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book € 50,00

series "Manuali"

pp. 448, Brossura, 978-88-15-38307-5
publication year 2023

ANDREA BOITANI

Macroeconomics

Preface

I Key variables and institutions

1. Gross domestic product and related variables

1.1 Introduction

1.2 Gross Domestic Product

1.3 Consumption, investment, government purchases

1.4 Italian GDP using the three approaches

1.5 National income identities

1.6 Is GDP really that important?

1.6.1. GDP per capita

1.6.2. Self-production and the underground economy

1.6.3. GDP, Human Development Index and Gross Domestic Happiness

1.7 Per capita income and inequality

1.8 Summary

2. Four ‘rates’

2.1 Introduction

2.2 The unemployment rate

2.2.1. Definitions

2.2.2. Consequences of unemployment

2.3 Price level and inflation rate

2.3.1. Inflation, deflation and hyperinflation

2.3.2. The consumer price index

2.4 The GDP growth rate

2.4.1. Nominal GDP and real GDP

2.4.2. Per capita real GDP growth

2.5 The interest rate

2.5.1. The nominal interest rate

2.5.2. The real interest rate

2.5.3. Short- and long-term interest rates

2.6 Summary

Appendix. Properties and uses of logarithms

3. Balance of payments and exchange rate

3.1 Introduction

3.2 The Balance of Payments

3.3 What is an open economy?

3.4 The balance of payments and national income accounts

3.5 The exchange rate

3.5.1. The nominal exchange rate

3.5.2. The real exchange rate

3.6 GDP and the purchasing power parity

3.7 The uncovered interest rate parity

3.8 Summary

4. Money and the government budget

4.1 Introduction

4.2 The nature and functions of money

4.3 Money supply and the role of banks

4.3.1. Monetary aggregates

4.3.2. The role of ordinary banks

4.4 The quantity equation

4.5 The government budget

4.6 Government debt

4.6.1. Deficit and debt

4.6.2. The arithmetic of three rates and the monetary union

4.7 Summary

5 Fluctuations and growth

5.1 Introduction

5.2 The stylised facts of economic growth

5.3 Fluctuations, trends and potential GDP

5.3.1. Fluctuations and growth

5.3.2. De-trending the data

5.3.3. Potential GDP and output gap

5.4 The business cycle

5.5 Importance of growth and cycle

5.6 Periods in Macroeconomics

5.6.1. The very long run

5.6.2. The long run

5.6.3. The short run

5.6.4. The medium run

5.7 Summary

II The long run

6 Aggregate demand and supply in the long run

6.1 Introduction

6.2 Aggregate demand (AD)

6.3 The price determined real wage

6.4 Trade unions and the bargained real wage

6.5 Competing claims equilibrium

6.6 Money neutrality

6.7 Policies to increase employment and GDP in the long run

6.7.1. More powerful antitrust authorities

6.7.2. Lower entry costs and deregulation

6.7.3. Reducing the tax wedge

6.8 Labour and goods markets: interactions*

6.9 Summary

Appendix. Cournot’s oligopoly

7 Saving and investment

7.1 Introduction

7.2 From national accounting to economic theory

7.3 Saving

7.4 Investment

7.5 Coordination of saving and investment

7.6 Summary

Appendix. Choice between present and future consumption

8 Inflation and its costs

8.1 Introduction

8.2 Inflation and the quantity theory equation

8.3 Costs of inflation

8.3.1. Transaction costs and distributional e↵ects

8.3.2. Fiscal drag, seigniorage and inflation tax

8.4 Supply of and demand for inflation

8.4.1. Public deficit and demand for inflation

8.4.2. The supply of inflation and central bank independence

8.5 Sector inflation and average inflation

8.6 Summary

9 The open economy in the long run

9.1 Introduction

9.2 Net foreign investment and net exports

9.3 Equilibrium in the open economy

9.4 Exogenous shocks and changes in equilibrium

9.5 Equilibrium with the two parities

9.6 Inflation, exchange rates and international competitiveness

9.7 Summary

III The short run

10 Income, expenditure and fiscal policies

10.1 Introduction

10.2 Constant wages and prices: a horizontal AS

10.3 Consumption function and the multiplier

10.3.1. The multiplier principle

10.3.2. A paradox of thrift

IN DEEP A crucial hypothesis

10.4 Fiscal policy

10.4.1. The government budget and the multiplier

10.4.2. Budget deficit, public spending and other ‘automatic stabilisers’*

10.4.3. The balanced budget theorem

10.5 The Covid pandemic and the multiplier

10.6 Summary

Appendix. Market power, income distribution and multipliers

10.A.1 The baseline model

10.A.2 Introducing the government

11 The role of money and the interest rate

11.1 Introduction

11.2 The IS and the goods market

11.3 Monetary and fiscal policy: the IS-IT model

11.4 The money market

11.4.1. Interest rate steering

11.5 Summary

Appendix 1. The derivation of the money demand function

Appendix 2. The IS LM model

12 The open economy in the short run

12.1 Introduction

12.2 The balanced balance of payments (BoP) curve

12.3 The IS curve in an open economy

12.4 Monetary and fiscal policies under flexible exchange rates

12.5 Monetary and fiscal policies under fixed exchange rates

12.6 Spillover e↵ects in a monetary union*

12.7 Summary

Appendix. Marshall-Lerner conditions

13 Financial and economic crisis

13.1 Introduction

13.2 The Great Recession

13.3 Real estate bubbles and ‘subprime’ mortgages

13.4 The appeal of debt

13.4.1. Moral hazard

13.4.2. The power of leverage

13.5 Explanatory models

13.5.1. Households spending and mortgage pattern

13.5.2. Financial hierarchy and bank leverage*

13.6 The sovereign debt crisis in the eurozone

13.6.1. Chronicle of a collapse foretold

13.6.2. A Europe not up to scratch

13.6.3. Self-defeating fiscal consolidation?

13.7 Summary

IV The medium run

14 The Phillips curve and the medium run AS

14.1 Introduction

14.2 Wage adjustment and the Phillips curve

14.3 The NAIRU and the inflationary process

14.4 A non-inflationary wage dynamics

14.5 From the Phillips curve to the medium run AS

14.6 Hysteresis and persistence in the unemployment rate*

14.7 Summary

15 Fluctuations, inflation and monetary policy rule

15.1 Introduction

15.2 IS and IT in the medium run

15.2.1. IS and the output gap

15.2.2. Inflation targeting

15.2.3. Taylor’s rule

15.3 The AD curve

15.4 Monetary policy and expectations

15.4.1. An inflation shock

15.4.2. A temporary negative demand shock

15.4.3. A permanent inflationary shock

15.5 The economy at the zero lower bound

15.5.1. Introduction

15.5.2. The kinked AD curve

15.5.3. Towards unconventional policies

15.5.4. Structural reforms at the zero lower bound

15.6 Post-Covid inflation and the Ukraine invasion

15.7 Summary

V Economic growth

16 Endogenous economic growth

16.1 Introduction

16.2 An endogenous explanation for growth

16.3 The continuous time model

16.4 Production of technology and economic growth

16.5 Growth and the environment*

16.6 Growth accounting

16.7 Summary

17 Economic growth and convergence*

17.1 Introduction

17.2 The Solow model

17.2.1. The production function and income shares

17.2.2. The model solution

17.3 Technical progress and growth

IN DEEP Growth and unemployment

17.4 Convergence and conditional convergence

17.5 Endogenous growth and decreasing marginal product

17.6 Summary

Appendix. The Solow residual

Index

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ANDREA BOITANI

Macroeconomics

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