Advanced Macroeconomic Theory – II

Paper Code: 
DECO 812
Credits: 
6
Contact Hours: 
90.00
Max. Marks: 
100.00
Objective: 

1.      To help the students analyze the post Keynesian theories involving IS - LM analysis

2.       To acquaint the students with the ideas of New Classical and New Keynesian macroeconomics

3.      To develop an understanding of trade cycles and open economy macroeconomics

18.00
Unit I: 
IS LM Model

·         Money market equilibrium: the LM curve – construction, factors that determine the slope of LM curve, factors that shift the LM curve

·         Goods market equilibrium: the IS curve - construction, factors that determine the slope of IS curve, factors that shift the IS curve

·         The IS and LM curves combined

·         Factors that affect the equilibrium income and interest rate;

·         Relative effectiveness of monetary and fiscal policy

18.00
Unit II: 
New Classical and New Keynesian Macroeconomics

·         Monetarist-Fiscalist debate on Policy Activism

·         New classical approach to macroeconomics

·         Real Business Cycle models

·         New Keynesian Macroeconomics- Sticky Price (Menu Cost) Model, Efficiency Wage Hypothesis

18.00
Unit III: 
Inflation and unemployment

·         Inflation –Unemployment trade off - The Phillips Curve

·         The natural rate of unemployment hypothesis and Adaptive expectation hypothesis

·         Relationship between short run and long run Phillips Curve

·         Sacrifice Ratio and Policy of disinflation

18.00
Unit IV: 
Theories of Trade Cycle

·         Concept and Phases of Trade Cycle

·         Theories of Trade Cycle- Innovations theory, Monetary theory, Keynes’ theory, Kaldor’s Theory , Samuelson’s Multiplier-Accelerator Model and  Hicks’ Theory

Control of business cycles – relative efficacy of monetary and fiscal policies

18.00
Unit V: 
Open Economy Macroeconomics

·         Mundell - Fleming model of a small open economy under imperfect and perfect capital mobility with fixed and flexible exchange rate regimes

·         Analysis of effectiveness of monetary and fiscal policies

Essential Readings: 
  1. Froyen, R. T., Macroeconomics: Theories and Policies, Pearson Education India; 10thedition, 2013
  2. Vaish, M.C. Macroeconomic Theory, Vikas Publishing House, New Delhi, 14th Edition, 2014
References: 

1.    Branson, W. H., Macroeconomic Theory and Policy, Affilated East-west Press Pvt Ltd.; 3rd edition, 2005.

2.    Mankiw,N. G., Macroeconomics, Worth Publishers Inc.,10thedition, 2019.

3.    Edgemond, P., Macroeconomics, Prentice Hall of India, 1999.

4.    Rana, K.C.&Verma, K.N., Macroeconomic Analysis, Vishal Publishing Co., 11th edition, 2014.

5.    Ahuja, H. L.,Macroeconomics – Theory & Policy, S. Chand, 20th edition, 2019.

Academic Session: 
2023-24
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