ECN 327: INTERMEDIATE MACROECONOMICS
Professor Leonard Lardaro
804 Chafee Hall
E-mail: llardaro@uri.edu

Texts: R. Gordon, Macroeconomics (11th ed) - 9th /10th eds acceptable as well - check Amazon.com
W. Carnes and S. Slifer, The Atlas of Economic Indicators
Stikky Stock Charts (at RI Book Co. only)
Course Blog Site: http://urimacro.blogspot.com/

Macroeconomics is the study of aggregate economic activity. The typical principles level course in macroeconomics provides a survey of methods for measuring macroeconomic activity and outlines basic models of the interrelationships between key macroeconomic variables such as the price level, gross domestic product, employment, unemployment, and interest rates. The purpose of this course is to expose students more formally to macroeconomic theory: its nature, uses, strengths, and weaknesses. The first part of this course reviews the topics covered at the principles level. For the remainder of the semester, these initial concepts are extended into more complex and realistic models that allow students to begin systematically evaluating questions of contemporary importance in this area. I assume that persons enrolled in this course have taken ECN 202 (or its equivalent), and possess familiarity with basic index numbers and the simple Keynesian model. YOU SHOULD REVIEW BASIC SUPPLY AND DEMAND - WE WILL USE THIS A GREAT DEAL THROUGHOUT THE SEMESTER.

The Gordon text is consistent with the applied orientation of this course, while also providing exposure to formal macroeconomic theory. It is a highly readable text, yet fairly complete in its topical coverage. Its distinctive features include an ongoing emphasis on the application of theory to contemporary problems, and an exposition that is primarily graphical (rather than algebraic). Historically, this emphasis has been the most effective one given the backgrounds of students.

The Carnes and Slifer text complements the main text well. It will assist you in applying macroeconomic theory to "the real world," while presupposing little theoretical background. Chapters provide well-written explanations (with examples) of key macroeconomic areas, allowing you to gain experience in the application of formal theory to events that are currently taking place. 

I have added a new text, Stikky Stock Charts, which does an exceptional job of providing a set of tools necessary for following actual asset markets. Within one hour you will be “up and running” with the ability to ascertain trends and several technical formations in markets. This is a critical supplement to the theory and other applied material that we will be covering, as it often signals changes in key variables well before what recent data releases would typically lead us to expect. We will use this background throughout the entire semester along with data and graphs from stockcharts.com.

In addition to these texts, I highly recommend that you read Barron's and the Wall Street Journal throughout this semester. For subscribers, the online versions are very useful. The online version of Barron's is especially powerful, as it contains weekly economic summaries that follow much of what we will be covering in class. I recommend the Morgan-Stanley Global Economic Forum: http://www.morganstanley.com/views/gef/index.html  and a currency/macro site, http://www.dailyfx.com/ . Also, the online version of Barron's has weekly economic summaries of each major "number" released that week, and an economic summary of the past week's data and trends. For the numbers go to: http://online.barrons.com/public/page/barrons_econoday.html?mod=9_0001_markettools . To get the overall summary of the week's major numbers, which focuses upon much of what we will be covering in class, click on the item Simply Economics. In lieu of these, nightly news and weekly publications such as Business Week and Newsweek are excellent sources. A very good general reference is MarketWatch: http://www.marketwatch.com/. Another recommended site is CNN Money: http://www.money.com. Finally, a substantial amount of class time will be devoted to group discussions and applications projects as a means of establishing your ability to apply the macroeconomic theory covered in lectures and the text.

I have created a course Blog, whose URL is given above (under Texts). I will post information, graphs, discussion of trends, etc. on this site throughout the semester. This allows me to provide information to you when we are not in class (especially on weekends). There will even be a couple of extra-credit assignments posted as the semester progresses.

Finally, there are three web sites that I HIGHLY recommend. The first is INVESTOPEDIA: http://www.investopedia.com/ . Enter a business term and you will see a definition and possibly articles relating to this term. Second is ANSWERS.COM: http://www.answers.com/ . Also, enter a term and get answers from several fields along with footnote references. I HIGHLY RECOMMEND THEIR ONE-CLICK ANSWERS DOWNLOAD (the URL for that page is: http://www.answers.com/main/product_info.jsp ). The last reference is Wikepedia, the online encyclopedia: http://en.wikipedia.org/wiki/Main_Page .

