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       Welcome to Macroeconomics for Policy

      This course aims to integrate economic analysis with macroeconomic policy issues, making use of policy cases in the UK and other countries to develop ideas and illustrate applications. It combines theory and empirical studies, familiarizing students with analytical framework and state-of-art empirical tools used in academic studies. It focuses on the impact of economic policy on macroeconomic performance and dynamics.

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  • Schedule


    • Study Outline

      TOPIC 1: FACTS ON THE UK BUSINESS CYCLES AND GROWTH

      Key Readings for Class Discussion:

      • Mankiw, N, Gregory. 2006. "The Macroeconomist as Scientist and Engineer." Journal of Economic Perspectives, 20 (4): 29-46.

      To promote initial discussions, please prepare some thoughts on the following:

      1. What’s the difference between the role of economists in government ministries, banks/businesses and academe?
      2. Should you need an economics PhD to become “Chief Economist”?
      3. What are the main policy challenges facing the UK? How have Brexit and/or COVID changed your answer from what it would have been a few years ago?
      4. Is the decomposition of fluctuations into a “trend” and a “business cycle” useful?


      TOPIC 2: PRODUCTIVITY AND GROWTH

      Key Readings for Class Discussion:

      • Growth accounting: multi-factor productivity estimates, UK: October to December 2019, Statistical bulletin ONS.

      In recent years an apparent slowing of productivity growth has created concern among the community of policymakers, academics, and business leaders, especially in developed economies. To help guide our discussions, we review some theories of economic growth to see why such a decline could be detrimental and to think about productivity in more depth empirically. Please read the ONS statistical bulletin to prepare for the following: 

      1. What are the factors behind the productivity slowdown? Are they the same as factors behind a broader slowing in growth?
      2. Why might the Global Financial Crisis have had persistent effects on productivity?
      3. What might be the potential impact of Brexit on productivity in the UK?


      TOPIC 3: PRODUCTIVITY ACROSS FIRMS AND COUNTRIES

      Key Readings for Class Discussion:

      Recent research has shown the enormous productivity differences across countries, industries firms and establishments. For instance, in the US some plants are producing twice as much output as other plants even in the same industry. Then the question is why. Please prepare to discuss the following questions: 

      1. What are the difficulties of measuring productivity?
      2. Evaluate the strengths and weaknesses of using productivity measures to assess the performance of countries and firms.
      3. Do you think there are any general truths on what determines productivity dispersion observed in data?
      4. On what basis would you justify policy intervention in innovation?


      TOPIC 4: PRODUCTIVITY AND INNOVATION POLICY

      Key Readings for Class Discussion:

      • Bloom, Nicholas, John Van Reenen, and Heidi Williams. 2019. "A Toolkit of Policies to Promote Innovation." Journal of Economic Perspectives, 33 (3): 163-84.
      The recent slowdown in productivity growth in the UK and other advanced economies provoked extensive concern among policymakers and researchers. How should we tackle the productivity slowdown? How are policies for stimulating innovation effectively? Please prepare to discuss the following questions: 

      1. How would you measure innovation activities: any pros and cons for each?
      2. On what basis would you justify policy intervention in innovation?
      3. Should we limit or promote the dominance of a few big tech companies in the UK?

      TOPIC 5: MONETARY POLICY - IMPLEMENTATION

      Key Readings for Class Discussion:

      • Matthew Osborne. 2016. “Monetary policy and volatility in the sterling money market” BOE Staff Working Paper No. 588.

      Monetary policy frameworks have evolved since the global crisis in 2008 – but even prior to the crisis, monetary frameworks have changed repeatedly in response to theoretical advances and practical experience. We will discuss highlight the role of central bank in influencing the economy. Prepare to discuss the following questions: 

      1. What is the goal for the Bank of England? Is this different from other central banks or from the goals the Bank had in the past?
      2. What is the main tool to achieve monetary policy goals? How has this changed over time? Why?
      3. What is the “zero lower bound” and is it a problem?


