# Macroeconomics / Olivier Blanchard.

Material type: TextPublication details: New Dehli : Pearson Prentice Hall, 2007Edition: 4th edDescription: xxiv, 587, [35] p. ill. (some col.) ; 26 cmISBN:- 0131860267

- 9788131711385 (pbk)

- 339 22 B6392

Item type | Current library | Call number | Status | Date due | Barcode |
---|---|---|---|---|---|

Books | UE-Central Library | 339 B6392 (Browse shelf(Opens below)) | Available | T1489 |

Includes bibliographical references and index.

Contents

Preface

Introduction 1

Chapter 1 A Tour of the World 3

1-1 The United States 4

Has the United States Entered a New Economy? 5

Should You Worry about the U.S. Budget Deficit? 7

1-2 The European Union 8

How Can European Unemployment Be Reduced? 10

What Will the Euro Do for Europe? 11

1-3 Japan 12

What Triggered the Slump? 13

How Will Japan Recover? 15

1-4 Looking Ahead 15

Appendix: Where to Find the Numbers? 19

Chapter 2 A Tour of the Book 21

2-1 Aggregate Output 22

GDP: Production and Income 22

Nominal and Real GDP 24

2-2 The Other Major Macroeconomic Variables 28

The Unemployment Rate 28

The Inflation Rate 31

2-3 The Short Run, the Medium Run, the Long Run 34

2-4 A Tour of the Book 35

The Core 35

Extensions 36

Back to Policy 36

Epilogue 37

Appendix: The Construction of Real GDP and Chain-Type Indexes

40

The Core 43

The Short Run 43

Chapter 3 The Goods Market 45

3-1 The Composition of GDP 46

3-2 The Demand for Goods 48

Consumption (C) 48

Investment (I) 50

Government Spending (G) 50

3-3 The Determination of Equilibrium Output 50

Using Algebra 51

Using a Graph 52

Using Words 55

How Long Does It Take for Output to Adjust? 55

3-4 Investment Equals Saving: An Alternative Way of Thinking

about Goods-Market Equilibrium 58

3-5 Is the Government Omnipotent? A Warning 60

Chapter 4 Financial Markets 65

4-1 The Demand for Money 66

Deriving the Demand for Money 68

4-2 The Determination of the Interest Rate. I 69

Money Demand, Money Supply, and the Equilibrium Interest Rate

69

Monetary Policy and Open Market Operations 73

Open Market Operations 74

Choosing Money or Choosing the Interest Rate? 75

Money, Bonds, and Other Assets 76

4-3 The Determination of Interest Rate. II* 76

What Banks Do 76

The Supply and the Demand for Central Bank Money 77

4-4 Two Alternative Ways of Looking at the Equilibrium* 82

The Federal Funds Market and the Federal Funds Rate 82

The Supply of Money, the Demand for Money, and the Money

Multiplier 83

Chapter 5 Goods and Financial Markets: The IS-LM Model 89

5-1 The Goods Market and the IS Relation 90

Investment, Sales, and the Interest Rate 90

Determining Output 91

Deriving the IS Curve 92

Shifts of the IS Curve 94

5-2 Financial Markets and the LM Relation 94

Real Money, Real Income, and the Interest Rate 95

Deriving the LM Curve 95

Shifts of the LM Curve 97

5-3 Putting the IS and the LM Relations Together 98

Fiscal Policy, Activity, and the Interest Rate 99

Monetary Policy, Activity, and the Interest Rate 101

5-4 Using a Policy Mix 103

5-5 How Does the IS-LM Model Fit the Facts? 107

The Medium Run 115

Chapter 6 The Labor Market 117

6-1 A Tour of the Labor Market 118

The Large Flows of Workers 118

6-2 Movements in Unemployment 120

6-3 Wage Determination 124

Bargaining 125

Efficiency Wages 125

Wages, Prices, and Unemployment 126

6-4 Price Determination 128

6-5 The Natural Rate of Unemployment 129

The Wage-Setting Relation 129

The Price-Setting Relation 129

Equilibrium Real Wages and Unemployment 130

From Unemployment to Employment 132

From Employment to Output 132

6-6 Where We Go From Here 133

Appendix: Wage- and Price-Setting Relations versus Labor Supply

and Labor Demand 137

Chapter 7 Putting All Markets Together: The AS-AD Model 139

7-1 Aggregate Supply 140

7-2 Aggregate Demand 142

7-3 Equilibrium in the Short Run and in the Medium Run 145

Equilibrium in the Short Run 145

From the Short Run to the Medium Run 146

7-4 The Effects of a Monetary Expansion 148

The Dynamics of Adjustment 148

Going Behind the Scenes 149

The Neutrality of Money 151

7-5 A Decrease in the Budget Deficit 151

Deficit Reduction, Output, and the Interest Rate 153

Budget Deficits, Output, and Investment 154

7-6 Changes in the Price of Oil 155

Effects on the Natural Rate of Unemployment 156

The Dynamics of Adjustment 157

7-7 Conclusions 159

The Short Run versus the Medium Run 159

Shocks and Propagation Mechanisms 160

Where We Go From Here: Output, Unemployment, and Inflation 160

Chapter 8 The Natural Rate of Unemployment and the Phillips Curve

165

8-1 Inflation, Expected Inflation, and Unemployment 166

8-2 The Phillips Curve 167

The Early Incarnation 167

Mutations 168

