Excerpts from book:

From my perspective, the purpose of this course is to put you in a position to read and critically analyze journal articles in macroeconomics. Notice that the goal of “teaching you macroeconomics” - by which I mean describing a series of theories and empirical observations about the macroeconomy - is secondary. Unfortunately, the only way to know enough to do research in a particular area of economics is to read a lot of journal articles. Since each of you will pursue a different research agenda, each of you will have to build your own reading list.

To give you an idea of what you need to know to read contemporary journal article, I have a copy of a recent article. I’ll pass it around the room, and everyone should take a close look at it. Right now, the majority of you would be at a complete loss to understand what the paper is about. By the end of the semester, I want you to be able to write a referee report on this paper. In fact, doing so will be your final assignment.

Most of the emphasis in this course will be on learning the mathematical tools needed to solve macro models. Models in macroeconomics are usually extremely complex, so their solution is rarely trivial. In some cases, we’ll need to use computers. Many times during the first year, you will be overwhelmed and annoyed by the extensive focus on theory and technique, rather than on empirical facts and deep economic insight. I can assure you that most economists are very much focused on insight, and unimpressed with technique.

To explain what we are going to talk about in this course, I’m going to write down the world’s simplest macroeconomic model.

Yt = AtLt

where Yt is output (GDP) at time t, Lt is labor input, and At is labor productivity. Notice that this model is stated in terms of aggregates and that time is an important element. OK, now that I have a model, I can speak clearly about macroeconomics is. It’s the study of the determinants of
Yt. Macroeconomists care about things like interest rates, inflation, exchange rates, maybe the stock market, etc., but only to the extent that they affect Yt.

Now macroeconomics is divided into two main subfields, the study of longrun growth (At), and the study of the business cycle (Lt). The basic plan for the semester is to get your feet wet by studying growth (serious analysis of business cycles gets technical). This will last about 2-3 weeks. Then we’ll invest 2 more weeks in developing a general macroeconomic model. This will be the hardest part of the course, and we won’t see the intellectual payoff until after the exam.

After the exam we’ll get into the meat of the course and the traditional focus of macroeconomics - trying to figure out why recessions happen and what we should do (if anything) to prevent them.