Student guide Faculty of Economics A.Y. 2010/11

Competition, Markets and Economic Policy
Lesson timetable, Notice board, Additional material
Aim of the course
The course is divided into two parts. The first takes a microeconomic approach to equip students for understanding the workings of the markets in which firms operate, and the modes of competitive interactions between firms. The themes of innovation and safeguarding correct market competition are examined, in line with the ideas of Industrial Economics.
The second part of the course takes a macroeconomic approach to the key problems of economic policy.
The aim is to illustrate the pathologies that can affect an economic system and the methods and instruments which Economic Policy authorities can use to remedy such problems. The topic areas of unemployment, inflation and public debt are studied, alongside the most important Economic Policy levers, i.e. the monetary and fiscal levers, income policies, and policies for stimulating growth.
Syllabus
SECTION 1 – 1ST SEMESTER
1. Industrial economics: the fundamental problems. Review of Microeconomics and Games Theory
 2. Monopoly, perfect competition and monopolistic competition
 3. Horizontal boundaries of the firm
 4. Vertical boundaries of the firm: "Hold-up" and double marginalization (ONLY for students who choose examination method 1)
 5. Strategic interaction. Bertrand's Paradox and its avoidance: I) Capacity constraints
 6. Strategic interaction: Cournot competition
 7. Avoiding the Bertrand Paradox: II) Dynamic Competition and Collusion
 8. (Continued) Collusion
9. Avoiding the Bertrand Paradox: III) Product differentiation
 10. Advertising
11. Market power and Concentration
 12. Structure of the market and cost of entry
 13. Deterrence to entry and proliferation of products: the case of breakfast cereals (ONLY for students who choose examination method 1)
 14. Mergers and acquisitions and antitrust policy: the Heineken-Birra Moretti case
 15. Innovation and R&D (Research & Development)
16. Industrial dynamics: Evolution of the industries (ONLY for students who choose examination method 1)
 
SECTION II – 2nd SEMESTER
Introduction.
· Economic analysis and the construction of macroeconomic scenarios for economic policy
· The (apparent) dichotomy between short-term and long-term (reference to AS/AD model)
 
SECTION I. INSTRUMENTS
1.1   Macroeconomic data: organisation, format, characteristics and properties
<!--[if !supportlists]-->1.     <!--[endif]-->Longitudinal and time series data
2. Census and sample data
3. Administrative, quantitative and qualitative data
4. Survey studies
5. Some data algebra
5. 1 Values at current and constant prices
5. 2 Growth rates and their transformations
5. 3 Composite indicators and index numbers
SECTION II. ECONOMIC CYCLE AND FORECASTS
 
2.1 The Economic cycle: Methodological aspects.
1. GDP and its transformations (per capita, growth rates, etc.)
2. Components of GDP and the other real variables
3. Definition of the economic cycle and its characteristics
4. Causes and implications of the cycle
5. Some interpretative theories
6. History and phases of the economic cycle: Italy, Europe, the world
 
2.2 Macroeconomic data for analysing the cycle: overview of some empirical methods
1. Correlation analysis
2. Linear regression (Lesson plan n. 2)
3. Multivariate statistical analysis.
3.1 Analysis of the main components
3.2 Cluster analysis
3.3 Discriminant analysis
 
2.3 Empirical analysis of the economic cycle
1. Randomness and regime changes (handling of outliers)
2. Seasonality
3. Standardization and normalization
4. Ranking [0-1] and rating
5. Separating the cycle from the trend
6. Use of moving averages for "smoothing" the series
7. Treatment of qualitative and cyclical trend data

2.4 Models for estimating and forecasting
1. Forecasting and techniques for constructing economic scenarios
2. Measures of the cycle and coincident and anticipatory indicators
3. Dating of the cycles and turning points
4. Autoregressive structures
5. The consensus
6. Rules of thumb
7. Expectations and prospects

