Category — Lecture Notes

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Why don’t students go to class anymore?

This is a constant refrain in faculty lounges around the world. One answer MIT surveyors found was when students didn’t feel they were learning, they didn’t go.

This is certainly because the penalty to not going to a lecture is reduced by the presence of online learning materials like power point slides and handouts.

However, the old standards still apply–the researchers found students were less likely to go if they thought the lecturer wasn’t very good, and if they thought they wouldn’t learn much, which makes perfect sense, and, it should be noted, has nothing to do with technology.

Several other interesting articles on this issue have been summarised by Dr. Paul L. Latreille in this article for the economics network. They make for fascinating reading, but re run many of the arguments my colleagues and I have about the relationship between student access to notes online and their attendance. In particular, Dr. Latreille takes attendance in his lectures, and allows access to that lecture’s notes using a password system. He found this strategy increased student attendance throughout the term.

My stand on issuing notes, etc, to students is pretty clear from this website. I give students everything I can think of to help them learn—lecture notes, handouts, podcasts, readings, coursepacks, software, solutions to past tests, links to current and past events that I think help them learn, and more. I don’t care where they get the information from, I just want to see them learn the material. I happen to think the best place to do that is inside of a lecture hall, but if a student decides to spend their time elsewhere, then so be it.

So I don’t take attendance at any lectures, and I won’t. Ever. I don’t remove bits of power point slides or other reductive strategies like that to make students show up. I’ll try to tell a decent story as best I can on the day, and hope most of them make it out of bed on time to hear it.

I will, however, quite cheerfully fail people who don’t make the grade, precisely because of this laissez faire policy.

Here are Dr Lattreille’s references in his case study, all of which are fascinating.

Barrett, R., Rainer, A. and Marczyk, O. (2007) “Managed Learning Environments and an Attendance Crisis?“, The Electronic Journal of e-Learning, 5(1), pp. 1-10

Burd, E. and Hodgson, B. (2006) “Attendance and Attainment: A Five Year Study“, Innovation in Teaching And Learning in Information and Computer Sciences, 5(2)

Clay, T. and Breslow, L. (2006) “Why Students Don’t Attend Class“, MIT Faculty Newsletter, XVIII(4)

Clearly-Holdforth, J. (2007) “Student non-attendance in higher education. A phenomenon of student apathy or poor pedagogy?“, DIT Level 3, 5

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You’ll want to read Barro, chapter 8, before this lecture.

The business cycle is a tricky concept in economics. We pretend we can measure it, and make serious and deep efforts to understand it as a profession, but economists are largely powerless to do anything about business cycles. We experience them like anyone else. Even the wikipedia article defining it is continually in dispute.

What is a business cycle?

Well, we call it a ‘cycle’ because there seems to be an up and down relationship between real (or actual) GDP and trend (or potential) GDP. When an economy is below it’s trend GDP, it might be heading into a recession. When an economy is above it’s trend GDP in terms of it’s real GDP, it might be experiencing a boom period.

GDP is assumed to break down into two parts, Real trend and cyclical. The cyclical part of GDP is the real part minus the trend part, and that is what we want to explain in this section of the course.

Barro shows us the proportionate deviation from trend GDP of the US Economy. What does it look like for Ireland?

It looks like the figure below.

We’d like to explain the existence and movement of business cycles through an equilibrium framework, so we’d like to consider changes in GDP, Y, C, etc, as they are affected following a shock, say, to technology, , or to investment, . The starting place for an equilibrium business cycle model is the production function,

.

In the short run, the capital stock , is fixed. The assumption is that if changes (say, computers fall out of the sky), that will effect only.

We derived the following two results in a previous lecture: the marginal product of labour will equal the real wage rate in equilibrium . Similarly, the interest rate will equal the marginal product of capital, which will equal the return on capital minus the depreciation rate: .

Our equilibrium business cycle model will have to explain changes in consumption, saving, and investment, over the business cycle.