Grading:
Your grade for this course will be based on the total number of points earned out of a total of 400 possible points from: a midterm exam; a cumulative final exam; a group paper; three group homeworks/projects; and participation. The midterm and final count as 120 points each. The group paper is 60 points, while the three homeworks/projects count as 90 points in total. Participation, which is substantially affected by attendance, is 10 points. Letter grades will be assigned according to the following table:

Test questions will be essay, problem, or short-answer essay. The homeworks/projects will be given at various points throughout the semester. The group paper (see below) requires you to research and produce a descriptive forecast of one of the topics I have selected for this semester. It is due on the last day of class. I will still accept forecast papers in the time period from the last class to the beginning of the final exam. HOWEVER, these tardy papers will be penalized one letter grade. Once the final exam has started, no papers will be accepted.

I will be assigning seats after the first week of class. From that time forward, I will monitor attendance.
- ANYONE WHO MISSES A TOTAL OF THREE CLASSES WILL BE BARRED FROM GROUP PARTICIPATION FOR THE REMAINDER OF THE SEMESTER. The participation portion of the grade will be adversely affected as well.
- Handing in all required work does NOT guarantee that you will pass this course.

Any student with a documented disability should contact me early in the semester so that we can work out reasonable accommodations to support your efforts in this course. You should also contact Disability Services for Students, Office of Student Life, 330 Memorial Union, 874-2098.

Group Paper: Due OUR Last Day of Class
Choose one of the following topics for your forecast paper. Study its historical behavior and determinants (i.e., explanatory variables) then outline the ways in which you expect the dominant trends and major explanatory factors to change and interact, providing an underlying basis for your forecast over the next six months. Summarize your findings with a 3 - 7 page typewritten, double-spaced paper that includes both short-term and long-term trend graphs. Be sure to elaborate on the basis for your prediction. DO NOT MERELY SUMMARIZE PAST BEHAVIOR THEN HAVE ONE OR TWO PARAGRAPHS ON A FORECAST! Be sure to include footnotes, as appropriate, and a bibliography. For this, the Chicago Manual of Style is available online: http://www.libs.uga.edu/ref/chicago.html .

The Dow Jones Industrial Average (give a +/- 50 point forecast)
The US Dollar – Euro Exchange Rate (give a +/- $0.05 forecast)
The 10-Year Government Bond Interest Rate (provide a +/- 25 basis point forecast)

Your grade for this paper will be heavily influenced by the factors that underlie your prediction. DO NOT simply repeat what others say. I will judge your paper in terms of: (i) the factors you identify as being most important; (ii) how you anticipate that these factors will interact to generate the forecast you decide upon; and (iii) how well the entire "product" fits together. A required resource for this paper is: Stockcharts.com: http://www.stockcharts.com.

Several recommended references for this paper are:
Business Week - "Business Outlook" page
The Morgan-Stanley Global Economic Forum: http://www.morganstanley.com/views/gef/index.html
An Exceptional Global Currency Site - DailyFx: http://www.dailyfx.com/
The Financial Times (website: http://news.ft.com/home/us )
The Economist (website: http://www.economist.com/index.html )

COURSE OUTLINE

Lecture Notes are in Adobe Acrobat Format (PDF files). If your computer does not have Acrobat installed, you can download it for free by clicking on the icon below:

