Macroeconomics / Olivier Blanchard.

Includes bibliographical references and index.

Chapter 1. A Tour of the World -- 1-1. The United States -- Is Unemployment Too Low? -- Is the Stock Market Too High? -- Why Has Growth Slowed Down? -- Why Has Wage Inequality Increased? -- 1-2. The European Union -- How to Reduce High Unemployment? -- What Will the Euro Do for Europe? -- 1-3. Japan and East Asia -- Why Has Japan Done So Poorly in the 1990s? -- What Was the Cause of the Asian Crisis of 1997? -- 1-4. Looking Ahead -- Appendix. Where to Find the Numbers -- Chapter 2. A Tour of the Book -- 2-1. Aggregate Output -- GDP, Value Added, and Income -- Nominal and Real GDP -- 2-2. The Other Major Macroeconomic Variables -- The Unemployment Rate -- The Inflation Rate -- 2-3. A Road Map -- A Tour of the Book -- Appendix. The Construction of Real GDP, and Chain-Type Indexes -- The Core -- The Short Run -- Chapter 3. The Goods Market -- 3-1. The Composition of GDP -- 3-2. The Demand for Goods -- Consumption (C) -- Investment (I) -- Government Spending (G) -- 3-3. The Determination of Equilibrium Output -- Using Algebra -- Using a Graph -- Using Words -- How Long Does It Take for Output to Adjust? -- 3-4. Investment Equals Saving: An Alternative Way of Thinking About Goods-Market Equilibrium -- 3-5. Is the Government Omnipotent? A Warning -- Chapter 4. Financial Markets -- 4-1. The Demand for Money -- Money Demand and the Interest Rate: The Evidence -- 4-2. The Determination of the Interest Rate: I -- Money Demand, Money Supply, and the Equilibrium Interest Rate -- Monetary Policy and Open Market Operations -- 4-3. The Determination of Interest Rates: II -- What Banks Do -- The Supply and Demand for Central Bank Money -- Two Alternative Ways of Looking at the Equilibrium -- Open Market Operations Revisited -- Chapter 5. Goods and Financial Markets: The IS-LM Model -- 5-1. The Goods Market and the IS Relation -- Investment, Sales, and the Interest Rate -- The IS Curve -- Shifts in the IS Curve -- 5-2. Financial Markets and the LM Relation -- Real Money, Real Income, and the Interest Rate -- The LM Curve -- Shifts in the LM Curve -- 5-3. The IS-LM Model: Exercises -- Fiscal Policy, Activity, and the Interest Rate -- Monetary Policy, Activity, and the Interest Rate -- 5-4. Using a Policy Mix -- 5-5. Adding Dynamics -- 5-6. Does the IS-LM Model Actually Capture What Happens in the Economy? -- The Medium Run -- Chapter 6. The Labor Market -- 6-1. A Tour of the Labor Market -- The Large Flows of Workers -- Differences across Workers -- 6-2. Movements in Unemployment -- 6-3. Wage Determination -- Bargaining -- Efficiency Wages -- Wages and Unemployment -- 6-4. Price Determination -- 6-5. The Natural Rate of Unemployment -- The Wage Setting Relation -- The Price Setting Relation -- Lquilibrium Real Wages, Employment, and Unemployment -- From Unemployment to Output -- 6-6. Where We Go From Here -- Chapter 7. Putting All Markets Together. The AS-AD Model -- 7-1. Aggregate Supply -- The Derivation of the Aggregate Supply Relation -- 7-2. Aggregate Demand -- 7-3. Equilibrium Output in the Short and the Medium Rum -- The Dynamics of Output and the Price Level -- 7-4. The Effects of a Monetary Expansion -- The Dynamics of Adjustment -- Looking, Behind the Scene -- The Neutrality of Money -- 7-5. A Decrease in the Budget Deficit -- The Budget Deficit, Output, and the Interest Rate -- Budget Deficits, Output, and Investment -- 7-6. Changes in the Price of Oil -- Effects on the Natural Rate of Unemployment -- The Dynamics of Adjustment -- 7-7. Conclusions -- The Short Run versus the Medium Run -- Shocks and Propagation Mechanisms -- Output, Unemployment, and Inflation -- Chapter 8. The