Macroeconomics III - ECO00002H

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  • Department: Economics and Related Studies
  • Module co-ordinator: Prof. Subir Chattopadhyay
  • Credit value: 20 credits
  • Credit level: H
  • Academic year of delivery: 2019-20

Module summary

The module introduces final year students to a select set of topics in modern macroeconomics.

Module will run

Occurrence Teaching cycle
A Autumn Term 2019-20 to Summer Term 2019-20

Module aims

Macroeconomics II introduced the IS-LM model and its generalisations to include labour markets, dynamics and international trade, and showed how that model could be used to formulate economic policy. It also introduced the Solow model of growth.

Macroeconomics III introduces general equilibrium and information economics to macro models as this allows the behaviour of the model to be understood in terms of economic fundamentals.

Term 1 of Macroeconomics III introduces the optimal growth model. It continues with other growth models which emphasise shocks to the economy. Finally, an introduction to real business cycle theory is provided.

Term 2 of Macroeconomics III concentrates attention on three issues:
Intergenerational trade, social security and capital formation studied within the framework of an overlapping generation model with production:

The efficiency wage approach and the search approach to labour markets
The role of liquidity and collateral in the economy

Module learning outcomes

On completing the module a student will be able to:

  • Understand some modern macroeconomic models with micro-foundations
  • Comment on some policy debates in macroeconomics

Module content

Fourteen hour long lectures have been timetabled.

It will help if you have access to the following during lectures:

(i) the reading material for each topic, which can be accessed through the VLE link “Reading List”

(ii) the “Handout”, available under “Term 2” through the VLE link “Lectures”, which contains many details that are used in the reading, and hence in the lectures, but are either treated differently or not developed at all in the reading.

Homework assignments will be solved in Practical classes which will be held in weeks 4, 5, and 7-9. Attendance will be taken. You do not need to submit solutions to the assignments but do try to solve the problems before the corresponding Practical class.

In week 7 you will be required to submit one piece of written work—an exercise from the homework assignments or a past paper—which will be marked and returned.

There will be one small group Seminar in week 10. This will give you an opportunity to ask questions and discuss the material covered in lectures.

It is essential that you attend lectures, work on the the reading and the Handout, make an honest effort to solve the homework exercises, and attend the Practical classes and Seminar.


Task Length % of module mark
University - closed examination
Macroeconomics III
3 hours 100

Special assessment rules



Task Length % of module mark
University - closed examination
Macroeconomics III
3 hours 100

Module feedback

This is provided in four different forms:

1. Complete solutions to all homework exercises will be posted on the VLE page after the material has been presented in the Practical classes.
2. You are encouraged to make use of Office Hours to make sure that you familiarize yourself with the material as it is being taught.
3. One piece of work will have to be submitted and will be marked and returned to you.
4. The Seminar meeting in week 10 of each term provides you with an opportunity to interact with me to raise questions and clarify doubts that you have.

Indicative reading

BLANCHARD, O., AND S. FISCHER: Lectures in Macroeconomics, MIT, 1989.
For the Diamond model: Ch 3 pgs. 91-97 (until “...alternative equilibria.”), pgs 102-107 (from “To answer this,...” until “...modified golden rule.”), and pgs 110-114.
For the efficiency wage model: Sec 9.4 (pgs 455-460).
For the Stiglitz and Weiss model: Sec 9.6 (pgs 478-484).

FREIXAS, C., AND J.-C. ROCHET: Microeconomics of Banking, MIT, 1997.
For the Bernanke and Gertler model: Sec 6.3.2 (pgs 171-176).
For the Kiyotaki and Moore model: Sec 6.4.2 (pgs 180-183).

ROMER, D.: Advanced Macroeoconomics, McGraw Hill, 1996.
For the search model: Sec 10.8 (pgs 473-481).

STIGLITZ, J. E., AND A. WEISS: “Credit Rationing in Markets with Imperfect Information,” American Economic Review, 1981, 393-399.

The information on this page is indicative of the module that is currently on offer. The University is constantly exploring ways to enhance and improve its degree programmes and therefore reserves the right to make variations to the content and method of delivery of modules, and to discontinue modules, if such action is reasonably considered to be necessary by the University. Where appropriate, the University will notify and consult with affected students in advance about any changes that are required in line with the University's policy on the Approval of Modifications to Existing Taught Programmes of Study.