So, we need an expression for a household’s budget constraint at any moment. Luckily, we have one:

.

This equation tells us the household’s consumption and saving decision is dependent on it’s real wage rate and it’s real asset income, .

If we aggregate all the household’s budget constraints in the economy, we have

,

which says that consumption and net investment is equal to real GDP minus depreciation, or real net domestic product.

If we substitute in the production function , we get

What will the income effect be on from a change in ? Because depreciation is fixed in the short run, we have technology increasing real income, and consumption will rise. The intertemporal substitution effect fights against the income effect on this, so no sharp prediction can be made.

Consumption and Investment

What does consumption and investment look like over the business cycle in Ireland?

Proportional values (using Logarithms) look like this:

We’ll go through more examples in the lectures.

Finally, here are the slides:

| View | Upload your own

Download them here:

EC4004_2008_Lecture6.pdf

Watch the slideshow here:

Right click on the image below to download the handout:

Galloping Gertie:

As engineering failures go, the 1940 collapse of the Tacoma Narrows Bridge ranks among the most visually arresting. When it was unveiled in June 1940, the bridge was the thrid largest suspension bridge in the world. It didn’t stay open long, because the bridge began to sway in high winds, so all traffic was banned from it. The bridge became known as Galloping Gertie, and on November 7, 1940, Gertie collapsed in a 42 mile per hour wind. The bridge was actually resonating, like a tuning fork, caused by the wind flowing over it. Here it is collapsing.

The ‘tuning fork’ theory has been known since ancient times: roman armies were trained to break their step going across bridges for fear of having the same effect as the wind on Galloping Gertie. One can see the effect of many people moving together on Norman Foster’s Millenium Bridge, below.

What has this to do with economics? Find out below.

[Read more →]

Here are the problems and lecture notes for today.

problem34_student.pdf

Homework:

Homework: Summarise Chapter 3 of Godley-Lavoie, 600-700 words or less. Post to your blogs by 12.00, Sunday 18th, &  Finish problem set 4 part 2, again posting summaries to your blogs.

MDU Macroeconomics Lecture 5: Inflation and Growth

Today:

0. Defining Inflation

1. Inflation and the Business Cycle

2. Cyclical v. Structural Inflation

3. The Unemployment Trade off

4. Costly Inflation

5. Inflation and Inequality

6. Money Wages and Real Wages

7. Purchasing Power in Ireland

8. Inflation Targeting and Central Banks

0. Defining Inflation

Inflation is defined as a general increase in prices, which we proxy by the Consumer Price Index. (CPI). Deflation is  corresponding fall in the price level.

Ireland’s baseline inflation index looks like this for the last 30 years:

We can see the influence of the “Celtic Tiger” years on Irish Inflation, especially if we look at changes in Inflation over the period 1992-2006:

Broadly speaking, inflation is a reduction in purchasing power over time. So, each euro one earns will be worth less as it purchases less than it did before. There are many factors which can cause inflation to increase: wars, industrial conflicts, supply constraints, trade blockades, and more.

There are six main points to consider when talking about inflation (elaborating on Bowles et al, pg. 479).

1. Inflation and the Business Cycle

The level of inflation varies over the business cycle and between business cycles. So if we plot  Irish GDP and Inflation, over 1992-2006, we see this:

2. Cyclical v. Structural Inflation



We typically see more rapid inflation as we approach the top of the business cycle. This is called cyclical inflation.

Structural Inflation occurs when the price level increases uniformly through the whole of a business cycle, boom and bust. We can see this in sub sections of the consumer price index, for example in construction. Note, the index construction changed during this period. I’ll talk about what that means in the lecture, but you should be aware of it. Details of the indexation methodology are here.

3. The Unemployment Trade off

The Unemployment Trade off describes a tendency we observe during a business cycle for inflation to rise when unemployment falls. If we graph Inflation as measured by the CPI against Unemployment over a ten year period for Ireland and fit a straight line to the cloud of points we assemble, we see the following relationship. This graph is telling us the wrong thing, as I’ll explain in the lecture, but have a look at it for the moment to get the general idea. All data is from here.

