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MEAP-P12
PGDM 2012-14: Term-II

Course Name - Macro Economic Analysis and Policy (MEAP)

Credits 3
Faculty Name Biswa Swarup Misra
Program PGDM
Academic Year and Term 2012-13

Course Description

Coverage of this course would include discussion of macroeconomic fundamentals, various macroeconomic policies (Monetary and fiscal), policy options under alternate macroeconomic scenario, Inflation-Unemployment tradeoff, open economy macroeconomics and exchange rate policies. The discussion will be centering round the Indian context so that participants can relate what is covered in the class room to what is happening around them in the real life situations and appreciate the subject of discussion.
Objective:
Having dealt with the principles guiding decision making of the individual economic agents in your EA-I course, we would shift our focus to discuss the macro economic factors, which influence business outlook in this course. Every Business operates with an outlook. The exposure to the working of the macro economy helps one to shape the future outlook of business.

Macroeconomic concepts involve abstractions as one deal with economic aggregates such as GDP, Inflation, and Exchange rate etc. Though abstract, we may be very much conversant with some of the macro economic concepts in our day-to-day life or can relate to them very easily. For instance, consider the case of the inflation, a macro economic aggregate. Inflation is measured by the rise in the price index. We do not observe the price index (an abstraction), though we can observe the prices of individual items such as price of a candle, watch etc. which contribute to the price index. Nonetheless, many people (especially the salaried class) can easily relate to the price index!

We would be primarily interested in three macroeconomic parameters i.e. growth, employment and inflation. The discussions in the class would be oriented to appreciate the factors governing the above three parameters.

Coverage of this course would include discussion of macroeconomic fundamentals, various macroeconomic policies (Monetary and fiscal), policy options under alternate macro economic scenario, Inflation - Unemployment tradeoff, open economy macroeconomics and exchange rate policies. The discussion will be centering round the Indian context so that participants can relate what is covered in the class room to what is happening around them in the real life situations and appreciate the subject of discussion.

Further details about the Course can be seen from the Session Plan.

I welcome you to this course.

2. Student Learning Outcomes (typically 3-5 bullet points)

1. Be able to ….. Make Sense of the Global as well as Domestic Macroeconomic Scenario
2. Be able to …. Understand the implications of the macroeconomic environment for Business
3. Be able to …. Appreciate the contents reported in Media on Macroeconomic Issues
3. Session Plan
Session-1What Macroeconomics is all about
Why we should be studying macroeconomics
Distinction between Micro and Macro economics
Important Macroeconomic Variables: Growth, Inflation, Unemployment
Distinction between Stock and Flow, Output and Wealth
Kinds of Macroeconomic Policy:
Monetary
Fiscal
Exchange rate
Reading
Principles of Economics - Mankiw (4th edition) Chapter- 1
Sessions 2-3Measuring the Value of Economic Activity
Concepts of GDP, GNP, NDP, NNP
Nominal vs. real GDP
GDP at market price and factor cost
Interrelations amongst different concepts of GDP
GDP as a measure of economic welfare
Reading
Principles of Economics - Mankiw (4th edition) Chapter- 23
Macroeconomics-Oliver Blanchard (4th edition)
Session-4Concept of Equilibrium Income and Multiplier
Predicting Growth - Harrod Domar Framework and sectoral growth accounting framework
Unemployment : Frictional, Structural and Cyclical Natural rate of unemployment
Unemployment Measurement in India - Usual Status, CDS, CWS
Principles of Economics - Mankiw (4th edition) Chapter- 23
Macroeconomics - Mankiw (6th edition)
Macroeconomics- Dornbusch, Fisher and Statrtz (9th edition)
Session-5Inflation:
Meaning and Measurement
Inflation Measurement in India- GDP Deflator, WPI, CPI-IW,CPI-AL, CPI-UNME, CPI-Rl
Biases in measurement of Inflation
Costs of inflation
Reading
Principles of Economics - Mankiw (4th edition) Chapter-24&35
Session 6-8Stylised facts about Short run economic fluctuations
Predicting business cycles with leading Indictor Analysis.
Framework of Aggregate Demand and Aggregate supply to study business cycles.
Hard Landing vs. Soft Landing
Demand pull vs Cost push Inflation
Session-9Long run determinants of Growth
Concept of Natural Rate of Output
Catch up effect and Convergence of Income across nations
Session-10Money-Functions
Components of monetary aggregates
Banks and Money Supply-Deposit Multiplier
Central bank and reserve money
Money Multiplier
Reading
Principles of Economics - Mankiw (4th edition) Chapter-29
Session-11Alternate characterization of goods market equilibrium: Saving-Investment equality vs. Equilibrium
Derivation of the IS Curve
Reading
Macroeconomics - Mankiw (6th edition)
Macroeconomics - Dornbusch, Fisher and Statrtz (9th edition)
Session-12Money Market
The theory of liquidity Preference
Derivation of the LM Curve
Reading
Principles of Economics - Mankiw (4th edition) Chapter - 34
Macroeconomics - Mankiw (6th edition)
Sessions 13-14Equilibrium in the short rum and impact of monetary and fiscal policy on short run equilibrium.
IS-LM model to aggregate demand curve
Reading
Macroeconomics - Mankiw (6th edition)
Session 15-16Aggregate Supply
Models of aggregate supply
Sticky wage, Sticky Price and the Imperfect-Information models
Aggregate supply Curve- Shart run vs. Long run
From Aggregate supply to Philips curve
Movement along the shift curve vs. Shifts in the Philips curve: The role of Expectations
Reading
Principles of Economics - Mankiw (4th edition) Chapter-33
Macroeconomics - Mankiw (6th edition)
Session-17International Trade and Protection
Benefits of trade:
Absolute vs. Comparative advantage
Terms of trade
Types of restrictions on trade
Motives for protection
Protection and consumer welfare
Reading
Macroeconomics- Dornbusch, Fisher and Statrtz (9th edition)
Macroeconomics- Oliver Blanchard (4th edition)
Session-18Balance of Payments and Exchange rate
Current vs. Capital Account
Balance in the Balance of Payments
Exchange rates;
Fixed vs. Flexible
Dirty Floating or Managed Exchange rate regime
Purchasing power parity theory of exchange rate
Movement in Exchange rate and impact on Balance of Payment – Marshall Lerner Condition
J-Curve effect
Reading
Principles of Economics - Mankiw (4th edition) Chapter-31
Macroeconomics - Mankiw (6th edition)
Macroeconomics- Dornbusch, Fisher and Statrtz (9th edition)
Session 19IS-LM model in the open economy:
Effectiveness of monetary vs fiscal policy under different exchange rate regimes
The Mundell- Fleming model - Impossible Trinity
Reading
Macroeconomics- Dornbusch, Fisher and Statrtz (9th edition)
Macroeconomics –Mankiw (6th edition)
Session-20Schools of Macroeconomic Thought
Mercantilism
Classical
Marxian
Neoclassical
Keynesian
Neo Keynesian
New Classical
New-Keynesian
Supply Side economics
Reading
Principles of Macroeconomics - Willis L. Peterson
Handout
Major macroeconomic policy debates
Reading
Principles of Economics - Mankiw (4th edition) Chapter-36






4. Evaluation Criteria

Created By: Debasis Mohanty on 08/23/2012 at 11:44 AM
Category: PGP-I Doctype: Document

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