Syllabus

Lectures: Mondays and Wednesdays, 9:30am-10:45am, Zoom Webinar

Office hours: Mondays and Wednesdays, 10:45am-11:45am, Zoom Webinar.

Graduate Student Instructors (GSIs): Graduate Student Instructors are all graduate students in the UCLA Economics Department. They will teach sections and hold 2 hours of office hours on Zoom every week.

0.1 Course Description

This course is meant to provide an intermediate-level treatment of macroeconomic topics, including the study of economic growth, business cycle fluctuations, unemployment, inflation, as well as open-economy macroeconomic issues such as trade imbalances and exchange rate policy. Although the title of the class is “Macroeconomic Theory”, students will learn both the theory as well as some of the empirical evidence behind the theory, and its practical implications. Special emphasis will be placed on the application of economic tools to contemporary economic problems and policies. Competing schools of thought will be presented, with a particular emphasis on Neoclassical and Keynesian theories; however, we shall try to develop as much as possible an evidence-based approach to macroeconomics. Class meetings will be highly interactive, with many opportunities for you to both ask and answer questions.

My objective is that, by the end of the course, you will be able to read, and critically assess writings from The Economist, The Wall Street Journal, or The New York Times. Macroeconomics is everywhere in the news - for example, Alexandria Ocasio-Cortez recently talked about the broken Phillips Curve with Jerome Powell, the Federal Reserve Chairman - and I want to walk you through the tools you need to understand it better. Economics is ultimately an empirical subject, so as much as possible I will try to convey not just the theory of how the economy works, but also the evidence supporting, or contradicting the theory. We will not always reach definitive conclusions on most of the issues we will examine, but you should have a more informed opinion on each of them and why these questions are hard and debated scientifically.

A strict prerequisite for the class is that you have taken Econ 101. If you do not meet this prerequisite, you are advised to take this course during another term. You should also be familiar with some elementary mathematics. For example, you need to know what a logarithm is, and how to calculate a geometric sum: \[1+c_1+c_1^2+...=\frac{1}{1-c_1} \quad \text{if} \quad 0<c_1<1,\] because that is really useful to understand how a Keynesian multiplier works, for example. If you do not know that already, that is fine too, but you should at least be willing to learn. If you want a treatment of Econ 102 which is less heavy on algebra, you are best advised to take this class in another term.

0.2 Textbook (very optional)

I will provide my own lecture notes, as I do not agree with some of the material which is found in undergraduate macroeconomics textbooks. However, if you really want to follow the class from a textbook, the closest to the course’s material is probably Olivier Blanchard’s Macroeconomics, 7th Edition (previous editions are fine, too). As I shall make clear during Lecture 13 on “Theoretical Controversies”, I do not believe in some of what is being taught in this book, for example the approach to the Phillips curve (part of the neoclassical synthesis, a paradigm which I believe is rejected in the data).1 During that lecture, I will tell you why I do not believe that approach to macroeconomics is correct. If you are surprised about that choice on my part, The Economist Magazine reported in a recent article on the teaching of macroeconomics titled “Why is macroeconomics so hard to teach?”,

Macroeconomics is difficult to teach partly because its theorists (classical, Keynesian, monetarist, New Classical and New Keynesian, among others) disagree about so much. It is difficult also because the textbooks disagree about so little. To reach the widest possible audience, most cover similar material: a miscellany of models that are not always consistent with each other or even with themselves. The result is that many professors must teach things they do not believe.

I will be theorizing as little as possible, and always provide you with the evidence when possible, so that you can make up your own mind about different schools of thought. I will be following Raj Chetty in trying to provide you with cutting-edge empirical research, and be as lightweight as possible on theories. Aiming at an evidence-based approach to macroeconomics is a challenge, as hard evidence is even harder to come by in macroeconomics than with microeconomics, but I hope that you will find that challenge and the resulting discussions interesting.

0.3 Dealing with questions

If you have any question about the material covered during the course, you should consider the following options in order:

  1. First, you should never refrain from asking questions during class.

  2. Second, you may ask questions during recitation sections. The smaller group should allow you to ask questions more freely. Our teaching assistants are all passionate graduate students, writing a ph.D. thesis on macroeconomics or other related subjects, so they will be very happy to help you.

