Macroeconomics: A European Perspective, 4th edition
By Olivier Blanchard, Alessia Amighini and Francesco Giavazzi
Contents:
List of figures xi
List of tables xv
List of Focus boxes xvii
About the authors xix
Preface xx
THE CORE
INTRODUCTION 3
Chapter 1
A tour of the world 4
1.1 The pandemic of 2020 5
1.2 The crisis of 2008–9 9
1.3 The United States 11
1.4 The EU and the euro area 15
1.5 China 20
1.6 Looking ahead 22
Key terms 23
Questions and problems 23
Appendix 1: Where to find the numbers 25
Appendix 2: What do macroeconomists do? 26
Chapter 2
A tour of the book 27
2.1 Aggregate output 28
2.2 The unemployment rate 33
2.3 The inflation rate 36
2.4 Output, unemployment and the inflation rate: Okun’s law and the Phillips curve 39
2.5 The short run, the medium run and the long run 41
2.6 A tour of the book 42
Summary 44
Key terms 44
Questions and problems 45
Further reading 47
Appendix: The construction of real GDP and chain-type indexes 49
THE SHORT RUN 53
Chapter 3
The goods market 54
3.1 The composition of GDP 55
3.2 The demand for goods 56
3.3 The determination of equilibrium output 59
3.4 Investment equals saving: an alternative
way of thinking about the goods-market equilibrium 66
3.5 Is the government omnipotent? A warning 68
Summary 70
Key terms 70
Questions and problems 71
Chapter 4
Financial markets: I 74
4.1 The demand for money 75
4.2 Determining the interest rate: I 78
4.3 Determining the interest rate: II 83
4.4 The liquidity trap 87
Summary 90
Key terms 90
Questions and problems 91
Further reading 93
Chapter 5
Goods and financial markets:
the IS-LM model 94
5.1 The goods market and the IS relation 95
5.2 Financial markets and the LM relation 99
5.3 Putting the IS and LM relations together 100
5.4 Using a policy mix 103
5.5 How does the IS-LM model fit the facts? 108
Summary 110
Key terms 110
Questions and problems 110
Further reading 113
Chapter 6
Financial markets II: the extended IS-LM model 114
6.1 Nominal versus real interest rates 115
6.2 Risk and risk premiums 118
6.3 The role of financial intermediaries 120
6.4 Extending the IS-LM model 123
6.5 From a housing problem to a financial crisis: 2006–8 126
Summary 135
Key terms 135
Questions and problems 136
Further reading 139
THE MEDIUM RUN 143
Chapter 7
The labour market 144
7.1 A tour of the labour market 145
7.2 Movements in unemployment 147
7.3 Wage determination 150
7.4 Price determination 155
7.5 The natural rate of unemployment 156
7.6 Where we go from here 159
Summary 160
Key terms 160
Questions and problems 160
Further reading 163
Appendix: Wage- and price-setting relations versus labour supply and labour demand 164
Chapter 8
The Phillips curve, the natural rate of
unemployment and inflation 165
8.1 Inflation, expected inflation and unemployment 167
8.2 The Phillips curve and its mutations 168
8.3 The Phillips curve and the natural rate of unemployment 172
8.4 A summary and many warnings 174
Summary 180
Key terms 180
Questions and problems 181
Appendix: Derivation of the relation between
inflation, expected inflation and unemployment 185
Chapter 9
From the short to the medium run: the IS-LM-PC model 186
9.1 The IS-LM-PC model 187
9.2 From the short to the medium run 191
9.3 Complications and how things can go wrong 193
9.4 Fiscal consolidation revisited 195
9.5 The effects of an increase in the price of oil 197
9.6 Conclusions 201
Summary 202
Key terms 203
Questions and problems 203
Chapter 10
The COVID economic crisis 207
10.1 The economic effects of the lockdown 210
10.2 The macro policy response 212
10.3 The economy post-lockdown 216
10.4 The economy post-vaccine 220
Summary 222
Key terms 222
Questions and problems 223
THE LONG RUN 227
Chapter 11
The facts of growth 228
11.1 Measuring the standard of living 229
11.2 Growth in rich countries since 1950 232
11.3 A broader look across time and space 238
11.4 Thinking about growth: a primer 240
Summary 244
Key terms 244
Questions and problems 245
Further reading 246
Chapter 12
Saving, capital accumulation and output 247
12.1 Interactions between output and capital 248
12.2 The implications of alternative saving rates 251
12.3 Getting a sense of magnitudes 258
12.4 Physical versus human capital 264
Summary 266
Key terms 266
Questions and problems 267
Further reading 268
Appendix: The Cobb-Douglas production
function and the steady state 269
Chapter 13
Technological progress and growth 271
13.1 Technological progress and the rate
of growth 272
13.2 The determinants of technological progress 278
13.3 Institutions, technological progress and growth 282
