Macroeconomics

Title Page
Copyright
Brief Contents
Contents
Preface
The Core
	Introduction
		Chapter 1 A Tour of the World
			1-1 The Crisis
			1-2 The United States
				Low Interest Rates and the Zero Lower Bound
				How Worrisome Is Low Productivity Growth?
			1-3 The Euro Area
				Can European Unemployment Be Reduced?
				What Has the Euro Done for Its Members?
			1-4 China
			1-5 Looking Ahead
			Appendix: Where to Find the numbers
		Chapter 2 A Tour of the Book
			2-1 Aggregate Output
				GDP: Production and Income
				Nominal and Real GDP
				GDP: Level versus Growth Rate
			2-2 The Unemployment Rate
				Why Do Economists Care about Unemployment?
			2-3 The Inflation Rate
				The GDP Deflator
				The Consumer Price Index
				Why Do Economists Care about Inflation?
			2-4 Output, Unemployment, and the Inflation Rate: Okun’s Law and the Phillips Curve
				Okun’s Law
				The Phillips Curve
			2-5 The Short Run, the Medium Run, and the Long Run
			2-6 A Tour of the Book
				The Core
				Extensions
				Back to Policy
				Epilogue
			Appendix: The Construction of Real GDP and Chain-Type Indexes
	The Short Run
		Chapter 3 The Goods Market
			3-1 The Composition of GDP
			3-2 The Demand for Goods
				Consumption (C)
				Investment (I)
				Government Spending (G)
			3-3 The Determination of Equilibrium Output
				Using Algebra
				Using a Graph
				Using Words
				How Long Does It Take for Output to Adjust?
			3-4 Investment Equals Saving: An Alternative Way of Thinking about Goods-Market Equilibrium
			3-5 Is the Government Omnipotent? A Warning
		Chapter 4 Financial Markets I
			4-1 The Demand for Money
				Deriving the Demand for Money
			4-2 Determining the Interest Rate: I
				Money Demand, Money Supply, and the Equilibrium Interest Rate
				Monetary Policy and Open Market Operations
				Choosing Money or Choosing the Interest Rate?
			4-3 Determining the Interest Rate: II
				What Banks Do
				The Demand and Supply for Central Bank Money
				The Federal Funds Market and the Federal Funds Rate
			4-4 The Liquidity Trap
			Appendix: The Determination of the Interest Rate When People Hold BothCurrency and Checkable Deposits
		Chapter 5 Goods and Financial Markets; The IS-LM Model
			5-1 The Goods Market and the IS Relation
				Investment, Sales, and the Interest Rate
				Determining Output
				Deriving the IS Curve
				Shifts of the IS Curve
			5-2 Financial Markets and the LM Relation
				Real Money, Real Income, and the Interest Rate
				Deriving the LM Curve
			5-3 Putting the IS and the LM Relations Together
				Fiscal Policy
				Monetary Policy
			5-4 Using a Policy Mix
			5-5 How Does the IS-LM Model Fit the Facts?