 I. INTRODUCTION
a. Traditional Introduction
Gordon, Chapter 1.
Carnes and Slifer, Chapter 1.
The Nature of Economic Change: http://www.clevelandfed.org/research/commentary/2003/Dec03.pdf
Bubble, Toil, and Trouble: http://www.clevelandfed.org/Research/Commentary/2003/1015.pdf
 Amos Web Encyclonomic," http://www.amosweb.com/cgi-bin/awb_nav.pl?s=wpd
A Journalist's Guide to Economic Terms: http://www.facsnet.org/tools/ref_tutor/econo_term/glossary.html
iFigure Calculators: http://www.ifigure.com/
How to Invest During a Recession: http://www.smartmoney.com/onthestreet/index.cfm?story=200101101
Layoffs: Creative Destruction: http://www.fool.com/news/foth/2001/foth010726.htm?ref=em_fwcm1
The US Economy at a Glance: http://stats.bls.gov/eag/eag.us.htm
(USE THE "PUZZLES" IN CHAPTER 1 TO ORGANIZE YOUR KNOWLEDGE OF TOPICS THROUGHOUT THE SEMESTER
b. Technical Analysis of Markets
Stikky Stock Charts (read entire book first week of class)
MY Handouts (Required reading):
(1)Getting Started with Stockcharts.com: http://www.uri.edu/artsci/ecn/lardaro/technical_analysis/Stockcharts%20Handout.pdf
Online Notes: Support and Resistance: http://www.uri.edu/artsci/ecn/lardaro/3345/SUPPORT_AND_RESISTANCE.pdf
(2) Moving Averages: http://www.uri.edu/artsci/ecn/lardaro/technical_analysis/MOVING%20AVERAGES.pdf
(3) Relative Strength Indicator: http://www.uri.edu/artsci/ecn/lardaro/technical_analysis/RELATIVE%20STRENGTH%20INDICATOR.pdf
(4) Price Relative: http://www.uri.edu/artsci/ecn/lardaro/technical_analysis/PRICE%20RELATIVE.pdf
(5) An Introduction to Stock Charting: http://www.uri.edu/artsci/ecn/lardaro/charting/charting.html
Recommended (but optional) references from Stockcharts.com:
Technical Analysis (Parts 1 &  2): http://stockcharts.com/education/Overview/techAnalysis1.html
Chart Analysis: http://stockcharts.com/education/ChartAnalysis/index.html
ChartPatterns.com: http://www.chartpatterns.com/

II.BASIC BUILDING BLOCKS
a. GDP
Online Notes: "Gross Domestic Product":
http://www.uri.edu/artsci/ecn/lardaro/ZV/GDP.pdf
Carnes and Slifer, Chapters 2, 17, 18.
Track Market Sectors: http://stockcharts.com/charts/performance/SPSectors.html
More Sector Tracking (Market Carpets): http://stockcharts.com/charts/carpet.html
Recessions and Business: http://investopedia.com/printable.asp?a=/articles/economics/08/recession-affecting-business.asp
Recessions and Industries that Thrive: http://investopedia.com/printable.asp?a=/articles/stocks/08/industries-thrive-on-recession.asp
Energy Price Futures: http://www.quote.com/us/futures/energy.action
Options and the Future: What Do Markets Think? http://www.clevelandfed.org/Research/Commentary/2002/1001.pdf
Business Cycle Expansions and Contractions: http://www.nber.org/cycles.html
The NBER's Recession Dating Procedure in the Light of Current Developments: http://www.nber.org/cycles/recessions.html
Official Business Cycle Dates Don't Capture All Ups and Downs: http://research.stlouisfed.org/publications/regional/05/10/nat_overview.pdf

b. Interest Rate Determination and Effects: The Money, Bond, and Stock Markets
Online Notes: The Money market: http://www.uri.edu/artsci/ecn/lardaro/3345/Money_Market.pdf
Online Notes: The Bond Market: http://www.uri.edu/artsci/ecn/lardaro/3345/BONDS.pdf
Online Notes: The Yield Curve, Stock Market, and Interest Rates: http://www.uri.edu/artsci/ecn/lardaro/3345/Yield_Curve.pdf
A Bond Primer: http://www.smartmoney.com/onebond/index.cfm?story=primer
The Bond Market Can't Make Up Its Mind: http://www.marketwatch.com/News/Story/Story.aspx?guid=%7B9537370A%2DE74D%2D4F62%2DB87D%2DE974AAA0998F%7D&siteid=mktw&dist=
Interest Rates, Yield Curves, and the Monetary Regime: http://www.clevelandfed.org/research/Commentary/2004/06-01.pdf
Track the Yield Curve: http://www.bondheads.com/
Historical Yield Curve: http://stockcharts.com/charts/YieldCurve.html
Leading Indicators of Behavioral Finance: http://www.investopedia.com/printable.asp?a=/articles/trading/06/behavioralfinance.asp
Why are TIIS Yields So High? The Case of the Missing Inflation-Risk Premium: http://www.clevelandfed.org/Research/Commentary/2003/0315.pdf
TIPS Basics: http://www.treasurydirect.gov/instit/statreg/auctreg/auctreg_gsrlist.htm
Why Haven’t Long-term Interest Rates Fallen? http://www.clevelandfed.org/research/commentary/2002/0102.pdf
The Living Yield Curve: 
http://www.smartmoney.com/onebond/index.cfm?story=yieldcurve
How to Invest During a Recession: http://www.smartmoney.com/onthestreet/index.cfm?story=200101101
US Treasury Yields (this site provides a graph of the current Yield Curve): http://www.bloomberg.com/markets/rates/index.html
FED Focus: http://money.cnn.com/news/specials/fed/

