Macroeconomics 1e

Graeme Chamberlin, Office of National Statistics Linda Yueh, Oxford University 582pp Published by Cengage Learning EMEA, ©2006 Available Now £47.99

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Macroeconomics is a general textbook in macroeconomics and provides examples from a wide international context. It therefore by necessity covers both standard introductory macroeconomic topics and also the latest concepts arising from study of this international context. Examples in the book that require mature economies relate to Europe and the U.S., upon which much of standard macroeconomic theory is based. Amongst others, issues spanning the U.S. ‘twin deficits,’ the euro and European economic and monetary union are treated. Macroeconomics also covers the changing international economic order, including the WTO, the growth model of Latin America in contrast to East Asia, the transition of China and other recently marketised economies. It also examines the financial crises of the past two decades that have fundamentally overhauled theories surrounding liquidity crises, exchange rates and structural reforms related to liberalisation.

Macroeconomics is suitable for several different levels of teaching. The first is a mode that requires review of some concepts normally covered in principles courses, such as the determinants of national income. This is to enable students with a less comprehensive background to access the required material in one text. The second is a standard intermediate treatment of macroeconomics, starting with a detailed derivation of the Keynesian Cross and components of aggregate demand, which leads to the general equilibrium models of IS-LM and AS-AD and the external sector. Finally, the textbook is suitable for more advanced teaching of macroeconomics: the standard models are followed by rigorous treatment of international policy coordination, financial crises, long-run economic growth and even development and transition economics.

Preface and Walk Through Tour

PART I - DEFINING THE MACROECONOMY

Chapter 1 Macroeconomics and the Circular Flow of Income
1.1 Introduction
1.2 The circular flow of income
1.3 National income accounting and the circular flow of income
1.4 Macroeconomic modelling and the circular flow of income


PART II - THE REAL MACROECONOMY

Chapter 2 Consumption
2.1 Introduction
2.2 Theories of consumption behaviour
2.3 The Keynesian consumption function
2.4 The permanent income and life cycle hypotheses
2.5 Explaining consumption patterns

Chapter 3 Investment
3.1 Introduction
3.2 Theories of fixed business investment
3.2.1 Optimal capital stock model
3.2.2Tobins q
3.3 Inventory investment
3.4 Residential investment
3.5 Credit rationing and investment

Chapter 4 Government Spending, Taxation, and Debt
4.1 Introduction
4.2 Deficits and debts
4.3 Fiscal policy and national income
4.4 Keynesian cross model
4.5 The Ricardian model: fiscal policy with forward-looking consumers


PART III—MONEY

Chapter 5 The Money Market
5.1 Introduction
5.2 What is money?
5.3 Monetary aggregates
5.4 The bond market
5.5 Determining the interest rate
5.5.1 The demand for money
5.5.2 Money supply
5.5.3 Equilibrium in the money market
5.6 The term structure of interest rates: yield curves
5.7 Monetary policy: money supply or interest rate?

Chapter 6 Financial Markets
6.1 Introduction
6.2 Efficient markets: asset pricing models
6.2.1 Expected dividend model
6.2.2 Uncertainty and the Capital Asset Pricing Model (CAPM)
6.3 Portfolio selection: Tobin model
6.4 Financial market volatility: efficient and inefficient markets
6.5 Bubbles and crashes in financial markets


PART IV—MODELS OF THE ECONOMY

Chapter 7 The IS-LM Model
7.1 Introduction
7.2 The IS curve: equilibrium in the goods market
7.3 The LM curve: equilibrium in the money market
7.4 General equilibrium: the IS-LM model
7.5 Comparative statics
7.5.1 Fiscal policy
7.5.2 Monetary policy
7.6 What policy do we use? Keynesians versus Classicists
7.7 The Neoclassical IS-LM model