Phillips Curve -- 8-1. Inflation, Expected Inflation, and Unemployment -- 8-2. The Phillips Curve -- The Early Incarnation -- Mutations -- Back to the Natural Rate of Unemployment -- 8-3. A Summary and Many Warnings -- The Inflation Process and the Phillips Curve -- Differences in the Natural Rate Across Countries -- Variations in the Natural Rate Over Time -- The Limits of Our Understanding -- Appendix. From the Aggregate Supply Relation to the Phillips Curve -- Chapter 9. Inflation, Activity, and Money Growth -- 9-1. Output, Unemployment, and Inflation -- Okun's Law: Output Growth and Changes in Unemployment -- The Phillips Curve: Unemployment and the Change in Inflation -- The Aggregate Demand Relation: Money, Growth, Inflation, and Output Growth -- 9-2. The Medium Run -- 9-3. Disinflation: A First Pass -- How Much Unemployment? And for How Long? -- Working Out the Required Path of Money Growth -- 9-4. Expectations, Credibility, and Nominal Contracts -- Expectations and Credibility: The Lucas Critique -- Nominal Rigidities and Contracts -- 9-5. The U.S. Disinflation, 1979 to 1985 -- The Long Run -- Chapter 10. The Facts of Growth -- 10-1. Growth in Rich Countries Since 1950 -- 10-2. A Broader Look Across Time and Space -- Looking Across Two Millennia -- Looking Across Countries -- 10-3. Thinking About Growth: A Primer -- The Aggregate Production Function -- The Sources of Growth -- Chapter 11. Saving, Capital Accumulation, and Output -- 11-1. Interactions between Output and Capital -- The Effects of Capital on Output -- The Effects of Output on Capital Accumulation -- 11-2. Implications of Alternative Saving Rates -- Dynamics of Capital and Output -- Steady-State Capital and Output -- The Saving Rate and Output -- The Saving Rate and the Golden Rule -- 11-3. Getting a Sense of Magnitudes -- The Effects of the Saving Rate on Steady-State Output -- The Dynamic Effects of an Increase in the Saving Rate -- The U.S. Saving Rate and the Golden Rule -- 11-4. Physical versus Human Capital -- Extending the Production Function -- Human Capital, Physical Capital, and Output -- Endogenous Growth -- Chapter 12. Technological Progress and Growth -- 12-1. Technological Progress and the Rate of Growth -- Technological Progress and the Production Function -- Interactions between Output and Capital -- Dynamics of Capital and Output -- The Effects of the Saving Rate -- 12-2. The Determinants of Technological Progress -- The Fertility of the Research Process -- The Appropriability of Research Results -- 12-3. The Facts of Growth Revisited -- Capital Accumulation versus Technological Progress -- Why Has Technological Progress Slowed Since the Mid-1970s? -- 12-4. Epilogue: The Secrets of Growth -- Appendix. Constructing a Measure of Technological Progress -- Chapter 13. Technological Progress, Wages, and Unemployment -- 13-1. Productivity, Output, and Unemployment in the Short Run -- Technological Progress, Aggregate Supply, and Aggregate Demand -- The Empirical Evidence -- 13-2. Productivity and the Natural Rate of Unemployment -- Price Setting and Wage Setting Revisited -- The Natural Rate of Unemployment -- The Empirical Evidence -- 13-3. Technological Progress and Distribution Effects -- The Increase in Wage Inequality -- The Causes of Increased Wage Inequality -- Extensions -- Expectations -- Chapter 14. Expectations: The Basic Tools -- 14-1. Nominal versus Real Interest Rates -- Computing the Real Interest Rate -- Nominal and Real Interest Rates in the United States Since 1978 -- 14-2. Expected Present Discounted Values -- Computing Expected Present Discounted Values -- Using Present Values: Examples -- Nominal versus Real Interest Rates, and Present Values -- 14-3. Nominal and Real Interest Rates, and the IS-LM Model -- 14-4. Money Growth, Inflation, and Nominal and Real Interest Rates -- Nominal and Real Interest Rates in the Short Run -- Nominal and Real Interest Rates in the Medium Run -- From the Short to the Medium Run -- Evidence on the Fisher Hypothesis --