c. Flexible Exchange Rates
Online Notes: "Flexible Exchange Rates":
http://www.uri.edu/artsci/ecn/lardaro/ZV/Flexible_Exchange_Rates.pdf
Carry Trade: http://www.investopedia.com/printable.asp?a=/articles/forex/07/carry_trade.asp
Taking Advantage of a Weak Dollar: http://investopedia.com/printable.asp?a=/articles/forex/08/weak-usd.asp
Burger Survey Provides Taste of International Economics: http://research.stlouisfed.org/publications/regional/04/01/international_econ.pdf
Forex Basics: http://www.investopedia.com/printable.asp?a=/articles/forex/08/forex-concepts.asp
A Hitchhiker's Guide to the US Current Account Problem: http://www.clevelandfed.org/research/Review/1990/90-q1-humpage.pdf
The Economic Rise of China: Threat or Opportunity? http://www.clevelandfed.org/research/commentary/2003/0801.pdf
Worries about Foreign Currency Reserves: http://online.wsj.com/public/article/SB114710757447146758-vgS6pBo_YDBwbCu5e9LjfsSVBgg_20070508.html?mod=blogs
Is Japan Recovering? http://www.aei.org/publications/pubID.19069/pub_detail.asp
The Weaker Dollar is Good News: http://www.aei.org/publications/pubID.17220/pub_detail.asp
The US Trade Deficit: Sideshow to the New Economy?: http://research.stlouisfed.org/publications/regional/00/04/TradeDeficit.pdf
A Beginner's Guide to Exchange Rates: http://economics.about.com/library/weekly/aa022703a.htm
The Morgan-Stanley Global Economic Forum:
http://www.morganstanley.com/views/gef/index.html
Economist.com Country Briefings: http://www.economist.com/countries/
The Currency Site: http://www.oanda.com
National Statistics: The Official UK Statistical Web Site: http://www.statistics.gov.uk/
Bloomberg Online - World Currencies:
http://www.bloomberg.com/markets/currencies/americas_currencies.html
(REVIEW THE CHAPTERS IN YOUR PRINCIPLES TEXT THAT DISCUSS GDP and Money Demand/Money Supply and basic interest rate determination)

III. THE SIMPLE KEYNESIAN MODEL
 a. Basic Theory
Gordon, Chapters 2,3.
Carnes and Slifer, Chapters 7,8,11,12,16.
Online Notes: "Introduction to Macroeconomics":
http://www.uri.edu/artsci/ecn/lardaro/ZV/Intro_to_Macro.pdf
Online Notes: "The Basic Keynesian Model":
http://www.uri.edu/artsci/ecn/lardaro/ZV/Basic_Keynesian_Model.pdf
Reckoning the Odds of Recession: http://politicalcalculations.blogspot.com/2006/04/reckoning-odds-of-recession.html
Sector Rotation: The Essentials: http://www.investopedia.com/printable.asp?a=/articles/trading/05/020305.asp
What Shape Will the Recovery Be? http://selectdl.smartmoney.com/investing/short-term-investing/the-shape-of-the-recovery-5-chart-signs-to-watch-for/?print=1
Are We Saving Enough? http://www.clevelandfed.org/Research/Commentary/2000/0700.pdf
Do We Have a Savings Crisis? www.stlouisfed.org/publications/re/2005/c/pages/saving_crisis.cfm
The Churn: The Paradox of Progress: http://www.dallasfed.org/fed/annual/1999p/ar92.pdf
Layoffs: Creative Destruction: http://www.fool.com/news/foth/2001/foth010726.htm?ref=em_fwcm1
(REVIEW THE CHAPTERS IN YOUR PRINCIPLES TEXT THAT DISCUSS THE KEYNESIAN CROSS, EQUILIBRIUM GNP, AND THE MULTIPLIER)

