Intermediate Economics

NAIRU; money creation; central bank behaviour; lender-of-last-resort; fiscal and monetary policy; austerity; output gap; unemployment; regulation; labour market regulation; stabilization policy; financial markets; financialisation; global financial imbalances; Eurozone crisis; competitiveness; relative unit labour cost; liberal market economies; co-ordinated market economies; secular stagnation.

Summary

This course introduces students to the basic theories and models underlying macroeconomic policymaking including New-Classical and New-Keynesian economics and Keynesian economics. Special attention will be given to central bank policy, based on NAIRU economics. We will look into causes and consequences of the rapid growth of the financial sector ('financialisation') in the U.S. and Europe. Special attention will be given to the causes and consequences of the Global Financial Crisis of 2008 and its aftermath. Using this theoretical understanding we turn to an analysis of the origins of the Eurozone crisis and an evaluation of the costs and benefits of expansionary fiscal consolidation (or austerity economics). What role did the financial sector play in the Eurozone crisis? Why did Germany manage to recover from the financial crisis so quickly? Why did the crisis hit the Eurozone periphery (Greece, Italy, Portugal and Spain) so hard? How can growth in Europe be restored? To understand the role of finance in all this, we need to understand what money is, what it does and where it comes from. Therefore, the course concludes with a thorough analysis of the money creation process, and the roles played by the central bank, the state and the commercial banks in this process.