4. Costly Inflation

Inflation is very costly because it makes economic outcomes more unpredictable. Economists say that the windfall effects of inflation are uncertain, and you can think of many reasons why that might be. There is also a cost to controlling inflation. For lots of information on this set of costs and how inflation is actually controlled, look here.

5. Inflation and Inequality

Each country’s mix of inflation and unemployment is both a product of and a determinant of that country’s income distribution. Data is from Nolan et al, pg. 17. Ireland’s Income distribution looks like this. approximately. See the paper linked to for a more nuanced picture and a more in depth analysis.

6. Money Wages and Real Wages

What you are paid each month is not what you can buy with that money. Your earnings are always determined by what you can purchase with them. The difference between your real wage (your wage taking inflation into account) and your nominal wage (what you see on your pay-slip) can sometimes make a real difference to what you can buy at the end of the month.

7. Purchasing Power in Ireland



Look at the table on page 489 of Bowles at al. We see the difference between the nominal wage (valued at 1982 $) and the real wage. We can see in each case a drop in purchasing power over the period from 1982-2002. For Ireland, we can compute the cost in today’s euros of purchasing 1 euros worth of goods in 1940. The change in purchasing power is staggering.

8. Inflation Targeting and Central Banks

The ECB is committed to inflation targeting. In the lecture we’ll discuss why this is and what effects it might have on your mortgage.

I’ll post lecture notes up during the lecture.

Don’t forget to bring a laptop, one to each group at least.

Also, we’ll be having a quiz, so re read your lecture notes!

Right Click the link below to download Lecture 3’s notes.

Download conceptsproblem1.pdf

Homework: Finish Problem 2, part 3. You’ll be tested on it next week.

Blogging: Upload your notes on todays lecture to your blog by next Sunday.

Aggregate Supply and Demand

Download the slides here: asad.ppt

Or, watch them here:

Q1: Does a macroeconomic equilibrium exist?

Q2: If the answer to Q1 is true, then will this equilbrium generate full employment?

We’ve already talked about measuring total output, so revise your notes on GDP, GNI, etc.

Aggregate Supply:

The total supply of goods and services produced in the economy in a given period

AS = (net output per hour)*(total hours of employment) = yN

Aggregate Demand

AD is the total demand for goods and services in an economy in a given period.

AD = C+I

C = cwN

AD= C+I- cwN+I

Total Saving = wages saved + all profit income

= Nc(1-c)+N(y-w)

= Nw-Nwc+Ny-Nw

=Ny-Nwc

Market Clearing

AS = yN=cwN+I = AD

Unemployment and Government Fiscal Policy

AD = C+ I + B = cwN + I + B

AS = yN = cwN + I + B = AD

yN- cwN = I + B

N(y-cw) = I+B

so

N* = (I+B)/(y-cw)

this is the equation for the equilibrium level of employment when AS=AD in the product market.

Reading for this lecture: Bowles et al, pgs 445–476

Unemployment: the persistent macro economic problem. Why does unemployment exist? Why does it still exist?

More stylised facts:

1. High employment sustained over a few years will reduce profits. This is called the high-employment squeeze.

2. The availability of imports for an country’s goods place additional limits on the effectiveness of macro policies aimed at high employment.

3. Monetary policy and fiscal policy approaches to job creation are both effective and in different ways, and they may work at cross purposes.

4. Sustained high employment levels are possible, but we have to change the policy mix as we move through the business cycle.

Wage Push in Ireland

Materials Cost Push

> Housing CPI Cost push

Unit Cost, Output and the Profit Rate

(a bad reproduction of figure 17.4, pg. 456)

Exports and Imports: the Irish experience.

EC6012 Course Outline

Right Click the link below and choose ’save target as’ to download the course outline.

