Business 33040: Macroeconomics
Professor Erik Hurst
Office: HPC 378 Spring 2009
email: phone: (773) 834 – 4073
Office Hours: By Appointment (available to answer questions via email).
Course Materials: (1) A course packet of readings which are not online (Required)
(2) A subscription to the Economist (Required)
(3) A course packet containing typed course notes from me (Required – if so desired, can download for free from my website.)
(3) Text: Abel, Bernanke and Croushore, Macroeconomics, Addison Wesley, 6th edition, 2007. (Optional)
Course Objective:
This course is designed to provide students with a unified framework that can be used to analyze macroeconomic issues such as growth, inflation, budget deficits, recessions, productivity, interest rates, monetary and fiscal policy, and foreign trade imbalances. In the class, we will develop analytical models that stress the microeconomic underpinnings of aggregate outcomes, and we will apply the models to the experience of the United States and other countries. We will then use these models and empirical evidence to address prominent issues related to macroeconomic performance.
A Note on Course Materials
The bulk of course materials will come from three sources: the lectures, the supplemental course notes, and the course readings. The supplemental notes (found in a course pack or posted on my web page) are my version of a text book. All of these notes were written by me based upon my lectures for this course. Most students find these notes to be extremely helpful in reviewing course material. The lectures of the course will describe important empirical regularities about the macroeconomy in order to help identify key questions, to guide model-building efforts, to evaluate the usefulness of the economic models, and/or to provide perspective on major economic developments. Much, but not all, of the material from in-class lectures will be posted as ‘lecture notes’ – approximately two-four days before I give the lecture. These notes can be downloaded prior to class. These notes will give a solid framework for the lectures, but are by no means a substitute for the lecture.
A Note on Course Materials (continued)
The course readings come in two forms. About 20% of the readings are found in a course pack. These readings come from a variety of sources. The remaining readings come from the Economist. It is much more cost efficient for you to buy a subscription to the economist to access these readings online then for me to include the readings in the course pack (the copy-write fees on these articles far exceed the subscription to the Economist). If you do not want to buy a subscription to the Economist, you can use Booth’s subscription. See my course web page for how to access Booth’s subscription. After each lecture, I will indicate which readings to focus on for the following week. I expect you to have completed the pre-course readings prior to week 1. Like the lecture notes, the course pack readings are not a substitute for the lectures. The readings from the course pack are fair game for all subsequent quizzes or exams.
Note: The Abel and Bernanke text book assigned for this class is only optional (but it is recommended). Many students succeed without buying the text. Likewise, many students find the text extremely helpful. I will leave it to you to see what works best for you. I have marked the appropriate readings from the text on the course reading list.
Extra Course Section
Given the current economic climate, I am finding it too difficult to cover all the relevant material in a standard 10 week course. For that reason, I have decided to add one additional lecture (with the approval of the Dean’s office). This extra session is mandatory and all information covered in this extra session will be fair game for exams and quizzes. I will offer the extra session during the third week of the quarter. I will offer two times for the additional section: The first will be Friday April 17th from 5:00 – 8:00 p.m. (in Hyde Park). This session will be for the campus sections. The second will be Saturday April 18th from 9 – 12 (at Gleacher). This session will be for the evening section. For those that have a course conflict, the dean’s office has agree to tape this lecture (and this lecture only) for distribution on the web. If these constraints propose a challenge to you, you should not take my course at this time.
How to Succeed in the Course
To succeed is simple: Come to class, follow the lectures and do all the readings. I want to stress the importance of understanding the material in the Supplemental Course Notes (the notes written by me – I wrote those notes and I write the quizzes and exams – you should see a correlation between the material I think is important enough for me to write a set of notes on and the material I think is important enough for me to test you on).
Weekly Quizzes:
I am teaching 3 sections this term. My two campus sections meet on Tuesday and Thursday mornings. My downtown section meets only on Tuesday evening at Gleacher. Each Tuesday (starting in week 2, excluding the week of the midterm), I will give a short 10-15 minute quiz covering the material from the previous week - including the readings. I will drop your lowest 2 quiz grades (no additional exceptions – I will only drop 2 quizzes.). Quizzes will always take place at the BEGINNING of class.
Course Grade (and grading policies):
30% Quizzes
70% Midterm and Final (Midterm counts once, final counts twice - take the highest two of those three grades and count 35% each - ie, the lowest of those three grades is dropped).
The first midterm will occur during week 5 and will last about 1 hour and 45 minutes. Like the quizzes, the midterm will take place on Tuesday (April 28, 2009). NOTE: the exam time for all students (both campus and evening) will be 1 hour and 45 minutes. For the campus students, the exam times will be 8:15 am – 10:00 am (for the 8:30 – 9:50 section) or 10:10 pm – 11:50 pm (for the 10:10 – 11:30 section). That is, campus classes will have their regular section class extended by twenty five minutes on April 28th.. If you cannot make these exam times and you want to take the midterm, you should not take my class. No alternate arrangements will be made.
Given my grading system above, you need not take the midterm (i.e., the midterm is optional). If you do not take the midterm, 70% of your course grade will be applied to the final. But, I strongly suggest you take the midterm and take it seriously. The midterm is easier than the final. That is my goal. I do not normalize the means of the midterm and final when computing the course average. I want to reward those who take the midterm and take the midterm seriously. If, for some reason (extreme medical emergency, death in the family) you cannot make the final exam, contact me in advance of the exam. For those who have an emergency and contact me in advance, you will be given a grade of an incomplete. For those who do not contact me in advance, you will fail the course. Those who receive an incomplete can sit the final exam the next time I teach this macro class (likely, although not guaranteed, winter 2010). I will then assign a course grade based on your midterm and final exam scores. I do not give any make up finals (aside from the caveat below)!