EXAM

b. Fiscal Policy
Online Notes: "Fiscal Policy":
http://www.uri.edu/artsci/ecn/lardaro/ZV/Fiscal_Policy.pdf  
The Return of Voodoo Economics: http://www.washingtonpost.com/wp-dyn/content/article/2006/05/14/AR2006051400806.html
Do Tax Cuts Pay for Themselves? http://www.cbpp.org/3-8-06tax.htm

IV.    MEASUREMENT IN MACROECONOMICS: INFLATION AND  UNEMPLOYMENT
Gordon, Chapter 2 (again).
Carnes and Slifer, Chapters 5,6,10,13.
Online Notes: "Inflation and Unemployment":
http://www.uri.edu/artsci/ecn/lardaro/ZV/Inflation_&_Unemployment.pdf
Seasonal Adjustment of Data: http://www.dallasfed.org/data/basics/seasonally.html
Inflation Central: http://www.clevelandfed.org/research/Inflation/index.cfm?first=5000&year1=1952&year2=2005
Is It More Expensive, or Does It Just Cost More Money? http://www.clevelandfed.org/research/commentary/2002/0515.pdf
The Demographics of Inflation Opinion Surveys: http://www.clevelandfed.org/Research/Commentary/2001/1015.pdf
What is the Right Inflation Rate? http://www.clevelandfed.org/Research/Commentary/2003/0915.pdf
The Employment Report: http://investopedia.com/printable.asp?a=/articles/04/092204.asp
What the Unemployment Rate Doesn't Tell US: http://financialedge.investopedia.com/financial-edge/0609/What-The-Unemployment-Rate-Doesnt-Tell-Us.aspx
Why Hiring Might Not Rise in a Recovery: http://www.latimes.com/business/la-fi-jobless-recovery2-2009jul02,0,4591258,print.story
Another Jobless Recovery” http://www.clevelandfed.org/research/trends/2008/0808/01ecoact.cfm
Economic Indicators (by the Numbers): http://www.newyorkfed.org/education/bythe.html
Flow of Funds Accounts of the US: http://www.federalreserve.gov/releases/Z1/Current/
Five Myths about Deflation: http://www.case.com.pl/upload/publikacja_plik/894167_Five%20Myths%20about%20deflation.pdf
Lardaro, Applied Econometrics, Chapter 3 (optional - on reserve)
Consumer Confidence Surveys, http://research.stlouisfed.org/publications/regional/03/04/confidence.pdf
The Internet Site for Economists: http://www.inomics.com/query/show?what=welcome
(REVIEW THE CHAPTERS IN YOUR PRINCIPLES TEXT THAT COVER THE CPI, INFLATION, AND THE UNEMPLOYMENT RATE).

DATA SOURCES:
Economic Report of the President -- Statistical Tables:
http://www.gpoaccess.gov/eop/download.html
The Statistical Abstract of the United States:
http://www.census.gov/prod/www/abs/statab2006_2009.html
Economy.com's Free Lunch: http://www.economy.com/freelunch  
Foreign Labor Statistics: http://146.142.4.24/cgi-bin/surveymost?in
Federal Reserve Economic Data (FRED): http://research.stlouisfed.org/fred2/
International Economic Data: http://www.dallasfed.org/data/interdata.html
BLS Major Indicator Releases:  http://www.bls.gov/bls/newsrels.htm
The US Economy at a Glance: http://stats.bls.gov/eag/eag.us.htm