		Chapter 6 Financial Markets II: The Extended Model
			6-1 Nominal versus Real Interest Rates
				Nominal and Real Interest Rates in the United States since 1978
				Nominal and Real Interest Rates: The Zero Lower Bound and Deflation
			6-2 Risk and Risk Premia
			6-3 The Role of Financial Intermediaries
				The Choice of Leverage
				Leverage and Lending
			6-4 Extending the IS-LM
				Financial Shocks and Policies
			6-5 From a Housing Problem to a Financial Crisis
				Housing Prices and Subprime Mortgages
				The Role of Financial Intermediaries
				Macroeconomic Implications
				Policy Responses
	The Medium Run
		Chapter 7 The Labor Market
			7-1 A Tour of the Labor Market
				The Large Flows of Workers
			7-2 Movements in Unemployment
			7-3 Wage Determination
				Bargaining
				Efficiency Wages
				Wages, Prices, and Unemployment
				The Expected Price Level
				The Unemployment Rate
				The Other Factors
			7-4 Price Determination
			7-5 The Natural Rate of Unemployment
				The Wage-Setting Relation
				The Price-Setting Relation
				Equilibrium Real Wages and Unemployment
			7-6 Where We Go from Here
			Appendix: Wage- and Price-Setting Relations versus Labor Supplyand Labor Demand
		Chapter 8 The Phillips Curve, the Natural Rate of Unemployment, and Inflation
			8-1 Inflation, Expected Inflation, and Unemployment
			8-2 The Phillips Curve and Its Mutations
				The Early Incarnation
				The Apparent Trade-Off and Its Disappearance
			8-3 The Phillips Curve and the Natural Rate of Unemployment
			8-4 A Summary and Many Warnings
				Variations in the Natural Rate across Countries
				Variations in the Natural Rate over Time
				High Inflation and the Phillips Curve Relation
				Deflation and the Phillips Curve Relation
			Appendix: Derivation of the Relation to a Relation between Inflation,Expected Inflation, and Unemployment
		Chapter 9 From the Short to the Medium Run: The IS-LM-PC Model
			9-1 The IS-LM-PC model
			9-2 Dynamics and the Medium Run Equilibrium
				The Role of Expectations Revisited
				The Zero Lower Bound and Debt Spirals
			9-3 Fiscal Consolidation Revisited
			9-4 The Effects of an Increase in the Price of Oil
				Effects on the Natural Rate of Unemployment
			9-5 Conclusions
				The Short Run versus the Medium Run
				Shocks and Propagation Mechanisms
	The Long Run
		Chapter 10 The Facts of Growth
			10-1 Measuring the Standard of Living
			10-2 Growth in Rich Countries since 1950
				The Large Increase in the Standard of Living since 1950
				The Convergence of Output per Person
			10-3 A Broader Look across Time and Space
				Looking across Two Millennia
				Looking across Countries
			10-4 Thinking about Growth: A Primer
				The Aggregate Production Function
				Returns to Scale and Returns to Factors
				Output per Worker and Capital per Worker
				The Sources of Growth
		Chapter 11 Saving, Capital Accumulation, and Output
			11-1 Interactions between Output and Capital
				The Effects of Capital on Output
				The Effects of Output on Capital Accumulation
				Output and Investment
				Investment and Capital Accumulation
			11-2 The Implications of Alternative Saving Rates
				Dynamics of Capital and Output
				The Saving Rate and Output
				The Saving Rate and Consumption
			11-3 Getting a Sense of Magnitudes
				The Effects of the Saving Rate on Steady-State Output
				The Dynamic Effects of an Increase in the Saving Rate
				The U.S. Saving Rate and the Golden Rule
			11-4 Physical versus Human Capital
				Extending the Production Function
				Human Capital, Physical Capital, and Output
				Endogenous Growth
			Appendix: The Cobb-Douglas Production Function and the Steady State
		Chapter 12 Technological Progress and Growth
			12-1 Technological Progress and the Rate of Growth
				Technological Progress and the Production Function
				Interactions between Output and Capital
				Dynamics of Capital and Output
				The Effects of the Saving Rate
			12-2 The Determinants of Technological Progress
				The Fertility of the Research Process
