BAEcon Development Studies

Year of entry: 2022

Course unit details:
Macroeconomics IIIA

Course unit fact file
Unit code ECON30611
Credit rating 10
Unit level Level 3
Teaching period(s) Semester 1
Offered by Economics
Available as a free choice unit? Yes


See course Blackboard pages.


Unit title Unit code Requirement type Description
ECON20401 Pre-Requisite Compulsory
Macroeconomics IIB ECON20402 Pre-Requisite Compulsory
ECON10001 Pre-Requisite Compulsory
Adv Maths - BAEcon & BSc Econ ECON10071 Pre-Requisite Compulsory
ECON20281 Pre-Requisite Compulsory
Pre-requisites: ECON20401 & ECON20402 AND EITHER (ECON10001 or ECON10071 or ECON20281)

In addition to ECON20401 and ECONN20401, students must have taken at least one of the following to be able to take this course unit (compulsory Pre-Requisite):

  • ECON10001 or
  • ECON10071 or
  • ECON20281


The course studies the scope and effectiveness of macroeconomic stabilization policy under the assumption of rational expectations. It also examines the set of incentives and constraints that policymakers face under alternative monetary policy regimes and assesses their relative merits and drawbacks.

Learning outcomes

On successful completion of the course, you will have a working knowledge of key macroeconomic models and understand their predictions about the effectiveness of macroeconomic stabilization policies.


Introduction to Expectations in Macroeconomics:

  • Main concepts of expectations in Macroeconomics; Adaptive vs. Rational Expectations.


The Mathematics of Rational Expectations Models:

  • Simple Macroeconomic models of lagged and forward expectations.


Rational Expectations and Policy Ineffectiveness:

  • The Rational Expectations Hypothesis (REH) and policy neutrality.


Rational Expectations and New Keynesian Economics:

  • Calvo contracts and the New Keynesian Phillips curve.


Dynamic Inconsistency and Credibility in Monetary Policy:

  • Rules versus Discretion.
  • Rules with Escape Clauses.
  • Central Bank Independence.


Addressing the Inflation Bias Problem of Discretionary Monetary Policy:

  • Reputation and Credibility; Optimal Preferences of a Central Banker.

Teaching and learning methods

Lectures and exercise classes.

Assessment methods

Method Weight
Other 10%
Written exam 90%
  • Final Exam Paper - 1.5 hours (90%).
  • Mid-Term Test - multiple choice (10%).

Feedback methods

  • Past exam papers.
  • Class feedback.
  • Office hours.
  • Revision sessions.
  • Discussion boards.

Recommended reading

  • Romer, David (2006), Advanced Macroeconomics, (McGraw Hill, 3rd edition).
  • Minford P. (1992), Rational Expectations Macroeconomics, Blackwell.
  • Heijdra B. and F. Van Der Ploeg (2002) Foundations of Modern Macroeconomics (Oxford).
  • Holden K., D.A. Peel & J.L. Thomson, Expectation Theory and Evidence. Macmillan.
  • G.K. Shaw (1984), Rational Expectations, Harvester Press.
  • Sheffrin S. (1983), Rational Expectations, Cambridge University Press.
  • Stevenson, A., V.Muscatelli, M.Gregory. Macroeconomic Theory and Stabilization Policy.
  • Walsh, C., Monetary Theory & Policy.

Study hours

Scheduled activity hours
Assessment written exam 1.5
Lectures 18
Tutorials 4
Independent study hours
Independent study 76.5

Additional notes


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