EC335-Theory of Macroeconomic Policy

Module Provider: School of Politics, Economics and International Relations
Number of credits: 20 [10 ECTS credits]
Level:6
Terms in which taught: Spring term module
Pre-requisites: EC201 Intermediate Microeconomics EC202 Intermediate Macroeconomics EC206 Intermediate Mathematics for Economics
Non-modular pre-requisites:
Co-requisites:
Modules excluded:
Current from: 2023/4

Module Convenor: Dr Christos Mavrodimitrakis
Email: c.mavrodimitrakis@reading.ac.uk

Type of module:

Summary module description:

This module is about macroeconomic policy. In modern capitalist societies, economic policy is in the hands of specific authorities (policy-makers); e.g., fiscal/monetary/macro-prudential authorities. They have in their disposal specific policy instruments, and objectives that they would like to meet. The policy instruments are connected to objectives through descriptive (structural) equations that show how the economy operates; these are the constraints that the authorities face when they manipulate their instrument of control in order to meet their objectives. Focusing on short to medium-run macroeconomic stabilisation, this module aims to analyse (un-)conventional monetary policy, fiscal policy and macroprudential policy using the benchmark IS-PC-MR (3-equation) model. Policies can be made in isolation, or in a strategic manner. The actual outcome in the macro-economy is the result of the interactions among the policy-makers and with the private sector. In such environments, situations of policy conflict and coordination may arise. The classical and new theory of economic policy will be presented and used to analyse macroeconomic policy issues.

Aims:

• To build a simplified structural model of the macroeconomy that takes into consideration the goods market, the financial market and the labour market.


• To use this model for macroeconomic policy analysis, whether (un-)conventional monetary, fiscal or macro-prudential policy.


• To explicitly define a policy-maker (authority) and analyse their objectives, instruments, and constraints when deciding on macroeconomic policy, whether (un-)conventional monetary, fiscal or macro-prudential policy.


• To explicitly deal with expectations and how different theories of expectations’ formation affect policy outcomes.


• To consider how the interactions among the different policy-makers and alternative institutional arrangements affect policy outcomes.

Assessable learning outcomes:

On the completion of the module, students should:

• be able to use theory to evaluate alternative economic policies;


• understand the choices and constraints policy-makers face;


• appreciate the way interactions among policy-makers affect policy outcomes;


• appreciate the way alternative institutional arrangements affect policy outcomes.

Additional outcomes:

Throughout the process of completing set exercises, students will have the opportunity to develop the skills required to do relevant research, write reports, understand technical articles, and apply theoretical knowledge to real world situations.

Outline content:

Basic topics include: The IS – PC – MR (3-equation) model; expectations; unconventional monetary policy; the financial sector; macro-prudential policy; fiscal policy; Classical (Tinbergen-Theil) vs. new theory of economic policy (policy games); institutional design. Additional content covered may include structural policies.

Brief description of teaching and learning methods:

Lectures; workshops; screencasts.

Contact hours:

	Autumn	Spring	Summer
Lectures		20	2
Supervised time in studio/workshop		4
Guided independent study:
Wider reading (independent)		60
Wider reading (directed)		40
Exam revision/preparation			40
Preparation for tutorials		4
Completion of formative assessment tasks		10
Reflection		20
Total hours by term	0	158	42
Total hours for module	200

Summative Assessment Methods:

Method	Percentage
Written exam	60
Set exercise	40

Summative assessment- Examinations:

One final examination; 3-hour (unseen) written exam.  Examinations are held in the summer term.

Summative assessment- Coursework and in-class tests:

One problem set, worth 40% of the overall module mark.  This can be group work (up to 3 students maximum).

Formative assessment methods:

Penalties for late submission:

The Support Centres will apply the following penalties for work submitted late:

• where the piece of work is submitted after the original deadline (or any formally agreed extension to the deadline): 10% of the total marks available for that piece of work will be deducted from the mark for each working day (or part thereof) following the deadline up to a total of five working days;
• where the piece of work is submitted more than five working days after the original deadline (or any formally agreed extension to the deadline): a mark of zero will be recorded.

The University policy statement on penalties for late submission can be found at: https://www.reading.ac.uk/cqsd/-/media/project/functions/cqsd/documents/cqsd-old-site-documents/penaltiesforlatesubmission.pdf
You are strongly advised to ensure that coursework is submitted by the relevant deadline. You should note that it is advisable to submit work in an unfinished state rather than to fail to submit any work.

Assessment requirements for a pass:

40

Reassessment arrangements:

Re-examination for all modules takes place in August of the same year. Re-assessment is by examination only; coursework is not included at the second attempt.

Additional Costs (specified where applicable):

Required textbooks - Macroeconomics: Institutions, Instability, and the Financial System by Carlin, Wendy, Soskice, David Paperback – Illustrated, 18 Dec. 2014. £52.99

Last updated: 30 March 2023