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ECON376 Macroeconomic Theory

A paper aimed at preparing Honours students for independent study in macroeconomics. The main topics covered will be the AS/AD paradigm, new classical macroeconomics, monetary and fiscal theory and policy.

I want this to be a paper where students learn about modern macroeconomic methods, but also apply them and foster skills such as academic writing and giving a presentation. The last couple of years have been exciting years for macroeconomists. The subprime mortgage crisis and the following Great Recession resuscitated the interest in macroeconomic questions and policies. In this paper we will study those questions using state-of-the-art macroeconomic models. What are the effects of monetary and fiscal policy? Should we be concerned about government debt levels? How does quantitative easing work? How does a bank run work and how can we increase financial stability? Macroeconomics over the recent past also focuses on topics such as inequality and the impacts of climate change. Macroeconomic theory has changed dramatically over the last decades. Academic publications and policy institutions (central banks, the Treasury, ...) use models based on microeconomic foundations. Those models are mathematically quite sophisticated. Nevertheless, the basic intuition embedded in those models can be exposited by drawing on diagrams and "old generation" models.

Roughly speaking, the course is divided into three main parts. I try to relate to real world events as often as possible. In the first part, we will have a look at important macroeconomic time series topics and then focus on building intuitive macroeconomic models and analyse monetary and fiscal policy measures in the closed- and open-economy framework. The second part provides a microfoundation of household and firm optimal behaviour. Then, we will combine those two sides of the market and build a stylised general equilibrium model, the workhorse model of macroeconomic research used in central banks and academia, the Real Business Cycle model. Finally, part three considers fiscal policy, government debt, details of monetary policy-making, and discusses models of the Global Financial Crisis.

Paper title Macroeconomic Theory
Paper code ECON376
Subject Economics
EFTS 0.15
Points 18 points
Teaching period Semester 1 (On campus)
Domestic Tuition Fees (NZD) $912.00
International Tuition Fees Tuition Fees for international students are elsewhere on this website.

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ECON 202 and (ECON 270 or ECON 271)
Schedule C
Arts and Music, Commerce, Science
Teaching staff

Dennis Wesselbaum


Charles I. Jones Macroeconomic, W. W. Norton & Company, Inc. (3rd and 2nd Edition are both fine).

Frederic S. Mishkin The Economics of Money, Banking, and Financial Markets, Addison-Wesley Series in Economics, 7th Edition.

Graduate Attributes Emphasised
Global perspective, Scholarship, Communication, Critical thinking, Research, Self-motivation.
View more information about Otago's graduate attributes.
Learning Outcomes

Students who successfully complete this paper will be able to:

  • Describe the process of macroeconomics research and explain the role of theoretical models in that process
  • Construct and solve macroeconomic models based on microeconomics fundamentals
  • Understand and analyse the underlying economic forces that drive unemployment, growth, inflation, savings, short-run fluctuations in consumption and investment, stability of the financial system and international issues
  • Use academic writing to summarise and critique the current macroeconomic literature and economic events

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Semester 1

Teaching method
This paper is taught On Campus
Learning management system


Stream Days Times Weeks
A1 Monday 15:00-15:50 9-14, 16-22
Tuesday 12:00-12:50 9-14, 16, 18-22


Stream Days Times Weeks
A1 Wednesday 12:00-12:50 9-14, 16-22