Summary 286
Key terms 286
Questions and problems 286
Further reading 288
Appendix: How to measure technological
progress and the application
to China 289
Chapter 14
The challenges of growth 291
14.1 The future of technological progress 292
14.2 Robots and unemployment 293
14.3 Growth, churn and inequality 295
14.4 Climate change and global warming 304
Summary 308
Key terms 308
Questions and problems 308
Further reading 311
EXTENSIONS
EXPECTATIONS 315
Chapter 15
Financial markets and expectations 316
15.1 Expected present discounted values 317
15.2 Bond prices and bond yields 321
15.3 The stock market and movements in stock
prices 327
15.4 Risk, bubbles, fads and asset prices 333
Summary 337
Key terms 337
Questions and problems 338
Further reading 339
Appendix: Deriving the expected present
discounted value using real or nominal
interest rates 340
Chapter 16
Expectations, consumption and
investment 341
16.1 Consumption 342
16.2 Investment 349
16.3 The volatility of consumption and investment 356
Summary 357
Key terms 358
Questions and problems 358
Appendix: Derivation of the expected present
value of profits under static expectations 361
Chapter 17
Expectations, output and policy 362
17.1 Expectations and decisions: taking stock 363
17.2 Monetary policy, expectations and output 366
17.3 Deficit reduction, expectations and output 369
Summary 377
Key terms 377
Questions and problems 377
Further reading 380
THE OPEN ECONOMY 383
Chapter 18
Openness in goods and
financial markets 384
18.1 Openness in goods markets 386
18.2 Openness in financial markets 392
18.3 Conclusions and a look ahead 400
Summary 401
Key terms 401
Questions and problems 402
Further reading 403
Chapter 19
The goods market in an open economy 404
19.1 The IS relation in the open economy 405
19.2 Equilibrium output and the trade balance 408
19.3 Increases in demand – domestic or foreign 409
19.4 Depreciation, the trade balance and output 414
19.5 Saving, investment and the current
account balance 418
Summary 420
Key terms 420
Questions and problems 421
Further reading 422
Appendix: Derivation of the Marshall-Lerner condition 423
Chapter 20
Output, the interest rate and the
exchange rate 424
20.1 Equilibrium in the goods market 425
20.2 Equilibrium in financial markets 426
20.3 Putting goods and financial markets together 429
20.4 The effects of policy in an open economy 431
20.5 Fixed exchange rates 436
Summary 439
Key terms 440
Questions and problems 440
Appendix: Fixed exchange rates, interest rates
and capital mobility 442
Chapter 21
Exchange rate regimes 444
21.1 The medium run 445
21.2 Exchange rate crises under fixed exchange
rates 449
21.3 Exchange rate movements under flexible
exchange rates 452
21.4 Choosing between exchange rate regimes 455
Summary 460
Key terms 460
Questions and problems 461
Further reading 464
Appendix 1: Deriving the IS relation under fixed
exchange rates 465
Appendix 2: The real exchange rate and
domestic and foreign real interest rates 465
BACK TO POLICY 469
Chapter 22
Should policymakers be restrained? 470
22.1 Uncertainty and policy 471
22.2 Expectations and policy 475
22.3 Politics and policy 480
Summary 486
Key terms 487
Questions and problems 487
Further reading 489
Chapter 23
Fiscal policy: a summing up 490
23.1 What we have learned 491
23.2 The government budget constraint:
deficits, debt, spending and taxes 492
23.3 Ricardian equivalence, cyclical adjusted
deficits and war finance 500
23.4 The dangers of high debt 504
23.5 The challenges facing fiscal policy today 509
Summary 509
Key terms 510
Questions and problems 510
Further reading 513
Chapter 24
Monetary policy: a summing up 514
24.1 What we have learned 515
24.2 From money targeting to inflation targeting 516
24.3 The optimal inflation rate 522
24.4 Unconventional monetary policy 528
24.5 Monetary policy and financial stability 530
Summary 534
Key terms 534
Questions and problems 535
Further reading 538
EPILOGUE 539
Chapter 25
The story of macroeconomics 540
25.1 Keynes and the Great Depression 541
25.2 The neoclassical synthesis 541
25.3 The rational expectations critique 544
25.4 Developments in macroeconomics up to
the 2009 crisis 547
25.5 First lessons for macroeconomics after
the crisis 550
Summary 552
Key terms 552
Further reading 553
APPENDICES 555
Appendix 1 An introduction to national income
and product accounts 557
Appendix 2 A maths refresher 563
Appendix 3 An introduction to econometrics 568
Glossary 573
Symbols used in this book 584
Index 586
Publisher’s Acknowledgements 598