"The basic tools for analyzing macroeconomic fluctuations and policies, applied to concrete issues and presented within an integrated New Keynesian framework.
The basic tools for analyzing macroeconomic fluctuations and policies, applied to concrete issues and presented within an integrated New Keynesian framework.
This textbook presents the basic tools for analyzing macroeconomic fluctuations and policies and applies them to contemporary issues. It employs a unified New Keynesian framework for understanding business cycles, major crises, and macroeconomic policies, introducing students to the approach most often used in academic macroeconomic analysis and by central banks and international institutions. The book addresses such topics as how recessions and crises spread; what instruments central banks and governments have to stimulate activity when private demand is weak; and what ""unconventional"" macroeconomic policies might work when conventional monetary policy loses its effectiveness (as has happened in many countries in the aftermath of the Great Recession.).
The text introduces the foundations of modern business cycle theory through the notions of aggregate demand and aggregate supply, and then applies the theory to the study of regular business-cycle fluctuations in output, inflation, and employment. It considers conventional monetary and fiscal policies aimed at stabilizing the business cycle, and examines unconventional macroeconomic policies, including forward guidance and quantitative easing, in situations of ""liquidity trap""-deep crises in which conventional policies are either ineffective or have very different effects than in normal time.
This book is the first to use the New Keynesian framework at the advanced undergraduate level, connecting undergraduate learning not only with the more advanced tools taught at the graduate level but also with the large body of policy-oriented research in academic journals. End-of-chapter problems help students master the materials presented."
By:
Edouard Challe (Ecole Polytechnique)
Translated by:
Susan Emanuel
Imprint: MIT Press
Country of Publication: United States
Dimensions:
Height: 229mm,
Width: 178mm,
Weight: 454g
ISBN: 9780262549295
ISBN 10: 0262549298
Pages: 360
Publication Date: 19 September 2023
Recommended Age: From 18 to 99 years
Audience:
College/higher education
,
Primary
Format: Paperback
Publisher's Status: Active
Preface ix Chapter 1 Introduction: From Business-Cycle Measurement to Macroeconomic Theory 1 1.1 The Gross Domestic Product and Its Breakdown 2 1.2 Measuring Business-Cycle Fluctuations 5 1.3 Business Cycle Theory 11 Part I Foundations: Aggregate Demand and Supply 17 Chapter 2 Aggregate Demand 19 2.1 The Real Interest Rates and the Macroeconomic Equilibrium 20 2.2 Private Consumption 22 2.3 Investment 32 2.4 Net Exports 34 2.5 Aggregation of Expenditures 42 2.6 Monetary Policy and Aggregate Demand 45 2.7 Exercises 48 2.8 Appendix: The Log-Linear IS Curve 50 Chapter 3 Aggregate Supply 51 3.1 Firm Behavior 53 3.2 Labor Market Equilibrium 58 3.3 The Natural Equilibrium 61 3.4 Equilibrium with Nominal Price Rigidities 63 3.5 Empirical Evaluation of the AS Curve 71 3.6 Alternative Formulations of the AS Curve 73 3.7 Exercises 79 3.8 Appendix: Optimal Labor Supply 85 Part II Business Cycles 87 Chapter 4 AS-AD Equilibrium and the Propagation of Macroeconomic Shocks 89 4.1 Macroeconomic Equilibrium 90 4.2 Effect of an Aggregate Demand Shock 93 4.3 Effect of an Aggregate Supply Shock 98 4.4 Nominal Rigidities and the Nature of Business-Cycle Fluctuations 101 4.5 Exercises 104 Chapter 5 Unemployment Fluctuations 109 5.1 The Dynamics of Unemployment and Worker Flows: Empirical Aspects 111 5.2 Search, Matching, and Equilibrium Unemployment 118 5.3 Macroeconomic Equilibrium 130 5.4 Exercises 134 Part III Conventional Macroeconomic Policies 141 Chapter 6 Monetary Policy 143 6.1 Monetary Policy Implementation 145 6.2 Optimal Monetary Policy 158 6.3 Expectations and the Credibility and Effectiveness of Monetary Policy 178 6.4 Exercises 198 Chapter 7 Fiscal Policy 203 7.1 Ricardian Equivalence 205 7.2 Fiscal Policy in General Equilibrium 216 7.3 The Government-Spending Multiplier 229 7.4 The Tax Multipliers 235 7.5 Exercises 242 Part IV The Liquidity Trap and Unconventional Policies 247 Chapter 8 The Liquidity Trap 249 8.1 The Financial Crisis and Aggregate Demand 250 8.2 The Zero Lower Bound on the Short-Term Nominal Interest Rate 257 8.3 The Liquidity Trap Paradoxes 268 8.4 Exercises 274 Chapter 9 Unconventional Monetary Policies 277 9.1 Forward Guidance 278 9.2 Large-Scale Asset Purchases 288 9.3 Iconoclastic Monetary Policies 298 9.4 Exercises 304 Chapter 10 Fiscal Policy and Structural Reforms in a Liquidity Trap 307 10.1 The General-Equilibrium AS-AD Model at the Zero Lower Bound 308 10.2 Fiscal Policy in a Liquidity Trap 311 10.3 Structural Reforms in a Liquidity Trap 323 10.4 Exercises 326 10.5 Appendix: Derivation of the General-Equilibrium AS-AD Model in a Liquidity Trap 328 References 331 Index 337
Edouard Challe is Professor of Economics at Ecole Polytechnique and Director of Research at CNRS (the French National Center for Scientific Research).