      TOPIC 6: MONETARY POLICY - THEORY AND EMPIRICS

      Key Readings for Class Discussion:

      We will see how a commonly used workhorse model (a simple New Keynesian framework) suggests how monetary policy impacts inflation and the real economy.

      We will review a basic set of textbook materials on this and consider a situation where there may be thought to be a tension between traditional goals of policy and a broader interpretation of the aims of policy. Specifically, we will look at a situation where housing (or other) asset prices are sharply rising while inflation looks stable. Please prepare to discuss the following questions: 

      1. How do interest rate changes affect inflation in the context of a New Keynesian model?
      2. How do unconventional monetary policy tools (i.e., QE, forward guidance, negative interest rates, etc.) affect inflation?
      3. Do you think the Bank of England should react to rapidly growing stock prices or housing prices when inflation is around a target?
      4. Why did some policymakers predict the Bank would raise interest rates in the case of a moderately disruptive Brexit?
      5. What happens to employment when interest rates rise? What happens to unemployment when inflation increases?


      Topic 7: CONSUMPTION 

      Key Readings for Class Discussion:

      Since the onset of the Covid pandemic, we have seen many fiscal stimulus packages that are designed to make consumers spend more, such as stimulus checks in the US and Japan. While in the US if you make more than certain threshold the amount will be reduced incrementally, cash handouts went to every individual in Japan, regardless of income level:

      1. What is the measure of the size of household consumption responses to cash handouts?
      2. How and why do consumption responses vary across different household types?
      3. How would you assess the potential impact of cash transfer programmes?
      4. What are some typical empirical difficulties in assessing the effects of fiscal (and other macroeconomic) policy?


      TOPIC 8: INVESTMENT

      Key Readings for Class Discussion:

      • Maffini, Giorgia, Jing Xing, and Michael P. Devereux. 2019. "The Impact of Investment Incentives: Evidence from UK Corporation Tax Returns." American Economic Journal: Economic Policy, 11 (3): 361-89.

      Tax/subsidy measures aimed at promoting investment growth are commonly observed across many countries. Please prepare to discuss the following questions: 

      1. What are the main features of investment at a micro level? At the macro level?
      2. What drives the heterogeneity of investment responses to taxes and why?
      3. How would you assess the potential impact of tax incentives to promote investment and what is the difficulty of doing so based on the past experiences?


      TOPIC 9: FISCAL STIMULUS AND GOVERNMENT DEBT

      Should we hurry to pay down government debt? But would cutting public spending aggressively hurt the economy? We will build a framework to think about this problem brought to the centre stage lately, and we will discuss a variety of issues ranging from MMT to the UK’s austerity programs. Key readings and other papers will be added here later, please stay tuned.

      The literature on fiscal policy is vast and the empirical assessment of it is extremely complex. Add to that the inherently “political” element of fiscal decision-making/discussion (relative to, say, monetary policy) and it is a stimulating and frustrating area to work in. We will focus initially on some standard topics but our discussions will be broader (considering COVID and Brexit).

      1. Assuming that Ricardian Equivalence holds, what predictions does it make for the financing patterns (of a given government spending plan) we should see in the real world? Does it imply that government spending has no effect?
      2. Are tax smoothing and automatic stabilizers the same thing?
      3. Can austerity be stimulative? How might it depend on context?
      4. How might Brexit/Covid affect public finances? In the short or long run?

  • Assessment


    • ASSESSMENT

      The basis for grading will be 40% on quizzes and 60% on a final project.


      ASSESSMENT 1: Coursework Tests

      Assessment Weighting: 40%

      There will be three quizzes:

      • Quiz 1 (opens on 4 November, closes  17 November) will cover Topic 1, 2, 3 (includes discussion in class). 