Back to the Natural Rate of Unemployment 172

8-3 A Summary and Many Warnings 173

Variations in the Natural Rate Across Countries 174

Variations in the Natural Rate Over Time 176

High Inflation and the Phillips Curve Relation 176

Deflation and the Phillips Curve Relation 180

Appendix: From the Aggregate Supply Relation to a Relation

Between Inflation, Expected Inflation, and Unemployment 183

Chapter 9 Inflation, Activity, and Nominal Money Growth 185

9-1 Output, Unemployment, and Inflation 186

Okun's Law 186

The Phillips Curve 188

The Aggregate Demand Relation 188

9-2 The Effects of Money Growth 190

The Medium Run 191

The Short Run 192

9-3 Disinflation 193

A First Pass 193

Expectations and Credibility: The Lucas Critique 195

Nominal Rigidities and Contracts 196

The Long Run

Chapter 10 The Facts of Growth

10-1 Growth in Rich Countries Since 1950

The Large Increase in the Standard of Living Since 1950

The Decrease in Growth Rates Since the Mid-1970s

The Convergence of Output per Capita

10-2 A Broader Look Across Time and Space

Looking Across Two Millennia

Looking Across Countries

10-3 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

11-2 The Implications of Alternative Saving Rates

Dynamics of Capital and Output

Steady-State 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

12-3 The Facts of Growth Revisited

Capital Accumulation Versus Technological Progress

Fluctuations in the Pace of Technological Progress

12-4 Institutions and Growth

Appendix: Constructing a Measure of Technological Progress

Chapter 13 Technological Progress, Wages, and Unemployment

13-1 Productivity, Output, and Unemployment in the Short Run

Technological Progress, Aggregate Supply, and Aggregate Demand

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 and Distribution Effects

The Increase in Wage Inequality

The Causes of Increased Wage Inequality

Extensions

Expectations

Chapter 14 Expectations: The Basic Tools

14-1 Nominal Versus Real Interest Rates

Nominal and Real Interest Rates in the United States Since 1978

14-2 Expected Present Discounted Values

Computing Expected Present Discounted Values

Using Present Values: Examples

Nominal Versus Real Interest Rates, and Present Values

14-3 Nominal and Real Interest Rates, and the IS-LM Model

14-4 Money Growth, Inflation, Nominal and Real Interest Rates

Revisiting the IS-LM Model

Nominal and Real Interest Rates in the Short Run

Nominal and Real Interest Rates in the Medium Run

From the Short to the Medium Run

Evidence on the Fisher Hypothesis

Appendix: Deriving the Expected Present Discounted Value Using

Real or Nominal Interest Rates

Chapter 15 Financial Markets and Expectations

15-1 Bond Prices and Bond Yields

Bond Prices as Present Values

Arbitrage and Bond Prices

From Bond Prices to Bond Yields

Interpreting the Yield Curve

The Yield Curve and Economic Activity

15-2 The Stock Market and Movements in Stock Prices

Stock Prices as Present Values

The Stock Market and Economic Activity

15-3 Bubbles, Fads, and Stock Prices

Appendix: Arbitrage and Stock Prices

Chapter 16 Expectations, Consumption, and Investment

16-1 Consumption

The Very Foresighted Consumer

An Example

Toward a More Realistic Description

Putting Things Together: Current Income, Expectations, and

Consumption

16-2 Investment

Investment and Expectations of Profit

A Convenient Special Case

Current Versus Expected Profit

Profit and Sales

16-3 The Volatility of Consumption and Investment

Appendix: Derivation of the Expected Present Value of Profits Under

Static Expectations

Chapter 17 Expectations, Output, and Policy

17-1 Expectations and Decisions: Taking Stock

Expectations, Consumption, and Investment Decisions

Expectations and the IS Relation

The LM Relation Revisited

17-2 Monetary Policy, Expectations, and Output

Monetary Policy Revisited

17-3 Deficit Reduction, Expectations, and Output

The Role of Expectations About the Future

Back to the Current Period

The Open Economy

Chapter 18 Openness in Goods and Financial Markets

18-1 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

18-2 Openness in Financial Markets

The Balance of Payments

The Choice Between Domestic and Foreign Assets

Interest Rates and Exchange Rates

18-3 Conclusions and a Look Ahead

Chapter 19 The Goods Market in an Open Economy

19-1 The IS Relation in the Open Economy

The Demand for Domestic Goods

19-2 Equilibrium Output and the Trade Balance

19-3 Increases in Demand, Domestic or Foreign

Increases in Domestic Demand

Increases in Foreign Demand

Fiscal Policy Revisited

19-4 Depreciation, the Trade Balance, and Output

Depreciation and the Trade Balance: The Marshall-Lerner Condition

