30510 - MONETARY AND FISCAL POLICY: CURRENT CHALLENGES
Course taught in English
Go to class group/s: 31
At least one course of macroeconomics is strongly recommended. The course itself is not maths-intensive: only simple algebra and virtually no calculus are used.
The course deals with contemporary issues of economic policy, particularly in Europe, as such it is meant to supply the tools for a deeper understanding of the contemporary world, that should be standard baggage of any educated economics student. The first goal of this course is to discuss some of the key macroeconomic problems of out times, using a rigorous framework but with an emphasis on facts and problems as opposed to complicated theoretical models. The experience of many years has taught me that in many cases our students leave Bocconi without a clear understanding of basic terms and facts. This, however, does not mean that we can just talk about problems as in newspapers or talk shows. We want to make sure that we can le all the tools needed to study a problem in a rigorous manner; we want to make sure that we use all the terms correctly and precisely; we want to make sure that we have the right intuitions, besides knowing the formulas and the models. The second goal of this course is methodological. Most, if not all, macroeconomic problems do not have an obvious, black-or-white solution: there are pros and cons in any solution we might think of. And in virtually all cases reasonable and competent individuals have very different views of the same issue. I therefore strive to present all the main sides of the debate, instead of presenting a simple model with a simple, one-sided solution. Of course, it is impossible to ensure 100 percent neutrality.
This is the program for the course:
- Preliminaries: GDP and national income accounting, price indices, nominal and real quantities.
- Preliminaries: real and nominal interest rates.
- Monetary policy: understanding money and the role of the European Central Bank.
- The evolution of monetary policy before, during and after the financial crisis.
- The government deficit and debt and the dynamics of the debt / GDP ratio.
- The debate on why the government debt should (or should not) worry policymakers.
- The effects of government spending and taxes: the (surprisingly many) different views.
- The debate on fiscal consolidations and austerity.
- Empirical evidence on fiscal consolidations.
- The initial debate on the fiscal constitution of the European Union.
- The European fiscal constitution: the Stability and Growth Pact and beyond.
- Insolvency, illiquidity, default, and restructuring.
- A case study: the Greek crisis.
- The exchange rate and the current account.
- The debate about monetary unions and the Euro.
- The view from Germany.
- Fiscal policy in a monetary union: Permanent transfers vs mutual insurance.
- The policy response: European rescue operations.
Identify the main issues in the European economic policy debate, understand the various sides of the debate, discuss critically the alternative proposals.
Understand the various sides of the debate on European issues, and discuss critically the alternative proposals.
- Face-to-face lectures
- Case studies /Incidents (traditional, online)
The case studies apply the tools learnt in the course to critical episodes in the recent history of Europe, for instance the Greek crisis.
Handouts written by the instructor are posted online before each lecture.