Chapter 8 The AD-AS Model
8.1 Introduction
8.2 The aggregate demand schedule
8.3 The aggregate supply schedule
8.3.1 Long run aggregate supply
8.3.2 Short run aggregate supply
8.4 Equilibrium in the AD-AS model
8.5 Comparative statics
8.5.1 Aggregate demand shocks
8..5.2 Aggregate supply shocks
8.6 Hysteresis and the medium run


PART V - SHORT-RUN FLUCTUATIONS AND STABILIZATION

Chapter 9 Business Cycles and Stabilization Policy
9.1 Introduction
9.2 Economic cycles
9.3 Real business cycles
9.4 New Keynesian theories of fluctuations
9.4.1 Wage rigidities
9.4.2 Price rigidities
9.5 Stabilisation policy

Chapter 10 Unemployment, Inflation and Monetary Policy
10.1 Introduction
10.2 The Phillips curve
10.3 Theories of unemployment
10.4 Costs and benefits of inflation
10.5 Policy choices: preferences between unemployment and inflation
10.6 Expectations augmented Phillips curve
10.6.1 Long run Phillips curve
10.6.2 Processes of expectations formation
10.6.3 Policy neutrality
10.6.4 Hysteresis
10.7 Monetary Policy
10.7.1 Monetary policy and inflation
10.7.2 The time inconsistency problem and central bank independence
10.7.3 Seignorage and hyper-inflation


PART VI - THE OPEN ECONOMY

Chapter 11 The Balance of Payments and Exchange Rates
11.1 Introduction
11.2 The balance of payments
11.3 Exchange rates
11.4 Theories of exchange rate determination
11.4.1 PPP: Purchasing Power Parity
11.4.2 UIP: Uncovered Interest Parity
11.4.3 Dornbusch model of exchange rate overshooting
11.5 Interaction of exchange rates and the balance of payments

Chapter 12 IS-LM-BP Model
12.1 Introduction
12.2 Constructing the IS-LM-BP model
12.2.1 The open economy IS curve (the ISXM schedule)
12.2.2 The BP curve
12.2.3 The open economy LM curve
12.2.4 Exchange rate regimes
12.2.5 Equilibrium in the IS-LM-BP model
12.2 Comparative statics
12.3 Mundell-Fleming model

Chapter 13 Aggregate demand and aggregate demand in the open economy
13.1 Introduction
13.2 The AD-CCE-BT (Salter-Swan) model
13.2.1 Competitiveness and the trade balance
13.2.2 Aggregate demand and competitiveness
13.2.3 The NAIRU and long run aggregate supply in the open economy
13.2.4 The trade balance and the sustainable level of output
13.2.5 Equilibrium in the Salter-Swan model
13.3 Achieving a target level of output


PART VII - INTERNATIONAL FINANCIAL ARCHITECTURE
Chapter 14 Exchange Rate Regimes and International Policy Coordination
14.1 Introduction
14.2 The choice of exchange rate regime
14.3 International policy coordination
14.4 Optimal Currency Areas (OCA)
14.4.1 Is Europe an OCA?
14.4.2 Should the UK join the Euro?

Chapter 15 International Financial Markets and Currency Crises
15.1 Introduction
15.2 The internationalisation of financial markets
15.3 Currency crises
15.3.1 First generation models: Latin America, 1981-82
15.3.2 Second generation models: ERM, 1992; Mexico, 1994-95
15.3.3 Third generation models: Asian financial crises, 1997-98
15.4 Preventing currency crises


PART VIII - ECONOMIC GROWTH IN THE LONG-RUN
16.1 Introduction
16.2 Neoclassical Model of Growth
16.2.1 The Solow Model
16.2.2 The Solow Model with Technology
16.2.3 Long-run Growth in the Solow model
16.2.4 The Convergence Hypothesis
16.3 Growth Models with Human Capital
16.4 Endogenous Growth Theories
16.4.1 The AK Model
16.4.2 The Romer Model
16.4.3 Evidence of Growth
16.4.4 Evaluation of Endogenous Growth Theories

Glossary
Index

Bibliographic information

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Graeme Chamberlin


Linda Yueh