[Kinsella_EC6012_CourseOutline_2.pdf]

Introduction

Monetary economics concerns the relationship between real and nominal variables. International monetary economics considers these relationships in the context of an open economy. The aim of this course is to develop simple models to evaluate the effects of policies on inflation, employment, real interest rates, and production.

Learning Outcomes

At the end of this course, students should be able to

• describe the development of major international institutions like the World Bank, the IMF, and the EU;
• give a brief account of some simple stock-flow consistent models used in evaluating monetary policy;
• describe the evolution of the neoclassical and structuralist macroeconomic modelling paradigms since Keynes’ death.

Lecturer Contact Details

My office is AM068a, office hours are 12–1pm on Tuesdays or by appointment. Contact me by email at stephen.kinsella@ul.ie.

Textbook



Students are urged to buy Goldey and Lavoie’s Monetary Economics An Integrated Approach to Credit, Money, Income, Production and Wealth, Palgrave-Macmillan, 2006.

I also recommend you buy Taylor, Restructuring Macroeconomics.

Basic reading for the first two lectures will be taken from Leddin and Walsh’s Macroeconomy of the Eurozone, or in the library at 339.09417/LED

Assessment

Assessment will consist of an end of term exam worth 50\% and a group presentation worth 30\% and 2 or 3 exercises worth 20\%. A sample exam will be distributed in week 6 of term. The exam is an essential part of the assessment, and each part of the course assessment must be passed.

The presentation will be on one of the models taught in the class: the group will be expected to present the fundamentals of the model to the class. Marks will be given for accuracy of material, structure of presentation, relevance of material, use of graphic displays and general preparedness. Written feedback will be given.

Lecture Outline & Layout

Lectures are 2 hours long, from 10am to 12pm in S114 in the Schuman building and participatory. This is a Master’s class, so students are expected to have read the lecture material before the lecture. Slides used during the lectures will be provided during the lectures and online at stephenkinsella.net. There will also be a podcast of the lecture available afterward on the site.

The layout for the course is as follows

Review of intermediate open economy macroeconomics Primitive concepts review. AS-AD, Balance of Payments, Circular Flow models in open  economies. `Money’ measurement and definition. Macroeconomic objectives, The money concept its origin, definition and current role; different types of money â commodity money, fiat money, etc; Measuring the money supply M0, M1, M2, etc

; Money supply counterparts, the causes of money supply changes ;The demand for money and its determinants ;The repo rate and its impact on the economy; The role of all the other interest rates in the economy; The monetary transmission mechanism; How the Reserve Bank conducts monetary policy; The reason for having inflation targets. [Two lectures, Reading: Chapters 2 and 3, Leddin & Walsh, 2003

A Simple Stock-Flow Social Accounting model  Introduction to Social Accounting Matrices, stock-flow accounting, simple transmission mechanisms for growth, and  [Three lectures], Reading: Chapter, Godley, 2006, Chapter 1, Taylor, 2004.

Balance Sheets, Transactions Matrices, and the Monetary Circuit Establishing the technical apparatus of the structuralist approach. [Three Lectures] Reading: Chapter 2 Godley, 2006

A very simple Model with Government Money Government and private money and a service economy [Two lectures] Reading:  Chapter 3 Godley, 2006

Government Money with Portfolio Choice The PC Model simulated and derived for the class.[Two lectures] Reading:  Chapter 4 Godley:2006

Presentations

Presentations will be made on the following papers in the following areas. All papers are available at http://www.stephenkinsella.net/?p=148. We’ll set a timetable for presentations in the first lecture.

Presentation 1 Robert Mundell,  The Pure Theory of International Trade.

Presentation 2 Lloyd A. Metzler Tariffs, the Terms of Trade, and the Distribution of National Income

Presentation 3 Harry G. Johnson  The Transfer Problem and Exchange Stability

Presentation 4 Gottfried Haberler \emph{Some Problems in the Pure Theory of International Trade

Presentation 5 H. W. Singer, The Distribution of Gains between Investing and Borrowing Countries

EC6012 Setting up Group Blogs

Here is the procedure for setting up your blog.