      • Quiz 2 (opens on 16 December, closes 5 January) will cover Topic 4, 5, 6 (includes the discussion in class)

      • Quiz 3 (opens on 20 January, closes 2 February) will cover Topic 7, 8, 9 (includes the discussion in class)

    • ECOM181 QUIZ 1
      Students must
      Mark as done
    • ECOM181 QUIZ 2
      Students must
      Receive a grade
    • ECOM181 QUIZ 3
      Students must
      Receive a grade

  • Resources

  • Link to Live Events

    Live Lecture
    TA session (aka class) 
    Office hours (Joep Lustenhouwer)  
    Microsoft Teams Office hours  Link (Friday 14:00, bi-weekly, starting 9 September, directly after the live lecture)

    Office hours (Martin)  
    Microsoft Teams Office hours  Link (Friday 16:00, bi-weekly, 16th September - 9th December)
    Microsoft Teams Office hours  Link (Friday 16:00, bi-weekly, 6th January - 20th January)

  • Topic 1: Facts on the UK business cycles and growth

    We will look at some stylized facts on the UK economy.

    The structure will be:
    1. recorded videos with slides,
    2. live session,
    3. TA session.
    Live lecture
    To prepare for first Live Lecture
    • watch recorded videos
    • read key reading for discussion: Mankiw, N, Gregory. 2006. "The Macroeconomist as Scientist and Engineer." Journal of Economic Perspectives, 20 (4): 29-46.
    Additional core reading
    • Jones, Charles I., 2016. “The facts of economic growth”, Handbook of Macroeconomics, Vol. 2: 3-69 (Focus here on the topics and issues that relate to what was discussed in the recorded videos)

    TA sessions


  • Topic 2: Economic growth

    We will study the basic Solow growth model and Talk about growth accounting and a productivity growth slowdown in the context of the UK.

    The structure will be:

    1. recorded videos with slides (Solow growth model),
    2. live session (Productivity growth slowdown and growth accounting based on Solow framework)
    3. TA session (Practical application of growth accounting).
    To prepare for Live Lecture
    Additional core reading







  • Topic 3: Productivity across firms and countries

    We will study the Solow model in continuous and an extension with endogenous growth (AK model). We will further study and discuss differences in productivity and its determinants - both at the firm level and at the country level.

    The structure will be:

    1. recorded videos with slides (Solow growth model in continuous time and endogenous growth AK model),
    2. live session (Productivity differences and determinants of productivity )
    3. TA session (Practice quiz questions and practical application of growth accounting).
    Important notes on recorded videos
    • In the video "Video_2_SolowModelContinuousTime"  it is implicitly assumed from minute 7:20 onward that depreciation, delta, is equal to zero. This makes the calculations on that slide easier. As an exercise, you can try to do the same derivations with non-zero delta included.
    • In the video "Video_4_AK Model: Part 2" there is a mistake in the equations written from minute 6:13 - 7:21. The term (delta + n) should not be multiplied with k in these 3 equations (since we have divided the whole equation by k). The expression on the next slide, written down at minute 8:08, is correct, and so is everything that follows that.
    To prepare for Live Lecture
    • watch recorded videos
    • read key readings for discussion:
    - Caselli, Francesco. 2016. “Accounting for Cross-Country Income Differences: Ten Years Later”. https://openknowledge.worldbank.org/handle/10986/26105
    - Syverson, Chad. 2011. "What Determines Productivity?" Journal of Economic Literature, 49 (2): 326-65.  (Exluding Sections 2.3, 3.1, 3.6, 4 and 5; these are also interesting but designated as optional additional reading)

    Additional core reading
    • Jones, Charles I., 2016. Introduction to Economic Growth, Chapter 9 ( Or Chapter 8 in the older first edition)

  • Topic 4: Productivity and Innovation policy

    We will study endogenous growth and innovation. In the videos, two further endogenous growth models are discussed. In the live lecture, we will focus on what policy should be implemented to encourage innovation and enhance economic growth. 

