ECON 503 Applied Macroeconomics


Contact Information
Dr. Brian Goff/414 Grise Hall
Phone: 745-3855 / Email:
Office Hours:  
(I am in my office or on campus most days from around 8-4 except around noon)

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).

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.

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



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 TutorGapminder Econ GraphicsIMF World GDP MapGDP 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; MilkenFraser 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 SummaryISLM Interactive Tutor
                                Mudell Fleming ISLM Version or TutorRBC 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 EstimatesFriedman 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) 

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 pptUnderstanding 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 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 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 15 (Dec 9)  Exam 2

Week 16  Exam 2  




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 AppendixForecast 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 RisesRecession 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,,2172243,00.html
The Effectiveness of Monetary Policy -- (lots of graphs; read beginning of each section closely, skim the rest) (StL Fed Sept 2007) 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