Students

ECON3011 – Macroeconomic Policy

2024 – Session 2, In person-scheduled-weekday, North Ryde

General Information

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Unit convenor and teaching staff Unit convenor and teaching staff Convenor
Jeffrey Sheen
jeffrey.sheen@mq.edu.au
Lecturer
David Orsmond
david.orsmond@mq.edu.au
Credit points Credit points
10
Prerequisites Prerequisites
ECON2004 or ECON204
Corequisites Corequisites
Co-badged status Co-badged status
Unit description Unit description
This unit further develops macroeconomic models with a focus on key contemporary policy and operational issues such as variable inflation rates, interest rates, alternative monetary policy frameworks, fiscal policy constraints, climate change, understanding financial crises, financial regulation and cryptocurrencies. Students develop an understanding of the factors that behind these issues and how key policy institutions such as the RBA, APRA and Treasury seek to address them.

Important Academic Dates

Information about important academic dates including deadlines for withdrawing from units are available at https://www.mq.edu.au/study/calendar-of-dates

Learning Outcomes

On successful completion of this unit, you will be able to:

  • ULO1: Analyse and explain macroeconomic policy within a general framework.
  • ULO2: Appraise how monetary and fiscal policies are determined in the context of the current economic environment.
  • ULO3: Critically evaluate the effectiveness of current macroeconomic policy in achieving its stated goals.

General Assessment Information

LATE SUBMISSION PENALTY

A maximum penalty of five percentage points of the total possible marks will be applied

per day to late submissions, for up to a maximum of seven calendar days. Tasks that have

not been submitted within the maximum number of additional late days will receive a

mark of zero, unless otherwise specified in the late penalties section of the Unit Guide.

Late submission for a task will only be permitted when specified in the unit guide. This

provision does not apply to online exams or other assessment with a time-limit of less than

24 hours.

 

Where an application for Special Consideration is approved and the outcome is an

extension to the due date of a task, submissions that are received after the new due date

will be subject to late penalties that are calculated from the new due date. This only

applies where the outcome is an extension to the due date – see the Special Consideration

Policy for a schedule of all possible outcomes.

Assessment Tasks

Name Weighting Hurdle Due
Participation 5% No In Weeks 1-13
Final examination 50% No In final examination period
Mid-session class test 25% No Week 7
Essay assignment 20% No Week 10

Participation

Assessment Type 1: Participatory task
Indicative Time on Task 2: 0 hours
Due: In Weeks 1-13
Weighting: 5%

 

Students are expected to participate in live seminars and the forum

 
On successful completion you will be able to:
  • Analyse and explain macroeconomic policy within a general framework.
  • Appraise how monetary and fiscal policies are determined in the context of the current economic environment.

Final examination

Assessment Type 1: Examination
Indicative Time on Task 2: 35 hours
Due: In final examination period
Weighting: 50%

 

A two-hour examination will be held during the University Examination Period, and will be on based on material covered in lectures from weeks 1 to 13 (inclusive), with an emphasis on material presented after the class test.

 
On successful completion you will be able to:
  • Appraise how monetary and fiscal policies are determined in the context of the current economic environment.
  • Critically evaluate the effectiveness of current macroeconomic policy in achieving its stated goals.

Mid-session class test

Assessment Type 1: Quiz/Test
Indicative Time on Task 2: 15 hours
Due: Week 7
Weighting: 25%

 

The 80 minute class test will be based on the lecture material and exercises covered in weeks 1 to 6.

 
On successful completion you will be able to:
  • Analyse and explain macroeconomic policy within a general framework.
  • Appraise how monetary and fiscal policies are determined in the context of the current economic environment.

Essay assignment

Assessment Type 1: Report
Indicative Time on Task 2: 20 hours
Due: Week 10
Weighting: 20%

 

Provide an answer to questions of an analytical nature and/or write a short essay/report which might require the use of data.

 
On successful completion you will be able to:
  • Appraise how monetary and fiscal policies are determined in the context of the current economic environment.
  • Critically evaluate the effectiveness of current macroeconomic policy in achieving its stated goals.

