Course description
Open economy macroeconomics aims at in-depth understanding of theories of the domestic economy and the rest of the world. This means that the current and capital accounts of the balance of payments take central place. Exchange rates and the foreign exchange market are given extensive treatment, and among policy questions the choice of exchange rate system figures prominently. Other questions are the implications of openness for the effects of fiscal and monetary policy and how shocks from abroad impinge on the domestic economy. The course includes a part on economic interactions and shock transmission at the world level. A main purpose is to prepare the students for doing applied work (in government agencies, financial institutions etc) analysing the effects of economic policies and of all kinds on shocks. Specifically, the students should be able to use models and logical arguments as tools to derive conclusions about the effects of exogenous events. Compared to bachelor lower level courses, the emphasis is now more on dynamic models and the effects on time paths. New techniques for dynamic analysis will be learned. Students should also learn to discuss the pros and cons of different policies. Since empirical knowledge is necessary for informed discussion of policy effects, students must acquire some knowledge of what empirical studies say about the international aspects of macroeconomics.
Reading list
R?dseth, A., 2000, Open economics Macroeconomics, Cambridge University Press. Chp 1-10. Note: Chapter 1 and 10.1 are on the reading list of ECON 3410/4410. Students who have not attended that course must be prepared to learn the material in those chapters mainly by self-study.
Lecture notes and articles distributed at the start and/or during the course.