Student guide Faculty of Economics A.Y. 2008/09

Economic Policy (Advanced)
Aim of the course
The learning objectives of the course are:
1. to provide a to a deeper understanding of macroeconomics and economic policy;
2. to describe the methods and theoretical justifications for public intervention in the economy;
3. to analyse the principal pathologies which affect economic systems, identifying their causes and solutions;
4. to understand the relations between the economic cycle and growth
5. to illustrate the subject with examples from Italian case studies.
1.The fundamentals of economic policy
1.1 Models for Economic Policy
1.2 Objectives (and objective functions) and instruments, Monetary policy, Budget policy
1.3 The fundamental law of economic policy
1.4 Dynamic inconsistency
1.5 Schools of thought
Overview of the debate on "rules and discretionary power"
The role of uncertainty and delays in Economic Policy
2.Deficit and debt
2.1 A brief overview of the public sector
2.2 Alternative schemas for financing expenditure
2.3 The sustainability of debt
3.1 Definition, characteristics and cost of inflation
3.2 Demand-pull inflation in the short run
3.3 Demand-pull inflation in the long run (role of monetary policy): quantitative theory and neutrality of money
3.4 Monetary policy as an instrument for combating demand-pull inflation in the long run:
Gradualism and "cold shower": the monetarist rule and rational expectations
Notes on the Taylor rule
3.5 Cost-push inflation and recovery policies
The devaluation/inflation spiral
The indexing problem
The Scandinavian model and structural inflation
4. Unemployment
4.1 Definition, characteristics and cost of unemployment
4.2 Cyclical unemployment the Philips curve and the role of nominal rigidity
Monetary illusion and poor extraction of the signal from noise
4.3 Equilibrium unemployment
The perfect competition model in the labour market
The imperfect competition model in the labour market
4.4 Eurosclerosis and the labour market reforms
4.5 Hysteresis and the insider/outsider model
5. Growth
5.1 Capital accumulation and the golden rule. The Solow model
5.2 Convergence between countries
5.3 Growth Accounting
5.4 The potential (or effective) role of the New Economy
The examination procedure will be communicated by the lecturer during the course and posted on the office notice board.
Reading list
Bianchi C., L'economia italiana e i problemi della politica economica, Milano, Guerini e Associati, 1998.
Course notes supplied by the lecturers