ECON-4330 Advanced Macroeconomics I

Instructor: Jay Rhee Office: 6117 LT

Tel: 253-3000 (Extension: 2385) Email address: jayrhee@uwindsor.ca
Class Time: M&W 11:30 -12:50 Class Location: 121 BB
Office Hour: M&W 16:00 -17:00

Course Objective

This course is the first sequence of advanced macroeconomics. The class will focus on developing
a common analytical framework that can be used to think about real-world problems. Students will
be expected to develop a good grasp of analytical tools

Text Book and required reading material

The course will follow no particular textbook, but, it will closely follow my own lecture notes.
The following books are of general interest for this course, and also contain some of the readings.

1. Macroeconomics: Theory and Policy, William Branson, 3rd Edition (Addison Wesley, 1989)
2. Advanced Macroeconomics, David Romer, 3rd Edition (McGraw-Hill, New York, NY, 2005)
3. Macroeconomics, Blanchard and Johnson, 3rd Canadian Edition, (Pearson-Prentice Hall, 2007)

Course Website

Go to https://blackboard.uwindsor.ca and enter your UWin ID and UWin Password, click on My

Courses and click on this course’s link. Course information including syllabus, reading the material,
announcements and grades will be posted here.

Course Requirements

(1) Exams
There will be two (2) exams: midterm and non-cumulative final. Each exam will contain
Analytical Questions.
Midterm: Wednesday, 26 October, from 11:30-12:50 pm.
Final: The date and time have been set by the Registrar and cannot be changed.

 Students are responsible for all material on the reading list and all material covered in
lectures. Lectures will not be limited to material covered in the text, nor will all content
on the reading list be addressed in lectures.
 A student who cannot write a test at the scheduled time per Senate By-Law 51.1.9 will
advise the instructor in a timely fashion in order to arrange accommodation if warranted.

1 
 
 ECON-4330 Advanced Macroeconomics I

 A student who misses the test because of health, bereavement, or other extenuating
circumstances that are substantiated (e.g., medical certificate, death certificate) or
otherwise deemed valid by the instructor will have the make-up test within two weeks of
the original test date. A student who misses a test without reason deemed valid per Senate
By-Law 51 will receive a grade of 0 for the test. No replacement tests will be given. The
medical certificate form is available on the course website.
 Should a student not write the examination at the regularly scheduled time, the instructor
will give the date of the make-up examination. A maximum of two chances is given.
Note that the format of any make-up test need not be the same as that of the regularly
scheduled final examination.

(2) Assignments

 There will be four assignments that will count toward a total of 20 points (5 points each).
 The assignment and its answer will be provided through the course website.
 The assignment handed in after the due date will not be accepted.
 There are two ways to hand in 1) in class, or 2) Upload to the course website, after
scanning, but photos by cell phone are not recommended.
 The assignment will be graded as excellent (5 points), good (2 points), and not good (0
points).

Course Grade

Grades will be based on the assignments (20 points, 10%), midterm exam (80 points, 40%), and
final (100 points, 50%).

“Feeling Overwhelmed?

 From time to time, students face obstacles that can affect academic performance. If you
experience difficulties and need help, it is crucial to reach out to someone.
 For help addressing mental or physical health concerns on campus, contact (519) 253-
3000:
- Student Health Services at ext. 7002 (http://www.uwindsor.ca/studenthealthservices/)
- Student Counselling Centre at ext. 4616 (http://www.uwindsor.ca/studentcounselling/
- Peer Support Centre at ext. 4551
 24 Hour Support is Available
- My Student Support Program (MySSP) is an immediate and fully confidential 24/7
mental health support that can be accessed for free through chat, online, and telephone.
This service is available to all University of Windsor students and offered in over 30
languages. Call: 1-844-451-9700, visit https://keepmesafe.myissp.com/ or download the
My SSP app: Apple App Store/Google Play.
 A full list of on- and off-campus resources are available
at http://www.uwindsor.ca/wellness.
 Should you need to request alternative accommodation, contact your instructor, head or
associate dean.”
2 
 
 ECON-4330 Advanced Macroeconomics I

Course Outline  
Week Mon/Date Contents Detailed Textbook

1 September 12 1. Introduction Overview

September 14
2. IS-LM Model and Goods Market and IS curve
September Aggregate Demand Financial Market and LM curve
2 19/21 Monetary and Fiscal Policies

3 September 3. Labour Market and Labor Market and Aggregate Supply

26/28 AD-AS Model Goods and Financial Markets
Aggregate Demand curve
Monetary and Fiscal Policies
October 3
4
October 5 4. The Phillips Curve Inflation and Unemployment
and Natural Rate The Phillips Curve
October Hypothesis Monetary Policy
5 17/19
Role of Expectations
October 24 6. Rational Expectations Adaptive Expectations
6 Rational Expectations

October 26 Midterm Ch.2 – Ch.4

October 31 7. Monetary Misperception Lucas Supply Curve

7 November 2 Theory Policy Ineffectiveness Proposition
Lucas Critique
Wage Contract
8 November 8. Nominal Rigidities Staggered Wage Setting
7/9 Monetary Non-Neutrality

9 November Seigniorage and Inflation

14/16 9. Money and Inflation Money Supply Growth
The Dynamic Inconsistency of
Low-Inflation
10 November 21
November 23 Money Supply Process
10. Money Supply and Interest Rate
Interest Rate Taylor Rule
November 28 Term Structure of Interest Rate

11 Expectational IS Curve
November 30 11. Introduction to New New Keynesian Phillips Curve
12 December Keynesian Model Methods of Undetermined
5/7 Coefficients

3 
 
 ECON-4330 Advanced Macroeconomics I

Course Outline and Readings

I. Introduction

Lecture Note, Introduction

Blanchard and Johnson, Macroeconomics, Chapter 1 and 2.