  3. Third, TAs will hold their office hours. The times for their office hours are reminded above.

  4. Fourth, you should feel free to ask questions on the discussion board (not by email). We will never respond to questions about contents by email (in particular those starting with “is X, Y, Z, test material”), because doing so would be unfair to the rest of the class. In contrast, we commit to respond to all questions on the Moodle Website within 24 hours (either me or the TAs will). Beware ! You should start studying for the midterm exam earlier than November 4 – we will stop answering questions at 6pm the day before each exam.

0.4 Class notes

Class notes will be posted after each class, so as to encourage you to take notes. Notes might not always be comprehensive, and everything I will say during class is potentially examinable, even if it does not appear in the notes. Thus, to do well it’s best if you attend all lectures.2

0.5 Data Science

A lot of what we do in the class involves a fair amount of data. I use the R statistical software in order to prepare my lecture notes and input the data from official sources, to provide you with the most up-to-date statistics. An introduction to R statistical software is available here. It includes some code which was used to prepare lecture 1. I think that data science, statistics and economics are very complementary skills (so does the Massachusetts Institute of Technology).

0.6 Exams and Grades

Your final grade has 3 components: one for homeworks, one midterm exam, and a comprehensive final exam. Your final grade will be given by whichever of these two options gives you the best grade: (Homeworks (10%) + Midterm (20%) + Final Exam (70%)) or (Homeworks (10%) + Midterm (35%) + Final Exam (55%)).

Please mark the following dates in your calendar:

  1. Monday, November 9, 2020 - 9:30 AM - 10:45 AM: Midterm Exam.
  2. Monday, December 14, 2020 - 8:00 AM - 11:00 AM: Final Exam.

In any case, there will be no make-up exams.

Regrade Policy. Students who wish to have their midterm or their final examinations regraded should submit a request in written form to their assigned Graduate Student Instructor, clearly explaining why they think they deserve a regrade. If a student requests a regrade, the whole exam will be regraded. Therefore, the grade can increase or decrease.

Exam content. Everything that I say during the class, that is covered during recitation sections, is potentially exam material. Exams will be a combination of multiple choice and short essay questions. Therefore, it is absolutely necessary that you attend all lectures! I encourage you to take notes during the class.

Exam practicalities. During exams, sufficient space will be provided on the sheets to answer. No notes, no books, no smartphones, no calculators, will be allowed during the exam. You must bring your UCLA ID in order to take the exam. Without a UCLA ID, you will not be allowed to take the exam. You will not need to bring scantrons, as we will be using Scantrons from the Office of Instructional Development (OID).

Other. For more details about policies regarding grading, exams and other matters please refer to the following link: https://www.econ.ucla.edu/undergraduate/. I will adhere to the guidelines specified in this webpage. If you wish to request an accommodation due to a suspected or documented disability, please contact the Center for Accessible Education as soon as possible at A255 Murphy Hall, (310) 825-1501, (310) 206-6083 (telephone device for the deaf). The website is http://www.cae.ucla.edu/.

0.7 Teaching Philosophy

To the extent possible, I will strive to emphasize facts over theories, and develop an evidence-based view of intermediate macroeconomics. This is a major difference with the way that I taught this class in the past. Many of the issues that we will look at are politically charged, and various theories have been developed which usually speak to either ideological views. Theory usually does not allow to conclude definitively. This is unfortunate, because macroeconomic questions are debated on both sides of the political spectrum:

  • Do advanced economies have too high levels of public debt?
  • Should fiscal stimulus be used to fight recessions?
  • What is the cause of unemployment? (how much is voluntary or involuntary?)

… and many other questions. Fortunately, these questions are increasingly studied on the empirical front. Whenever possible, we shall try to “let the data speak”, and put the different theories that we will study to the test. Empirical research is still ongoing, and I will do my best to teach you the most up-to-date findings. In doing so, I will try to be as objective as possible, and try to avoid any conservative or liberal bias. According to this article (link), the latter is more of a risk than the former. I will always try to give you both sides of the debate, and arguments supporting each side. You are welcomed (and even encouraged !) to disagree with what I say during class !

  1. If these words “Phillips curve” and “neoclassical synthesis” don’t mean anything to you, we shall learn that too.↩

  2. David Romer, a leading macroeconomist at U.C. Berkeley, has some evidence on this: https://www.jstor.org/stable/2138449.↩