    To prepare for Live Lecture

    Additional core reading

    ●          Gaggl, Paul, and Wright, Greg C., 2017. "A Short-Run View of What Computers Do: Evidence from a UK Tax Incentive", American Economic Journal: Applied Economics, Vol. 9(3): 262-94 (Focus on the Intorduction and on Sections I and IV (A))

    ●          Jones, Charles I., 2016. Introduction to Economic Growth, Chapter 5 (Sections 5.1, 5.2, 5.3)


  • Topic 5: Monetary policy implementation

    This topic focuses on the operational details of monetary policy. How exactly can the Bank of England influence the short term interest rate? How can a better operational framework reduce over-night interest rate volatility? And how did this framework have to change during times of unconventional monetary policy?

    To prepare for Live Lecture

    Additional core reading

    ●          The Bank of England’s Sterling Monetary Framework (The Red Book), June 2015

    ●          Keister, Todd, 2012. Corridors and floors in monetary policy, Liberty Street Economics blog


  • Topic 6: Monetary policy: Theory and Empirics

    This topic focuses on the transmission of monetary policy to the real economy and to inflation. The videos introduce the widely used 3 equation New Keynesian model. We will first consider monetary policy transmission through the lens of that model. But based on recent empirical evidence, we will also consider monetary policy transmission from a different perspective in the live lecture. 

    To prepare for Live Lecture

    • watch recorded videos
    • read key readings for discussion. Rather than scientific papers, this week these key readings are two articles about scientific papers that allow you to get the main message without having to struggle through the technical details.  These articles are:
       -   Cloyne, Ferreira, and Surico (2016) “Household debt and the transmission of monetary policy: New evidence”, https://cepr.org/voxeu/columns/household-debt-and-transmission-monetary-policy-new-evidence

      -    Economics in central banking: Greg Kaplan, Benjamin Moll and Gianluca Violante, https://www.centralbanking.com/awards/3970686/economics-in-central-banking-greg-kaplan-benjamin-moll-and-gianluca-violante


    Additional core reading

    ●        Bernanke, Ben and Gertler, Mark, 2001. “Should central banks respond to movements in asset prices?”, American Economic Review, Vol. 91(2): 253-257

    ●        Gali, Jordi, 2015. Monetary policy, inflation and the business cycle, Chapter 3 (note, Gali has excellent lecture slides that contain the main elements of his book’s chapters)


  • Topic 7: Fiscal stimulus and consumption

    This topic focuses on consumption and on how consumption changes due to anticipated and unanticipated changes in income. A particular focus is put on how consumption cahnges when taxes are changed. The videos focus on theory whereas we will focus more on empirics in the live lecture. 

    To prepare for Live Lecture


    Additional core reading

    ●          Johnson, David, S., Parker, Jonathan A, and Souleles, Nicholas S., 2006. "Household Expenditure and the Income Tax Rebates of 2001", American Economic Review, 96(5): 1589-1610

    ●          Romer, David, 1996. Advanced Macroeconomics, Chapter 8 (“Consumption”), sections 8.1-8.4


  • Topic 8: Taxes and investment

    This topic focuses on investment and on how tax incentives may influence investment. We also consider whether liquidity constraints may again play a role.  

    To prepare for Live Lecture


    Additional core reading

    ●          Zwick, Eric and Mahon, James, 2017. “Tax policy and heterogeneous investment behavior”, American Economic Review, Vol. 107(1): 217-248

    ●          Romer, David (1996) Advanced Macroeconomics, Chapter 9 (the “Investment Chapter”), sections 9.1-9.3


  • Topic 9: Fiscal stimulus and Government debt

    This topic focuses on Government debt. If the government implements fiscal stimulus, this typically leads to a lower fiscal surplus and increased government debt. We discuss different theories about the importance and rule of government debt and how government debt may relate to inflation. 

    To prepare for the Live Lecture

    • watch recorded videos
    • read key readings for discussion:
       -        Lee, Vivien and Sheiner, Louise, 2019. What are automatic stabilizers?, Brookings blog post

       -        Ryan Banerjee, Valerie Boctor, Aaron Mehrotra, Fabrizio Zampolli, 2022, Fiscal deficits and inflation risks: the role of fiscal and monetary policy regimes, SUERF Policy Brief, No 445


    Additional core reading

    ●         John Cochrane, 2022,  The Fiscal Theory of Inflation, The Grumpy Economist.

