UNIVERSITY OF LIMERICK

KEMMY BUSINESS SCHOOL

DEPARTMENT OF ECONOMICS

International Political Economy 1

EC6101

Course Outline and Reading List

AUTUMN SEMESTER 2006/2007

Lecturers:                      Dr
Anthony Leddin and Stephen Kinsella

External Examiner:        Professor
Eamon O’Shea, NUI (University College, Galway)

The purpose of
this course is to introduce the student to the principles underlying the
macroeconomy.  This is the study of
how aggregate economic variables such as, the real growth rate, inflation and
unemployment, behave and how the government and central bank might influence
their behaviour.  The latter part
of the course is concerned with three issues in macroeconomic theory and
policy:  (1) The “Celtic Tiger”
economy and the recent performance of the Irish economy, (2) Ireland in
European Monetary Union (EMU) and the economic performance of EMU and (3)
globalisation.

As part of this course, students are required to
submit a project based on econometric analysis.  The titles are given by the lecturer and the class will be
divided into project groups of 4 to 5 students (depending on class size).  The project will account for 40% of the
final mark.

The reference book is:

Leddin, Anthony and Brendan M.
Walsh, The Macroeconomy of the Eurozone.  Gill and Macmillan, 2003.

Students should
also consult the following books for certain sections of the course:  (listed edition or more recent).

Blanchard, O., Macroeconomics,  Third
edition, Prentice Hall, 2003.

Taylor, L. Reconstructing
Macroeconomics, Harvard University Press, 2004.

De Grauwe, Paul,  The Economics of Monetary
Integration, Oxford University Press, 5th
edition, 2004.

D. Gujarati, Basic Econometrics, McGraw Hill, 4^th  edition, 2003. 

Eiteman, David, Arthur Stonehill
and Michael Moffett, Multinational Business Finance, Addison Wesley, 10^th edition, 2004.

Newman, C. & O'Hagan, J. The Economy of
Ireland, 9th Edition National & Sectoral Policy Issues, Gill & MacMillan, 2005

The Basic Model

September, 27.   Introduction
(AL)

            GNP,
business cycle, unemployment, inflation. Policy constraints.

            L
& W Ch. 1.

September 28 & 29. Theory of Income Determination:  Basic Model  (AL)

The aggregate
supply and demand model:  Three
issues:  1.  Demand and supply-side shocks.  2.  Okun’s law. 
3.  Natural real GNP and automatic
adjustment mechanisms. 

            L
& W Ch. 2 and 3

October 18.       Fiscal
Policy (Hereafter SK)

            Stabilisation
policy and the Washington consensus, fiscal policy in Ireland, past and
present.

            L
& W Ch. 4, and 5

            Barrett
et al, eds. ESRI Quarterly Commentary

            CSO.ie,
various reports to be distributed in class.

            IMF
and OECD Country Reports for Ireland.

October 19.       Project

Econometrics:  An Introduction to Regression Analysis
with Microsoft Excel

Regression
analysis, data sources and econometric software packages. 

Theory:  e.g.
Gujarati, Damodar. - Basic Econometrics – 4^th ed. - New York : McGraw Hill, 2003. 

            Short
Loan 330.015195/GUJ

Software: Microsoft Excel, Data Analysis Package. Useful
Tutorials are available at http://helios.bto.ed.ac.uk/bto/statistics/tress11.html and http://phoenix.phys.clemson.edu/tutorials/excel/regression.html

.

October 20.       Money
and Banking, the Quantity Theory of Money and Interest Rate Determination

            Money;  functions, creation and control.  European Central Bank.  Inserting the money market into the      AD/AS model.

            L
& W Ch. 6 and 7.

Taylor,
pgs 79-93.

November 15.    The
Balance of Payments and Exchange Rate Theory (SK)

            Foreign
exchange market, flexible exchange rates, real exchange rates, trade-weighted
exchange rate            index,
Central Bank intervention, external reserves, fixed exchange rates.  Inserting the foreign      exchange market into
the AS/AD model.

            L
& W Ch. 9, 10 and 11.

November 16.    Purchasing power parity.   (SK)

            Absolute
and relative PPP.

            Burgernomics,
http://research.stlouisfed.org/ publications/review/03/11/pakko.pdf  and       www.economist.com/markets/bigmac/index.cfm

            L&W,
Chapter 10. 

November 17.    Covered and uncovered
interest rate parity theory and the Fisher equation.  (SK)

            L&W,
Chapters 10 and 8.

November 17.    Open Economy Monetary Model.
(SK)

            L&W,
Chapters 10 and 12.            

            Lane,
Philip, The New Open Economy Macroeconomics, A Survey. Available at http://www.tcd.ie/Economics/TEP/1999_papers/TEPNo3PL99.pdf

Three Major Topics

December 6.       The
Economic Performance of the Irish Economy in the Long-run, the “Celtic Tiger”
and recent      economic
performance.

            L&W,
Chapter 24.

December 7.       Why
Ireland joined EMU and the economic performance of the EMU economy.

            L
& W Chapter 14.

            De
Grauwe, Chapters 2 & 3.

December 8.       Globalisation

            Benefits and costs. Global
inequality and poverty. Role of the IMF and World Bank.

            Additional
reading:  Joseph Stiglitz, "Globalization
and its Discontents", Penguin Books, 2002. and, J. E. Stiglitz, Fair
Trade for All: How Trade Can Promote Development (Initiative for Policy Dialogue Series C) (Hardcover), 2006.

            Guest
speaker :  Dr Donal Donovan, IMF,
Washington D.C.