1. Go to Blogger.com.

2. Set up the blog in 3 steps. This is free.

3. Email me the link to the blog.

4. Post your group homework on the blog.

EC6012 International Monetary Economics Lecture 1



Right click the link below to download the handout:

[Download EC6012_Lecture1.pdf]

Mathematics in Macroeconomics

Mathematical formalism is only useful when

1. it tests internal consistency between different propositions within a theory (e.g. the proposition that different markets clear simultaneously);

2. it clarifies what ‘drives’ the restuls (e.g, given the minimal assumptions under which it will be true that more exports can be achieved at the cost of a worsening distribution of income), and;

3. It provides a solid base for empirical analysis.

Important characteristics of structuralist models

1. differences in behaviour of different income groups matter

2. differences in available technologies in different sectors or countries matter.

3. structuralist models are based on the social relations between broad groups of economic actors

Intellectual Foundations

Keynes Kalecki,  Ricardo, Marx

=> Fundamental assumption: the economy’s institutions and social groups play causal roles in determining overall behaviour of the economy.

Theoretical Foundations

Richard Stone

Wynne Godley

Lance Taylor

Accounting Relationships between macroeconomic fundamentals

Problems

>Politics

Market-balance relationships constrain economic actors in important ways.

All the models you will see in this course are constructed directly from aggregates like household consumption, business investment, etc.

Stocks v Flows

flows (GDP is the sum of payments to labour, payments for ’surplus’ (profits) and payments for indirect taxes)

stocks (cumulative flow: the country’s net foreign asset position is the sum over time of its current account surpluses.)

All the models you’ll see in this class will be stock-flow consistent.

Causality

Structural Macreconomics Problems

1. Inequality and Poverty

Keynes, John Maynard KeynesThe General Theory of Employment, Interest and Money,  Chapters 6  & 7 (link to full text)

(Write a 1 page summary of each of these chapters as an exercise)

2. Inflation and Macro Stability

G. Calvo, L. Leiderman and C. Reinhart, Inflows of capital to developing countries in the 1990s, Journal of Economic Perspectives 10, n. 2 (1996),

Knut Wicksell, 1906, The Influence of the Rate of Interest on Prices,

3. Policy Instability

Prospects and Policies for the U.S. Economy. Why Net Exports Must Now Be the Motor for U.S. Growth  Wynne Godley, Alex Izurieta and Gennaro Zezza,

Methodology

1. Present a series of models, starting very simply, and gradually including all the real-world complications.

2. Write down a system of equations and accounting identities, attribute initial values to all stocks and all flows and to behavioural parameters

3. We’ll use stylised facts for most of these.

4. Then use numerical simulation to check the accounting and find the steady state of the economy

5. finally, we shock the system with varying assumptions to check robustness.

=> This gives us an ‘informed intuition‘ about the real world.

Right Click the link below and choose ’save target as’ to download the answers.

[Download EC4333_PS3_Ans.pdf]

Right click the file to download the marks for the continual assessment part of this course.

[Download EC4333_Final_Grades_All.pdf]

Right click to download the .pdf of this short lecture.
[Download EC4333_Lecture10_Recap_handout.pdf]

right click the link below to download the .pdf.
[Download EC6101_Lecture6_UE.pdf]

Right click the link below and choose ’save target as’.

[Download EC6101_Lecture_5_PPP_handout.pdf]

Right click the link below and choose ’save target as’

[Download EC6101_lecture4_open_ec_macro.pdf]

This is a 5 hour lecture, here are the 80+ slides for it. Watch the entire (gasp) lecture as a movie by clicking the picture below

or, more realistically, right click the link below and choose ’save target as’.

[Download Irish_Ec_Environment_Lecture1_Handout_Slides.pdf]

Here are the notes I’ll distribute in class.

[Download EC3601_Irish_Ec_Environment_CoursePack_06-1.pdf]