Branson, William H., Macroeconomics: Theory and Policy, Chapter 1.

II. IS-LM Model and Aggregate Demand

Lecture Note, IS-LM Model and Aggregate Demand.

Blanchard and Johnson, Macroeconomics, Chapter 3, 4 and 5.

Branson, William H., Macroeconomics: Theory and Policy, Chapter 4 and 5.

Hicks, J. R. “Mr. Keynes and the ‘Classics’; A Suggested Interpretation”, Econometrica

Vol. 5, No. 2 (Apr. 1937), pp. 147-159.

III. Labour Market and AD-AS Model

Lecture Note, Labour Market, and AD-AS Model.

Blanchard and Johnson, Macroeconomics, Chapters 9 and 10.

Branson, William H., Macroeconomics: Theory and Policy, Chapter 6, 7, 8, and 9.

IV. The Phillips Curve and Natural Rate Hypothesis

Lecture Note, the Phillips Curve, and Natural Rate Hypothesis.

Blanchard and Johnson, Macroeconomics, Chapter 12 and 13.

Branson, William H., Macroeconomics: Theory and Policy, Chapter 20.

Friedman, M., “The Role of Monetary Policy,” American Economic Review, March 1968

Phelps, E., “Money-Wage Dynamics and Labor Market Equilibrium,” Journal of Political
Economy 76, August 1968.

Phillips, A.W., “The Relation between Unemployment and the Rate of Change of Money, Wage
Rates in the United Kingdom, 1861-1957,” Economica 25, August 1958.

4 
 
 ECON-4330 Advanced Macroeconomics I

V. Rational Expectations and the Monetary Misperception Theory

Lecture Note, Rational Expectations and the Monetary Misperception Theory

Blanchard and Johnson, Macroeconomics, Chapter 19 and 20.

Branson, William H, Macroeconomics: Theory and Policy, Chapter 11 & 12.

Lucas, R., “Some International Evidence on Output-Inflation Tradeoffs,” American Economic

Review, June 1973.

Lucas, R., “Econometric Policy Evaluation: A Critique,” in Brunner and Meltzer (eds.), Carnegie-
Rochester Conference Series, Vol. 1, 1976.

Muth, John F., “Rational Expectations and the Theory of Price Movements,” Econometrica, 29
June 1961.

Sargent, T., and N. Wallace, “Rational Expectations, and the Optimal Monetary Instrument, and
the Optimal Money Supply Rule,” Journal of Political Economy, April 1975.

VI. Nominal Rigidities

Lecture Note, Nominal Wage Rigidities.

Blanchard and Johnson, Macroeconomics, Chapter 22.

Branson, William H, Macroeconomics: Theory and Policy, Chapter 11.

Fischer, S., “Long-term Contracts, Rational Expectations, and the Optimal Money Supply Rule,”
Journal of Political Economics, February 1977.

Taylor, J., “Staggered Wage Setting in a Macroeconomic Model,” American Economic Review,
May 1979.

Taylor, J., “Aggregate Dynamics and Staggered Contracts,” Journal of Political Economy,
February 1980.

McCallum, B., “On Non-Uniqueness in Rational Expectation Model: An Attempt at Perspective,”

Journal of Monetary Economics, March 1983.

McCallum, B., “Solutions to linear rational expectations models: a compact exposition,” Economic
Letters 61, 1998.

5 
 
 ECON-4330 Advanced Macroeconomics I

VII. Money and Inflation

1. Seigniorage and Inflation

Lecture Note, Money and Inflation

Blanchard and Johnson, Macroeconomics, Chapter 13.

Cagan, Phillip, “The Monetary Dynamic of Hyperinflation”, In Milton Friedman (ed.) Studies in the
Quantity Theory of Money, University of Chicago Press, (1956).

2. The Dynamic Inconsistency of Low-Inflation

Lecture Note, Money, and Inflation

Blanchard and Johnson, Macroeconomics, Chapter 23.

Barro, R. and Gordon, David, “Rules, Discretion, and Reputation in a Model of Monetary Policy,”
Journal of Monetary Economy, July 1983.

Barro, R. and Gordon, David, “A Positive Theory of Monetary Policy in a Natural Rate Model,”
Journal of Political Economy, August 1983

VIII. Money Supply and Interest Rate

Lecture Note, Money Supply and Interest Rate.

Blanchard and Johnson, Macroeconomics, Chapter 24.

Branson, William H, Macroeconomics: Theory and Policy, Chapter 15.

William Pool, “Optimal Choice of Monetary Policy Instruments in a Simple Stochastic Macro
Model,” Quarterly Journal of Economics, May 1970.

IX. Introduction to New Keynesian Model

Lecture Note, Introduction to New Keynesian Model

Romer, David, Advanced Macroeconomics, Chapter 9.

Walsh, C.E., Monetary Theory and Policy, Chapter 8.

6