Final
The exam times for the final are set by Booth and not me. Historically, I NEVER offer alternate final times. You must be able to make the final time for one of the three sections if you enroll in my course.
This year, things will be slightly different (only slightly). Given that I am teaching in the spring quarter, I know that some internships start during final’s week. Especially in this economic climate, I am willing to offer some flexibility. If you have an internship starting during final’s week, you will have to email me during week 8 (I will remind you as the course progresses – do not email me earlier!). I will then forward your names to the dean’s office and they will verify your internship situation. For those with valid internships starting during final’s week, I will offer the final on the afternoon of Saturday June 13th in Chicago (at Gleacher). So, if your internship is out of town, you will have to fly back to Chicago on Friday night or Saturday morning to take the final Saturday afternoon. No other exceptions will be made.
Provisional Grades
In order to receive a provisional grade, 1) you MUST take the midterm and 2) you MUST get a grade of at least a C-. If you receive a D or an F on the midterm (which is really hard to do), I will not provide a provisional grade for the course.
Re-Grades
Any Quiz/Exam for which there is a re-grade request must be done within 7 days after I return the exam to you. The request for re-grade MUST be done in writing and attached to the exam when submitting the exam for a re-grade. The request must include a description of what the problem is and why you think the exam should be graded differently. In such cases, I will re-grade the whole exam – not just the question you identified.
Communication
On occasion, I will post email questions from students and my answers to these questions. I will discuss the questions that I think lots of students have. Hopefully, this will be an efficient way to disseminate information and review core material from the course. All student identifiers will be removed when I post the questions.
Note: If you do not want your question posted, you can explicitly state that in any emails you send.
Additionally, I will tend to only answer email questions 2 days a week. We will set these days as the class progresses. Tentatively, I will plan on allocating Monday mornings and Friday afternoons for responding to emails.
Honor Code
Even if not explicitly stated on each test and quiz, the honor code is always in effect. By taking this course, you explicitly pledge your honor that you will not cheat (or help others to cheat) in any way on the quizzes/exams. Any violations will be punished to the greatest extent allowed.
Course Outline/Reading List
The articles listed are required reading. Readings marked with a (*) can be found in the course pack. All other readings can be found in the online version of the Economist (see course web page for information). Below, I list the tentative schedule of topics. This is the order in which we will be covering material in this class. It is tentative in the sense that some lectures are a little longer and may extend into the following class, while others are shorter, meaning I will introduce a new topic during that week’s lecture. After each lecture, I will tell you for which readings you will be responsible.
Topic 0: Getting in the Mood for Macro!
Pre-Course Readings (These are the readings you should do prior to week 1.) Goal: To frame the issues of the course via a few short articles from the popular press. We will explore many of the details of these articles throughout the course.
I. Overview of Macroeconomics
1. Size Does Matter: In Defense of Macroeconomics* (Paul Krugman: 7/9/1998)
2. Baby Sitting the Economy* (Paul Krugman: 8/13/1998)
3. Why Aren’t We All Keynesians Yet?* (Paul Krugman: 8/3/1998)
II. A Brief History of Economic Time: Economic Landscape Late 1990’s-2006 (Historical Expansions in U.S.? The New Economy Fizzles Out? Soft Landings? U.S. Recessions? A Double Dip? Where’s the Jobs? Oil Shocks? Inflation? Housing Bubble Bursts?)
4. How Real is the New Economy? (Economist: 7/24/1999)
5. Soft or Hard (Economist: 4/22/2000)
6. Unwelcome Numbers (Economist: 8/3/2002)
7. Poised for Growth? (Economist: 6/14/2003)
8. Losing its Way (Economist: 8/14/2004)
9. By the Numbers (Economist: 8/13/2005)
10. Gimme Shelter (Economist: 8/26/2006)
11. Stag or 'flation? (Economist: 5/5/2007)
III. The Times They Are a Changin’: U.S./World Economy from 9/11/01 - 10/11/01
12. When the Economy Held Its Breath (Economist: 9/15/2001)
13. How Big a Blow (Economist: 9/22/2001)
IV. 2008 Financial Crisis
14. Wall Street’s Bad Dream (Economist: 9/20/2008)
15. Bad or Worse (search bad worse) (Economist: 10/11/2008)
16. Diamond and Kashyap Primer Erik’s web page
VI. The (New) Link Between Governments and Markets
17. When Fortune Frowned (Economist: 10/11/2008)
18. Taming the Beast (Economist: 10/11/2008)
VI. Macroeconomic Modeling
19. Big Questions and Big Numbers (Economist: 7/15/2006)
20. What the World Bank Knows (Economist: 1/13/2007)
Topic 1: Introduction to Macro Data
Chapters 1, 2, and 3.5 from Text.
* Note that two articles are titled “Grossly Distorted Picture” – but the dates differ. You will be responsible for reading both. In your mind, refer to them by date.
I. The Difficulty in Measuring Economic Variables
A. Difficulty in Measuring Prices
21. Feeling the Heat (Economist: 6/24/2006)
B. Difficulty in Measuring Output/Output Growth
22. Divining the Future (Economist: 1/15/2005)
23. Leading Us Astray? (Economist: 4/8/2006)
24. Grossly Distorted Picture (dated 2008) (Economist: 3/15/2008)
25. Diagnosing Depression (Economist: 1/3/2009)
C. Difficulty in Measuring Unemployment
26. It’s The Taking Part That Counts (Economist: 7/30/2005)