1 If you need help with your assignment, please contact:

  • the academic teaching staff in your unit for guidance in understanding or completing this type of assessment
  • the Writing Centre for academic skills support.

2 Indicative time-on-task is an estimate of the time required for completion of the assessment task and is subject to individual variation

Delivery and Resources

CLASSES

There will be some pre-recorded learning material posted on iLearn each Tuesday or before. There will also

be a 2-hour face-to-face class each Wednesday, 4-6pm in 14SCO T5 Lecture Theatre

 

To access your timetable, visit Class Finder and confirm the day and location (which could change)

on eStudent.

Prizes

VICTOR ARGY PRIZE FOR ECON3011

This prize commemorates Victor Argy who was Professor of Economics at Macquarie University

from 1973 until his death in 1993. The prize, to the value of $350, is awarded for proficiency in

ECON3011 and is open to all candidates proceeding to the degree of Bachelor.

 

RECOMMENDED TEXTS

There is no required textbook for this unit.

It is assumed that you understand well an intermediate macroeconomics textbook eg O. Blanchard and J. Sheen, Macroeconomics, 2014, 4th edition, Pearson (https://www.pearson.com.au/9781442559516)

Good reference texts for this unit are:

Stephen Williamson, Macroeconomics , 2018, 6th global edition, Pearson (https://www.pearson.com.au/9781292215761)

or

Charles Jones, Macroeconomics International Student Edition, 5th edition 2020 (Purchase ebook at https://protect-au.mimecast.com/s/TXBwCBNqgBC32mKNTr-dU0?domain=wiley.com)

Up-to-date commentaries and data on the Australian economy can be found in the following:

  • Reserve Bank of Australia, Bulletin, published monthly: http://www.rba.gov.au
  • Department of the Treasury, Economic Roundup, AGPS, Canberra, published quarterly (available online at http://www.treasury.gov.au/)

Data relating to Australia and other countries are also available on the Internet. Useful sites include the following:

  • ABS Time Series Service: http://www.abs.gov.au
  • Budget Papers for Australia: http://www.treasury.gov.au/
  • Reserve Bank of Australia: http://www.rba.gov.au
  • FRED, https://fred.stlouisfed.org/

Useful readings for the topics are given in the Unit Schedule, and extra readings may be recommended during the lectures.

Unit Schedule

WEEKS 1-2 Refresher on ISLM, AS-AD; Malthusian growth model, Solow growth model, Endogenous growth models (JS)

  • Blanchard and Sheen 2013 Chs 5-12  
  • McLeay,M. Radia, A and Thomas R. 2914 Money creation in the modern economy. Bank of England Quarterly Bulletin Q1 2014 •    
  • Williamson Chs 1,-3, 7-8
  • Jones Chs 3, 5, 6, 9, 11

 

WEEK 3  Low inflation/high inflation/disinflation (JS)

Blanchard, O. 2018 Should we reject the natural rate hypothesis? Journal of Economic Perspectives, Vol 32, 1 Winter 2018 https://pubs.aeaweb.org/doi/pdf/10.1257/jep.32.1.97

Bernanke, B & Blanchard, O. An analysis of pandemic-era inflation in 11 economies https://www.piie.com/publications/working-papers/2024/analysis-pandemic-era-inflation-11-economies

Cassidy, N., Rankin,E., Read, M. and Seibold,C. 2019 Explaining Low Inflation Using Models https://www.rba.gov.au/publications/bulletin/2019/jun/explaining-low-inflation-using-models.html •    

Williamson Chs 14-15

Jones Ch 13 

 

WEEK 4   Secular stagnation, potential growth, technology and inequality (JS)

Arsov, I and Watson, B. 2019 Potential Growth in Advanced Economies RBA Bulletin 12 December 2019 https://www.rba.gov.au/publications/bulletin/2019/dec/potential-growthinadvanced-economies.html

Gordon, R. 2014 US Economic Growth is Over: The Short Run Meets the Long Run, Think Tank 20: Growth, Convergence and Income Distribution: The Road from the Brisbane G-20 Summit: https://www.brookings.edu/wp-content/uploads/2016/07/tt20-united-states-economicgrowth-gordon.pdf