V. THE IS - LM MODEL, INTERNATIONAL TRADE, FISCAL AND MONETARY POLICY
a. THE IS-LM MODEL
Gordon, Chapters 4,5,6.
Carnes and Slifer, Chapters 3,9,11,14,15,17.
A Look at Return on Invested Capital: http://www.fool.com/news/foth/2000/foth000927.htm  
Stock Prices and Output Growth: An Examination of the Credit Channel: http://www.clevelandfed.org/research/commentary/2002/0815.pdf

b. MONETARY POLICY
Gordon, Chapter 13.
Carnes and Slifer, Chapters 1,19,20,21.
Behind the Scenes of your Mortgage: http://investopedia.com/printable.asp?a=/articles/pf/07/secondary_mortgage.asp
Credit Default Swaps: http://investopedia.com/printable.asp?a=/articles/optioninvestor/08/cds.asp
Market Crashes: http://www.investopedia.com/features/crashes/
The Credit Crisis Visualized: http://www.getrichslowly.org/blog/2009/02/25/the-credit-crisis-visualized/
Who is to Blame for the Sub-Prime Crisis? http://investopedia.com/printable.asp?a=/articles/07/subprime-blame.asp
Why Housing Bubbles Pop: http://investopedia.com/printable.asp?a=/articles/07/housing_bubble.asp
Globalization and Monetary Policy: http://www.clevelandfed.org/For_the_Public/News_and_Media/Speeches/2008/Pianalto_20080513.cfm 
The Taylor Rule: A Guidepost for Monetary Policy? http://www.clevelandfed.org/Research/Commentary/2003/0703.pdf
The FED Abandons Bold Reflation Measures: http://www.aei.org/publications/pubID.18113/pub_detail.asp
Japan's Lost Decade: Lessons for America: http://www.aei.org/publications/pubID.12375/pub_detail.asp 
Japan's Choices: http://www.aei.org/publications/pubID.14026/pub_detail.asp 
Federal Reserve Economic Data (FRED): http://research.stlouisfed.org/fred2/   
"The Beige Book" of the Federal Reserve, released every six weeks:
http://www.federalreserve.gov/FOMC/BeigeBook/2006/
"US Monetary Policy: An Introduction,"
 http://www.frbsf.org/publications/federalreserve/monetary/index.html

VI. A FLEXIBLE PRICE AGGREGATE ECONOMIC MODEL
a. Aggregate Demand and Aggregate Supply
Gordon, Chapter 7.
Carnes and Slifer, Chapter 8.
The New Economy: What It Really Means, Business Week, 11/17/97: http://www.businessweek.com/1997/46/b3553084.htm
Cost-Push vs. Demand Pull Inflation: http://investopedia.com/printable.asp?a=/articles/05/012005.asp
Inflation-Protected Securities: http://investopedia.com/printable.asp?a=/articles/04/091504.asp
Deflationary Shocks: http://www.investopedia.com/articles/economics/09/deflationary-shocks-economy.asp
Inflation's Economic Cost: http://www.stlouisfed.org/publications/re/2006/c/pages/inflation.cfm
Predicting Inflation: http://research.stlouisfed.org/publications/regional/02/01/Inflation.pdf
Stagflation 1970s Style: http://investopedia.com/printable.asp?a=/articles/economics/08/1970-stagflation.asp
Understanding Supply-Side Economics: http://investopedia.com/printable.asp?a=/articles/05/011805.asp

b.  Inflation, Unemployment, Productivity, and the Philips Curve
Gordon, Chapters 8, 9.
Government Revises Job Tracker: http://cnnfn.cnn.com/2000/05/08/economy/jobs/
Predicting Inflation: Food for Thought: http://www.stlouisfed.org/publications/re/2002/a/pages/lead-article.html
The American Economy: Producing More with Less: http://www.stlouisfed.org/publications/re/2000/c/pages/economic-backgnd.html
The Microchip Flexes its Muscle: Can it Compete with History's Best?: http://www.stlouisfed.org/publications/re/2001/c/pages/lead-article.html
Rising Oil Prices and Turmoil: http://research.stlouisfed.org/publications/regional/01/01/OilPricesTurmoil.pdf
Producing More with Less: http://research.stlouisfed.org/publications/regional/00/07/Producing.pdf
The Natural Rate, NAIRU, and Monetary Policy, http://www.frbsf.org/econrsrch/wklyltr/wklyltr98/el98-28.html
The Tech Adoption Life Cycle: http://www.fool.com/research/2000/foolsden000825.htm
(BE ABLE TO LINK TEXT MATERIAL WITH THE NEW ECONOMY AND EXTEND ALL  TO THE STOCK MARKET AND MONETARY POLICY)

PAPER (DUE OUR LAST DAY OF CLASS)
FINAL EXAM