Rates (JME 2005) ; Econbrowser
on FX & Commodity Prices;
How
Did Leading Indicators Perform During 2001 Recession? (Richmond Fed, Summer
2003);
;
Inflation rates, lag structure, and capacity utilization
Interest
rates and VARs
KCSFI as predictor of GDP growth
Generating Forecast wtih
Fair Model
Long Run Growth & Demographics
After the Baby Boom:
Population Trends and the Labor Force of the Future -- 14 (Philadelphia Fed
Q4, 2005)
Supplemental Readings: Why are Married Women
Working More: Some Macroeconomic Explanations -- 10 (Philadelphia Fed Q4,
2004):
Work and
Taxes: Allocation of Time in OECD Countries -- (KC Fed 3rd Quarter
2007);
Exchange
Rates and Business Cycles Across Countries --20(Richmod Fed Winter,
2007)
What
We Don't Know Could Hurt Us: Reflections on the Measurement of Economic
Activity -- 16 (Journal of Economic Perspectives Summer, 2005)
Manufacturing
Jobs Increasingly Undercounted (Chicago Fed March,
2007)
Econbrowser on Recession
Probability Rises & Recession
Probability Index
NBER & Recession Dating --see econbrowser:
Are
U.S. and 7th District Business Cycles Alike? -- (Chicago Fed Q3,
2006)
Excel File on Prices (graphs, regressions,
data)
The
Macroeconomics of Oil Shocks -- (Philadelphia Fed Q1, 2007)
Energy
Markets and the Midwest Economy -- 13 (Chicago Fed Q4, 2005)
Recent
Trends in Home Ownership -- (StL Fed Sept-Oct, 2006)
Hamilton
Jackson Hole Comments
Holman Jenkins on Subrime Problem: Overdone? Payback
The SubPrime Market Problems & Liquidity Crises -- Econbrowser
(What is a Liquidity Event?)
Subprime Mess Involved
German Bank
http://business.guardian.co.uk/markets/story/0,,2172243,00.html
The
Effectiveness of Monetary Policy -- (lots of graphs; read beginning of each
section closely, skim the rest) (StL Fed Sept 2007)
Bankrate.com
Fedwatch
Using
Fed Fund Futures to Predict Monetary Policy -- 9 (Richmond Fed Spring,
2001)
Understanding
the Term Structure of Interest Rates -- 8 (William Poole StL Fed Sept-Oct,
2005)
Macroeconomic
News and Real Interest Rates -- (StL Fed March-April, 2006)
The
Rise in Personal Bankruptcies -- (StL Fed Jan-Feb, 2007)
Excel File on Interest Rate graphs, regressions,
data
Excel File on Forward Rates & Yield
Curve
On
the Size and Growth of Government -- (StL Fed Jan-Feb, 2006)
Debt Graphs
Considering
the Capital Account -- (StL Fed -- Nov 2004)
A
Perspective on US Capital Flows -- (StL Fed -- 2004)
The
Increasing Importance of Proximity for Exports from U.S. States -- (StL Fed
Nov-Dec, 2004)
Exchange
Rates and Business Cycles (Richmond Fed, Winter 2007)
Higly Technical
Readings: Common
Risk Factors in Currency Markets -- UCLA Working Paper 2008; Asset Prices &
Current Account -- STL Fed