    ●         Jordi Gali, 2020, Helicopter money: The time is now, voxEU

    ●         Romer, David 1996. Advanced Macroeconomics, Chapter 13 (Budget Deficits and Fiscal Policy), sections 13.1-13.3


  • Introduction to Knowledge, Skills and Behaviours


    • Introduction

      Knowledge, Skills & Behaviours (KSBs) and they are the main assessment methods used in an End-Point Assessment (EPA). They represent the core attributes an apprentice must have in order to be competent in the occupation they are working in. 

      • Competency

      The KSBs must be met by the apprentice, evidenced and assessed in order to pass their course. It is the role of the Independent End-Point Assessor (IPEA) to test an apprentice’s competence against the KSBs rather than against the duties that they have developed for the employment role. It is important to identify the KSBs required to undertake each duty, and map each KSB to at least one duty. 

      • Knowledge

      Knowledge refers to the technical detail and ability that an apprentice needs to both attain and understand in order to carry out their duties. Some of these will be specific to the occupation, but some may be broader such as practical training. 

      • Skills

      This is where the apprentice’s knowledge is applied in a practical way. Skills will have been learned through both experience, and in employment training from a senior member of staff. It is important to note that skills should not be the simple repetition of the tasks or duties the apprentice carries out. It is the confidence in both the process and the quality of outcomes.

      • Behaviours

      Behaviours are mainly referring to the mindset that the apprentice has. Do they think in a way that is required for the duties they are expected to carry out? These don’t just have to be instinctive, they can be learnt. Importantly, behaviours  are transferable, so they may be similar across apprenticeship standards. Knowledge or skills are typically more specific to a particular apprenticeship. Examples of behaviours include: teamwork, problem solving, and having a professional attitude.

  • Standards for Knowledge, Skills and Behaviours

    • Knowledge

      K1: Applied econometric techniques, such as micro-econometric techniques, time series and/or panel data, including limitations thereof. (1,2) 

      K2: Applications of micro-economic and macro-economic theory in a range of policy and business contexts. (1,3) 

      K3: Understanding the robustness and quality of economic statistics, model generated data and external information; data cleaning; hypothesis testing; the most relevant software and programming techniques; main requirements for successful survey design. (1,2,3,4,5,9) 

      K4: Appraisal and evaluation techniques, including cost-benefit analysis, multi-criteria decision analysis, real options and least regrets; and the underpinning tools that are required to conduct appraisals e.g. asset pricing models. (1,2)  

      K5: Non-market valuation techniques including willingness to pay/accept. (2) 

      K6: Topics from competing streams of economic thought and the implications they have for policies, e.g. market failures, rationale for intervention, and business strategies (1,2) 

      K7: Quality assurance techniques and sources of risks to quality of analysis (1,2,3,5,11) 

      K8: Team's capacity to deliver - organisation specific processes for: securing additional resources from within and without the organisation; work planning and associated risk management techniques; and the demands from clients. (6,9,10,11) 

      K9: The wider context affecting the work area and how changes might affect clients and analysis. (7) 

      K10: Different communication styles and techniques; stakeholder theory; different ways of presenting data. (1,2,3,5,8) 

      K11: Techniques to assess how future political, economic, social, technological, legal and environmental developments could affect organisation, work programmes or clients (9). 

      K12: Understand high level business objectives and strategy in order to anticipate demands for economic analysis (9).

