LES5803 - Macroeconomics III

Credit hours

Instructor
Humberto Francisco Silva Spolador
Silvia Helena Galvao de Miranda

Objective
The discipline aims to achieve two goals. The first is to examine long-term macroeconomic
developments, that is, from the perspective of economic growth. The central question: why has Brazil
been left behind in the international context? The performance of Brazil is compared to other countries,
discussing the possible determinants of the evolution observed both from a theoretical point of view and
in light of the available evidence. The roles of savings and capital accumulation, knowledge and
technology, and efficiency and their effects on productivity and per capita income are examined. The
second objective, focusing on the short and medium term, is to present a synthesis of the main
developments in stabilization policies since the 1970s. The central question is: What causes economic
cycles and what can be done to stabilize them? These are, on the one side, the so-called real business
cycles, and, on the other, the so-called “neoclassical synthesis”, that is, theoretical developments based
on the integration of the ideas of Keynes and the Classics, with an emphasis on the role of expectations
and debates around the Phillips curve. This is followed by the incorporation of the theory of rational
expectations and its implications in the various fields of macroeconomics, both in the new classical and
in the new Keynesian schools. From this perspective, we discuss the effectiveness of stabilization policies
in the face of demand and supply shocks, the choice of policies, the role of public debt and its
sustainability.

Content
Part I. Long Term: economic growth 1. Long Term Growth: Brazil and other countries 2. Theories and
Evidence: Importance of savings and capital a. “AK” Model 3. Theories and Evidence: Knowledge and
efficiency of labor a.Solow model 4.Growth in Brazil: going beyond saving 5.Capital accumulation
a.Savings, capital price, capacity utilization, productivity 6.Product growth (GDP) a.Capital accumulation,
strength of labor, technology (total productivity) 7.Total Productivity Growth a.Technological progress,
technical efficiency, scale effect, allocative effect 8.Growth and Interest Rates a.Endogenous savings:
Ramsey Model 9.Real Business Cycles Model aThe approach of P. Romer Part II. Short-Term Business
Cycles: The Search for Stability 1.Phillips Curve and Neoclassical Synthesis 2.Aggregate Supply with
Expectations 3.Rational Expectations a.New Classical Model b.New Keynesian Model c.New Keynesian
Phillips Curve 4.Evaluation of Macroeconomic Policies a. Anticipated and Unanticipated Shocks in
Demand and Aggregate Supply b. Optimal Employment and Inflation Policy 5. Tax Policies and Debt
Sustainability a. Seigniorage and Inflation Tax b. Inflation Bubble c. Ricardian Equivalence, Sustainability
and Growth.

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