				The Appropriability of Research Results
				Management, Innovation, and Imitation
			12-3 Institutions, Technological Progress, and Growth
			12-4 The Facts of Growth Revisited
				Capital Accumulation versus Technological Progress in Rich Countries since 1985
				Capital Accumulation versus Technological Progress in China
			Appendix
: Constructing a Measure of Technological Progress
		Chapter 13 Technological Progress: The Short, the Medium, and the Long Run
			13-1 Productivity, Output, and Unemployment in the Short Run
				The Empirical Evidence
			13-2 Productivity and the Natural Rate of Unemployment
				Price Setting and Wage Setting Revisited
				The Natural Rate of Unemployment
				The Empirical Evidence
			13-3 Technological Progress, Churning, and Inequality
				The Increase in Wage Inequality
				The Causes of Increased Wage Inequality
				Inequality and the Top 1%
EXTENSIONS
	Expectations
		Chapter 14 Financial Markets and Expectations
			14-1 Expected Present Discounted Values
				Computing Expected Present Discounted Values
				A General Formula
				Using Present Values: Examples
				Constant Interest Rates
				Constant Interest Rates and Payments
				Constant Interest Rates and Payments Forever
				Zero Interest Rates
				Nominal versus Real Interest Rates and Present Values
			14-2 Bond Prices and Bond Yields
				Bond Prices as Present Values
				Arbitrage and Bond Prices
				From Bond Prices to Bond Yields
				Reintroducing Risk
				Interpreting the Yield Curve
			14-3 The Stock Market and Movements in Stock Prices
				Stock Prices as Present Values
				The Stock Market and Economic Activity
				A Monetary Expansion and the Stock Market
				An Increase in Consumer Spending and the Stock Market
			14-4 Risk, Bubbles, Fads, and Asset Prices
				Stock Prices and Risk
				Asset Prices, Fundamentals, and Bubbles
			Appendix: Deriving the Expected Present Discounted Value UsingReal or Nominal Interest Rates
		Chapter 15 Expectations, Consumption, and Investment
			15-1 Consumption
				The Very Foresighted Consumer
				An Example
				Toward a More Realistic Description
				Putting Things Together: Current Income, Expectations, and Consumption
			15-2 Investment
				Investment and Expectations of Profit
				Depreciation
				The Present Value of Expected Profits
				The Investment Decision
				A Convenient Special Case
				Current versus Expected Profit
				Profit and Sales
			15-3 The Volatility of Consumption and Investment
			Appendix: Derivation of the Expected Present Value of Profits underStatic Expectations
		Chapter 16 Expectations, Output, and Policy
			16-1 Expectations and Decisions: Taking Stock
				Expectations, Consumption, and Investment Decisions
				Expectations and the IS Relation
			16-2 Monetary Policy, Expectations, and Output
				Monetary Policy Revisited
			16-3 Deficit Reduction, Expectations, and Output
				The Role of Expectations about the Future
				Back to the Current Period
	The Open Economy
		Chapter 17 Openness in Goods and Financial Markets
			17-1 Openness in Goods Markets
				Exports and Imports
				The Choice between Domestic Goods and Foreign Goods
				Nominal Exchange Rates
				From Nominal to Real Exchange Rates
				From Bilateral to Multilateral Exchange Rates
			17-2 Openness in Financial Markets
				The Balance of Payments
				The Choice between Domestic and Foreign Assets
				Interest Rates and Exchange Rates
			17-3 Conclusions and a Look Ahead
		Chapter 18 The Goods Market in an Open Economy
			18-1 The IS Relation in the Open Economy
				The Demand for Domestic Goods
				The Determinants of C, I, and G
				The Determinants of Imports
				The Determinants of Exports
				Putting the Components Together
			18-2 Equilibrium Output and the Trade Balance
			18-3 Increases in Demand—Domestic or Foreign
				Increases in Domestic Demand
				Increases in Foreign Demand
				Fiscal Policy Revisited
			18-4 Depreciation, the Trade Balance, and Output
				Depreciation and the Trade Balance: The Marshall-Lerner Condition