      Skills

      S1: Apply micro-economic and/or macro-economic theories and modelling, including econometric, to inform a range of business and policy decisions. (1,2)

      S2: Where appropriate convert the policy or other question into a tractable appraisal, evaluation or other analysis drawing on the most appropriate analytical method. And, where appropriate, consider: non-market valuation methods, the counterfactual, opportunity cost, risk and uncertainty and how to estimate discount rates and costs of capital. (2)

      S3: Critically assess available information sources and judge validity and usefulness for the issue at hand; clean and manipulate data; be aware of data limitations and explain them; clearly describe and present data using data visualisation techniques; and draw out and explain policy and business implications to clients (1,2,3,4,5)

      S4: Prioritise scarce resources, including own time, and focus work on areas of greatest impact; deploy project management techniques; negotiate for additional resources where appropriate; manage delivery risks; build and maintain relationships with colleagues and clients and develop and utilise internal and external networks (6,10)

      S5: Scope areas of work identifying: objectives, analytical methods, resources required and potential delivery risks. Able to recognise when complementary expertise is required e.g. scientists, other social scientists and data specialists. (9)

      S6: Use horizon scanning methodologies to anticipate new trends, opportunities and challenges that may influence outcomes of interest to client. (7)

      S7: Clearly communicate economic principles and concepts to non-economists; present trade-offs and uncertainties and articulate these clearly; frame advice, drawing on knowledge of stakeholders' positions, for maximum impact (1,2,3,7,8).

      S8: Design Quality Assurance processes and implement these, following organisational best practices, and drawing on sources of external expertise; critically assess economic analysis and improve it. (11)

      Behaviours

      B1: Ethical conduct: analyst attributes sources and ideas to their originator; provides honest advice on all relevant aspects to an issue; avoids bias. (1,2,3,5)

      B2: Proactive: seeks opportunities to apply analysis to policy and business problems; seeks ideas for improvements, such as new approaches and/or methods; looks beyond the narrow confines of a problem or opportunity when producing analysis; is a passionate advocate for analysis; uses professional judgement and reaches conclusions even when evidence is incomplete. (1,2,4,7,9,10)

      B3: Collaborative: understands others point of view and adapts approach or ask; seeks to reconcile different views; builds trust with colleagues and clients; shares ideas and work with other professionals; respects and appreciates diversity; listens to others' points of view, however challenging; invites and considers feedback; aware of the impact of language and non verbal behaviour on others. (4,6,7,8,9)

      B4: Rigour: demonstrates a commitment to detail. (5,11)

      B5: Leadership: leads others, including outside organisational structures, to deliver outcomes. (6)

  • ECOM181 Module Evaluation Survey

  • Assessment 2: Project

    ASSESSMENT 2: PROJECT

    Assessment Weighting:  60%

    DESCRIPTION:

    The final project will be done in groups and consists of exploring the current macroeconomic setting of a chosen country and making recommendations for monetary, fiscal, or industrial policy. Your analysis and recommendations will be presented live (end July) in slide form (PPT or Beamer) and submitted in a more formal written report thereafter (due by 5 August), incorporating feedback from the presentation. Groups should comprise 3-4 students.



    • ECOM181 Project Group Allocation Group choice
      This section is for Learners to confirm  their group allocation 

      Instructions: 
      Since  the  system does not allow allocation on behalf of your chosen group, a       nominated Leader of each group should:
      - firstly, select from any of the available  slots below >>> and SAVE your choice,
      - then notify members of your group which of the slots you  have chosen 
       - the group member should then proceed by following  steps above  but using the slot allocated for your group
      Please be reminded that allocation is limited to 4 members only

      Deadline Thursday 17th November  2022

      Kindly email emapstudentsupport@qmul.ac.uk if you have any issues.



    • ECOM181 Group Project Proposal Submission Assignment

      The submission of the report is required by ONE  nominated member of each group. All groups submit here and then they will be randomly allocated to Tatsuro or Sarah.


    • ECOM181 Group Project- Peer Reviews Glossary
    • ECOM181 Group Project FINAL Report Submission Assignment

      FINAL Report Submission required  for ECOM181 - Macroeconomics for Policy 

      The submission of the report is required by ONE  nominated member of each group 


    • ECOM181 Group Project Video Submissions Assignment
      Students must
      Mark as done

  • Topic 19