2.5 Stabilisation policies
 
SECTION III. ANALYSIS OF THE MACROECONOMIC SCENARIO
3.1 The money market
1. The monetary economy
2. Monetary policy and short-term interest rates
3. Rules and systems of monetary policy
        Taylor rule
         Interest rate targeting
         Money targeting
         Inflation targeting
4. The European system and its pillars
5. Determinants of interest rate behaviour and how to predict their evolution
6. The link between short and long term rates and the yield curve
 
3.2 The currency market
1. Types and determinants of exchange rates
2. International competitiveness: some measures not based only on exchange rates
3. How to anticipate their movements
4. Purchasing power parity and the Big Mac Index (of which you can see both the 2005 table and its 2006 evolution)
5. Currency policies
6. Exchange rates and financial markets: uncovered interest rate parity.
7. Currency risk and its management
 
3.3 Prices and inflation
1. Measurement and general characteristics
2. Causes of inflation
2.1 Short and long run
2.2 Demand and costs
3. Consequences of inflation on firms, families, the state and on the economic system as a whole.
4. How to defend against inflation.
 
3.4 Public accounts
1. Definitions and role of the public sector.
2. Quick overview of the theories on financing of expenditure and on the sustainability of public debt.
3. Distortions connected with the tax burden.
4. The unpleasant monetarist arithmetic
5. Ricardian equivalence
 
3.5 The supply side:
1. The labour market
2. Industry and its indicators
 
SECTION IV. ECONOMIC GROWTH
4.1 Economic growth:
1. Outline of the theory
2. The international and national situation: past, present and prospects
3. Role and measures of productivity
4. Role of capital accumulation and of technological progress
5. Growth accounting
SECTION V. IN SUMMARY.
5.1 A summary view: taking the "pulse of the economy":
5.2 Reconstruction of the macroeconomic scenario for a European country
Examinations
SECTION 1 – 1ST SEMESTER
There will be a written examination at the end of the course.
Students can choose between two examination methods.
Examination method 1 consists of four topics to be discussed (evaluating whether the proposed statements are True, False, or Uncertain) and two open-ended questions, dealing with the material covered during the lectures.
Examination method 2 covers all the material presented during the lectures, with the exclusion of lessons 4, 13 and 16 of the syllabus. In place of the excluded material, students must attend 4 tutorial sessions (dealing with the same topics covered during the lectures). The exam will consist of four questions to be discussed as in Examination method 1 (evaluating whether the proposed statements are True, False, or Uncertain) and an exercise similar to those done during the tutorial sessions.
 
SECTION II – 2ND SEMESTER
·  There will be only  a written examination at the end of the course.
·  There will be no intermediate progress tests.
·  Students will have the opportunity (optionally) to complete group projects in the form of mini research papers. The grades earned for the optional projects can add up to 3/30 to the result of the written test.
Reading list
SECTION 1 – 1ST SEMESTER
COURSE TEXTBOOKS
The required course textbooks (for the specified parts of the course) are:
¨ Cabral L. (2002), Economia Industriale, Carocci editore
¨ Besanko D., Dranove D., Shanley M. (2001), Economia dell'Industria e Strategie d'Impresa, UTET
¨ Garavaglia C. (2006), Economia Industriale: Esercizi e Applicazioni, Carocci editore
to be completed with:
- Lecture notes
- Materials and slides supplied by the lecturers (NOTE: The slides and materials distributed by the lecturers during the course are an integral part of the programme and will be covered in the examination. The slides can be downloaded from the course website, which will be updated on a weekly basis).
- Additional reading materials and textbooks for further study will be set during the lectures.
 
SECTION II – 2ND SEMESTER
Course textbooks:
(SOLE): "Come si legge Il Sole 24 Ore", 7ma edizione, 2004, disponibile in biblioteca.
(GEI): "Guide to economic Indicators: making sense to Economics", The Economist, Fifth Edition, 2003, disponibile in Biblioteca
(CIP): "Congiuntura Economica e previsione", di Innocenzo Cipolletta, Il Mulino, 1992, disponibile in Biblioteca
(MS): "Macroeconomia ", di D.Miles e A.Scott, 2006, Zanichelli disponibile in Biblioteca
Additional material distributed in class