The Effects of a Depreciation

Combining Exchange-Rate and Fiscal Policies

19-5 Looking at Dynamics: The J-Curve

19-6 Saving, Investment, and the Trade Balance

Appendix 1: Multipliers: Belgium Versus the United States

Appendix 2: Derivation of the Marshall-Lerner Condition

Chapter 20 Output, the Interest Rate, and the Exchange Rate

20-1 Equilibrium in the Goods Market

20-2 Equilibrium in Financial Markets

Money Versus Bonds

Domestic Bonds Versus Foreign Bonds

20-3 Putting Goods and Financial Markets Together

20-4 The Effects of Policy in an Open Economy

The Effects of Fiscal Policy in an Open Economy

The Effects of Monetary Policy in an Open Economy

20-5 Fixed Exchange Rates

Pegs, Crawling Pegs, Bands, the EMS, and the Euro

Pegging the Exchange Rate, and Monetary Control

Fiscal Policy Under Fixed Exchange Rates

Appendix: Fixed Exchange Rates, Interest Rates, and Capital

Mobility

Chapter 21 Exchange Rate Regimes

21-1 The Medium Run

Aggregate Demand Under Fixed Exchange Rates

Equilibrium in the Short Run and in the Medium Run

The Case for and Against a Devaluation

21-2 Exchange Rate Crises Under Fixed Exchange Rates

21-3 Exchange Rate Movements under Flexible Exchange Rates

Exchange Rates and the Current Account

Exchange Rates, and Current and Future Interest Rates

Exchange Rate Volatility

21-4 Choosing Between Exchange Rate Regimes

Common Currency Areas

Hard Pegs, Currency Boards, and Dollarization

Appendix 1: The Real Exchange Rate, and Domestic and Foreign Real

Interest Rates

Appendix 2: Deriving Aggregate Demand Under Fixed Exchange

Rates

Pathologies

Chapter 22 Depressions and Slumps

22-1 Disinflation, Deflation, and the Liquidity Trap

The Nominal Interest Rate, the Real Interest Rate, and Expected Inflation

The Liquidity Trap

Putting Things Together: The Liquidity Trap and Deflation

22-2 The Great Depression

The Initial Fall in Spending

The Contraction in Nominal Money

The Adverse Effects of Deflation

The Recovery

22-3 The Japanese Slump

The Rise and Fall of the Nikkei

The Failure of Monetary and Fiscal Policy

The Recovery

Chapter 23 High Inflation

23-1 Budget Deficits and Money Creation

23-2 Inflation and Real Money Balances

23-3 Deficits, Seignorage, and Inflation

The Case of Constant Nominal Money Growth

Dynamics and Increasing Inflation

Hyperinflation and Economic Activity

23-4 How Do Hyperinflations End?

The Elements of a Stabilization Program

Can Stabilization Programs Fail?

The Costs of Stabilization

23-5 Conclusions

Back to Policy

Chapter 24 Should Policy Makers Be Restrained?

24-1 Uncertainty and Policy

How Much Do Macroeconomists Actually Know?

Should Uncertainty Lead Policy Makers to Do Less?

Uncertainty and Restraints on Policy Makers

24-2 Expectations and Policy

Hostage Takings and Negotiations

Inflation and Unemployment Revisited

Establishing Credibility

Time Consistency and Restraints on Policy Makers

24-3 Politics and Policy

Games Between Policy Makers and Voters

Games Between Policy Makers

Politics and Fiscal Restraints

Chapter 25 Monetary Policy: A Summing Up

25-1 The Optimal Inflation Rate

The Costs of Inflation

The Benefits of Inflation

The Optimal Inflation Rate: The Current Debate

25-2 The Design of Monetary Policy

Money Growth Targets and Target Ranges

Money Growth and Inflation Revisited

Inflation Targeting

Interest Rate Rules

25-3 The Fed in Action

The Mandate of the Fed

The Organization of the Fed

The Instruments of Monetary Policy

The Implementation of Policy

Chapter 26 Fiscal Policy: A Summing Up

26-1 The Government Budget Constraint

The Arithmetic of Deficits and Debt

Current Versus Future Taxes

The Evolution of the Debt-to-GDP Ratio

26-2 Four Issues in Fiscal Policy

Ricardian Equivalence

Deficits, Output Stabilization, and the Cyclically Adjusted Deficit

Wars and Deficits

The Dangers of Very High Debt

26-3 The U.S. Budget: Current Numbers and Future Prospects

Current Numbers

Medium-Run Budget Projections

The Long-Run Challenges: Low Saving, Aging, and Medical Care

Epilogue

Chapter 27 Epilogue: The Story of Macroeconomics

27-1 Keynes and the Great Depression

27-2 The Neoclassical Synthesis

Progress on All Fronts

Keynesians Versus Monetarists

27-3 The Rational Expectations Critique

The Three Implications of Rational Expectations

The Integration of Rational Expectations

27-4 Current Developments

New Classical Economics and Real Business Cycle Theory

New Keynesian Economics

New Growth Theory

27-5 Common Beliefs

Appendix 1 An Introduction to National Income and Product Accounts

Appendix 2 A Math Refresher

Appendix 3 An Introduction to Econometrics

Glossary

Index

There are no comments on this title.