The objective of the course is to introduce students to the theory and
practice of macroeconomic and monetary policy, including regulation of
the financial system.
Specific learning outcomes upon completion of this curricular item are:
• Ability to apply macroeconomic concepts and theories to analyze
problems of employment and inflation
• Capability to analyze the role macroeconomic policymakers in
managing business cycles
• An understanding of the policy problems facing central banks
• Ability to interpret recent macroeconomic empirical work on
economic crises and the effects of fiscal and monetary policy
The course starts with discussing the historical development of
Macroeconomic theories explaining the origin of business cycles:
- Say’s law versus Malthus’ gluts
- The Great Depression + the Keynesian revolution: Keynes, Hicks,
- Business cycle theory: Schumpeter, Austrians, Kuznets
- Recent financial crises
Next, the course continues with discussing the roles of different
authorities in conducting macroeconomic policies. This part of the
course includes the following topics:
- Money: creation, control of the money supply, interest rates,
bank reserves, securitization
- Central banking: Fed, ECB, independence, different targets
- Stabilizing role of Fiscal policy: automatic stabilizers,
crowding out, budget deficits, effectiveness
- Stabilizing role of Monetary policy: Taylor rules, quantitative
easing, liquidity trap, effectiveness
- The Debt-Driven Crisis: the Micro-explanation to the Great
The course concludes with discussing recent empirical work on economic
crises and the effects of fiscal and monetary policy.
This course is the sequel to the course Development of Macroeconomic
Lectures, guest lectures and working groups
Grade is average of problem sets (2/5) and written examination (3/5),
with written exam grade of at least 5.0.
Acemoglu, Daron, David Laibson and John A. List, 2016, Economics,
Harlow, Essex, Pearson Education Ltd. ISBN 13: 978-1-292-07920-2, incl.
access code MYECONLAB.
Basic knowledge of math and statistics, as provided in the academic core
of any academic program at the VU University Amsterdam or equivalent.
Development of Macroeconomic Thought