Appendix. Deriving the Expected Present Discounted Value Using Real or Nominal Interest Rates -- Chapter 15. Financial Markets and Expectations -- 15-1. Bond Prices and the Yield Curve -- Bond Prices as Present Values -- Arbitrage and Bond Prices -- From Bond Prices to Bond Yields -- The Yield Curve and Economic Activity -- 15-2. The Stock Market and Movements in Stock Prices -- Stock Prices as Present Values -- The Stock Market and Economic Activity -- 15-3. Bubbles, Fads, and Stock Prices -- Appendix. Arbitrage and Stock Prices -- Chapter 16. Expectations, Consumption, and Investment -- 16-1. Consumption -- The Very Foresighted Consumer -- Toward A More Realistic Description -- Putting Things Together: Current Income, Expectations, and Consumption -- 16-2. Investment -- Investment and Expectations of Profit -- A Convenient Special Case -- Current versus Expected Profit -- Profit and Sales -- 16-3. The Volatility of Consumption and Investment -- Appendix. Derivation of the Expected Present Value of Profits when Future Profits and Interest Rates Are Expected to Be the Same as Today -- Chapter 17. Expectations, Output, and Policy -- 17-1. Expectations and Decisions: Taking Stock -- Expectations and the IS Relation -- The LM Relation Revisited -- 17-2. Monetary Policy, Expectations, and Output -- 17-3. Deficit Reduction, Expectations, and Output -- The Role of Expectations About the Future -- Back to the Current Period -- The Open Economy -- Chapter 18. Openness in Goods and Financial Markets -- 18-1. Openness in Goods Markets -- The Choice between Domestic and Foreign Goods -- Nominal Exchange Rates -- Real Exchange Rates -- 18-2. Openness in Financial Markets -- The Balance of Payments -- The Choice between Domestic and Foreign Assets -- 18-3. Conclusions and a Look Ahead -- Chapter 19. The Goods Market in an Open Economy -- 19-1. The IS Relation in the Open Economy -- The Demand for Domestic Goods -- The Determinants of the Demand for Domestic Goods -- 19-2. Equilibrium Output and the Trade Balance -- 19-3. Increases in Demand, Domestic or Foreign -- Increases in Domestic Demand -- Increases in Foreign Demand -- Games That Countries Play -- 19-4. Depreciation, the Trade Balance, and Output -- Depreciation and the Trade Balance: The Marshall--Lerner Condition -- The Effects of a Depreciation -- Combining Exchange-Rate and Fiscal Policies -- 19-5. Looking at Dynamics: The J-Curve -- 19-6. Saving, Investment, and Trade Deficits -- Appendix. Derivation of the Marshall--Lerner Condition -- Chapter 20. Output, the Interest Rate, and the Exchange Rate -- 20-1. Equilibrium in the Goods Market -- 20-2. Equilibrium in Financial Markets -- Money versus Bonds -- Domestic Bonds versus Foreign Bonds -- 20-3. Putting Goods and Financial Markets Together -- 20-4. The Effects of Policy in an Open Economy -- The Effects of Fiscal Policy in an Open Economy -- The Effects of Monetary Policy in an Open Economy -- 20-5. Fixed Exchange Rates -- Pegs, Crawling Pegs, Bands, the EMS, and the Euro -- Pegging the Exchange Rate, and Monetary Control -- Fiscal Policy under Fixed Exchange Rates -- Appendix. Fixed Exchange Rates, Interest Rates, and Capital Mobility -- Chapter 21. Exchange Rates: Adjustments, Crises, and Regimes -- 21-1. Fixed Exchange Rates and The Adjustment of the Real Exchange Rate -- Aggregate Demand Under Fixed Exchange Rates -- Aggregate Demand and Aggregate Supply -- 21-2. Exchange Rate Crises -- Crises in the European Monetary System -- 21-3. Choosing Between Exchange Rate Regimes -- The Problems of Flexible Exchange Rates -- The Limited Costs of Fixed Exchange Rates -- The Benefits of Fixed Exchange Rates -- Appendix. Exchange Rate Movements -- Pathologies -- Chapter 22. Pathologies I: High Unemployment -- 22-1. The Great Depression -- The Fall in Spending -- The Contraction in Nominal Money -- The Adverse Effects of Deflation -- The Recovery -- 22-2. Unemployment in Europe -- Labor Market Rigidities -- Hysteresis -- Eurosclerosis or Hysteresis? -- 22-3. Conclusions -- Chapter 23. Pathologies II: High Inflation -- 23-1. Budget Deficits and Money Creation -- 23-2. Inflation and Real Money Balances -- 23-3. Deficits, Seignorage, and Inflation -- The Case of Constant Money Growth -- Dynamics and Increasing Inflation -- Hyperinflations and Economic Activity -- 23-4. How Do Hyperinflations End? -- The Elements of a Stabilization Program -- Can Stabilization Programs Fail? -- The Costs of Stabilization -- 23-5. Conclusions -- Chapter 24. Pathologies III: Transition in Eastern Europe, and the Asian Crisis -- 24-1. Transition in Eastern Europe -- By How Much Has Output Declined? -- Why Did Output Decline? -- Why Have Some Countries Recovered and Not Others? -- 24-2. The Asian Crisis -- Why the Crisis? -- Why Did the Exchange Rate Crisis Lead to a Recession? -- What Are the Lessons from the Asian Crisis? -- Back to Policy -- Chapter 25. Should Policy Makers Be Restrained? -- 25-1. Uncertainty and Policy -- How Much Do Macroeconomists Actually Know? -- Should Uncertainty Lead Policy Makers to Do Less? -- Uncertainty and Restraints on Policy Makers -- 25-2. Expectations and Policy -- Hijackings and Negotiations -- Inflation and Unemployment Revisited -- Establishing Credibility -- Time Consistency and Restraints on Policy Makers -- 25-3. Politics and Policy -- Games between Policy Makers and Voters -- Games between Policy Makers -- Back to the Balanced-Budget Amendment -- Chapter 26. Monetary Policy: A Summing Up -- 26-1. The Optimal Inflation Rate -- The Costs of Inflation -- The Benefits of Inflation -- The Optimal Inflation Rate: The Current Debate -- 26-2. The Design of Monetary Policy -- Money Growth and Inflation Revisited -- From Money to Monetary Aggregates -- Taylor's Rule -- 26-3. The Fed in Action -- The Mandate of the Fed -- The Organization of the Fed -- The Instruments of Monetary Policy -- The Practice of Policy -- Could the Conduct of U.S. Monetary Policy Be Improved? -- Chapter 27. Fiscal Policy. A Summing Up -- 27-1. The Government Budget Constraint -- Current versus Future Taxes -- Debt and Primary Surpluses -- The Evolution of the Debt-to-GDP Ratio -- 27-2. Four Issues in Fiscal Policy -- Ricardian Equivalence -- Deficits, Output Stabilization, and the Cyclically Adjusted Deficit -- Wars and Deficits -- The Dangers of Very High Debt -- 27-3. The U.S. Budget Deficit -- The Budget Outlook Until 2009 -- Surpluses and the Low U.S. Saving Rate -- Surpluses and The Aging of America -- Chapter 28. Epilogue: The Story of Macroeconomics -- 28-1. Keynes and the Great Depression -- 28-2. The Neoclassical Synthesis -- Progress on All Fronts -- Keynesians versus Monetarists -- 28-3. The Rational Expectations Critique -- The Three Implications of Rational Expectations -- The Integration of Rational Expectations -- 28-4. Current Developments -- New Classical Economics and Real Business Cycle Theory -- New Keynesian Economics -- New Growth Theory -- 28-5. Common Beliefs -- Appendix 1. An Introduction to National Income and Product Accounts -- Appendix 2. A Math Refresher -- Appendix 3. An Introduction to Econometrics.