				The Effects of a Real Depreciation
				Combining Exchange Rate and Fiscal Policies
			18-5 Looking at Dynamics: The J-Curve
			18-6 Saving, Investment, and the Current Account Balance
			Appendix: Derivation of the Marshall-Lerner Condition
		Chapter 19 Output, the Interest Rate, and the Exchange Rate
			19-1 Equilibrium in the Goods Market
			19-2 Equilibrium in Financial Markets
				Domestic Bonds versus Foreign Bonds
			19-3 Putting Goods and Financial Markets Together
			19-4 The Effects of Policy in an Open Economy
				The Effects of Monetary Policy in an Open Economy
				The Effects of Fiscal Policy in an Open Economy
			Fixed Exchange Rates
				Pegs, Crawling Pegs, Bands, the EMS, and the Euro
				Monetary Policy when the Exchange Rate Is Fixed
				Fiscal Policy when the Exchange Rate Is Fixed
			Appendix Fixed Exchange Rates, Interest Rates, and Capital Mobility
		Chapter 20 Exchange Rate Regimes
			20-1 The Medium Run
				The IS Relation under Fixed Exchange Rates
				Equilibrium in the Short and the Medium Run
				The Case for and against a Devaluation
			20-2 Exchange Rate Crises under Fixed Exchange Rates
			20-3 Exchange Rate Movements under Flexible Exchange Rates
				Exchange Rates and the Current Account
				Exchange Rates and Current and Future Interest Rates
				Exchange Rate Volatility
			20-4 Choosing between Exchange Rate Regimes
				Common Currency Areas
				Hard Pegs, Currency Boards, and Dollarization
			Appendix 1: Deriving the IS Relation under Fixed Exchange Rates
			Appendix 2: The Real Exchange Rate and Domestic and Foreign RealInterest Rates
	Back to Policy
		Chapter 21 Should Policy Makers Be Restrained?
			21-1 Uncertainty and Policy
				How Much Do Macroeconomists Actually Know?
				Should Uncertainty Lead Policy Makers to Do Less?
				Uncertainty and Restraints on Policy Makers
			21-2 Expectations and Policy
				Hostage Takings and Negotiations
				Inflation and Unemployment Revisited
				Establishing Credibility
				Time Consistency and Restraints on Policy Makers
			21-3 Politics and Policy
				Games between Policy Makers and Voters
				Games between Policy Makers
				Politics and Fiscal Restraints
		Chapter 22 Fiscal Policy: A Summing Up
			22-1 What We Have Learned
			22-2 The Government Budget Constraint: Deficits, Debt, Spending, and Taxes
				The Arithmetic of Deficits and Debt
				Current versus Future Taxes
				The Evolution of the Debt-to-GDP Ratio
			22-3 Ricardian Equivalence, Cyclical Adjusted Deficits, and War Finance
				Ricardian Equivalence
				Deficits, Output Stabilization, and the Cyclically Adjusted Deficit
				Wars and Deficits
			22-4 The Dangers of High Debt
				High Debt, Default Risk, and Vicious Cycles
				Debt Default
				Money Finance
		Chapter 23 Monetary Policy: A Summing Up
			23-1 What We Have Learned
			23-2 From Money Targeting to Inflation Targeting
				Money Targeting
				Inflation Targeting
				The Interest Rate Rule
			23-3 The Optimal Inflation Rate
				The Costs of Inflation
				The Benefits of Inflation
				The Optimal Inflation Rate: The State of the Debate
			23-4 Unconventional Monetary Policy
			23-5 Monetary Policy and Financial Stability
				Liquidity Provision and Lender of Last Resort
				Macroprudential Tools
		Chapter 24 Epilogue: The Story of Macroeconomics
			24-1 Keynes and the Great Depression
			24-2 The Neoclassical Synthesis
				Progress on All Fronts
				Keynesians versus Monetarists
			24-3 The Rational Expectations Critique
				The Three Implications of Rational Expectations
				The Integration of Rational Expectations
			24-4 Developments in Macroeconomics up to the 2009 Crisis
				New Classical Economics and Real Business Cycle Theory
				New Keynesian Economics
				New Growth Theory
				Toward an Integration
			24-5 First Lessons for Macroeconomics after the Crisis
Appendix 1 An Introduction to National Income and Product Accounts
Appendix 2 A Math Refresher
Appendix 3 An Introduction to Econometrics
Glossary
Index
Credits