PIIE 2020 How to Fix Economic Inequality? An Overview of Policies for the United States and Other High-Income Economies. (https://www.piie.com/microsites/how-fix-economic-inequality)

 

WEEK 5   Monetary policy frameworks – inflation targeting and alternatives (JS)

Debelle, G. 2018 Twenty-five Years of Inflation Targeting in Australia. RBA Conference, Central Bank Frameworks: Evolution or Revolution? 2018 https://www.rba.gov.au/speeches/2018/spdg-2018-04-12.html

Rogoff, K. 2017. Dealing with monetary paralysis at the zero bound. Journal of EconomicPerspectives, https://scholar.harvard.edu/files/rogoff/files/ dealing_with_monetary_paralysis_at_the_zero_bound.pdf

RBA Explainer - Unconventional monetary policy. https://www.rba.gov.au/education/resources/explainers/unconventional-monetary-policy.html

Jones Ch12

WEEK 6   Links between fiscal policy and monetary policy – the government budget constraint, the fiscal theory of prices, hyperinflation (JS)

Blanchard and Sheen 2013 Chs 23-24

Blanchard, O. (2019) Public Debt and Low Interest Rates, American Economic Review, www.piie.com/system/files/documents/wp19-4.pdf

Blanchard, O. (2021) Fiscal Policy under Low Interest Rates Draft text: https://fiscal-policyunder-low-interest-rates.pubpub.org/

Cochrane, J. (2022) The Fiscal Theory of the Price Level Draft text: https://www.johnhcochrane.com/research-all/the-fiscal-theory-of-the-price-level-1

Jones Ch 18

 

WEEK 7   Mid-session test 

 

WEEK 8 The causes of financial crises and policy responses (DO)

Reinhart, C. and K. Rogoff (2008), This Time is Different: Eight Centuries of Financial Folly, NBER Paper 13882, March https://www.nber.org/papers/w13882.pdf

RBA Explainer: The Global Financial Crisis, https://rba.gov.au/education/resources/explainers/pdf/the-global-financial-crisis.pdf

Williamson Ch. 18

 

WEEK 9  Financial regulation: Principles and practice (DO)

Yuksel, M. (2019), ‘A decade of post-crisis G20 financial sector reforms,’ RBA Bulletin, June https://rba.gov.au/publications/bulletin/2019/jun/pdf/a-decade-of-post-crisis-g20-financialsectorreforms.pdf

Orsmond. D. and F. Price (2016), ‘Macroprudential policy frameworks and tools,’ RBA Bulletin, December https://www.rba.gov.au/publications/bulletin/2016/dec/ pdf/rbabulletin-2016-12-macroprudential-policy-frameworks-and-tools.pdf

 

WEEK 10  Digital money and the payments system; the future of cryptocurrencies, CBDCs – eg Bitcoin, Ripple, central bank digital currencies (JS)

Dark, C., Emery, D, Ma,J. and Noone, C. 2019 Cryptocurrency: Ten Years On. RBA Bulletin,www.rba.gov.au/publications/bulletin/2019/jun/cryptocurrency-ten-years-on.html

Kumar, A, Smith. C 2018 Crypto-currencies – An introduction to not-so-funny moneys, Journal of Economic Surveys 32,8 https://onlinelibrary.wiley.com/doi/full/10.1111/ joes.12289

Härdle, W. and Harvey, C. and Reule, R., Understanding Cryptocurrencies (March 26, 2019).https://ies.keio.ac.jp/upload/20191125econo_Wolfbang_wp.pdf

Richards, T., Thompson, C., and Dark, C. Sep 2020. Retail central bank digital currency -    design considerations, rationales and implications. RBA Bulletin. https://www.rba.gov.au/publications/bulletin/2020/sep/retail-central-bank-digital-currency-design-considerations-rationales-and-implications.html

Williamson Chs 18

 

WEEKS 11-12-13  Official Australian and global economy reports (JS)

Latest RBA Statement on Monetary Policy, Treasury Budget Papers, Intergenerational Report, WEO

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Unit information based on version 2024.03 of the Handbook