Core Macroeconomics, Hilary Term 2012

Week 7: Fiscal policy

This week we continue our study of macroeconomic policy, turning our focus to fiscal policy. The Carlin and Soskice chapter will give you some useful technical tools for understanding the mechanics of deficits and debt, as well as an introduction to rule-based constraints on fiscal policy. The Romer chapter covers some of the same material, but goes much further in discussing political economy approaches to understanding how and why deficits emerge. A number of useful articles have appeared in Oxford Review of Economic Policy (OXREP) in recent years, a selection of which is listed below. You should not feel limited by this list, and may wish to explore a wider range of sources in preparing your essay.

Readings

Carlin & Soskice Ch. 6
Romer (Advanced Macroeconomics) Ch. 11
OXREP
  Winter '05 issue, articles by Allsopp & Vines, Solow, and Krguman
  Winter '09 issue, article by Adam & Vines
  Spring '10 issue, articles by Wren-Lewis, Barrell & Weale
  Winter '11 issue, article by Helm

Assignment

Please write an essay answering the following question.

What, if anything, have the recent financial crisis and recession taught us about the role of fiscal policy in managing an economy? Discuss with reference to a) a country in a monetary/currency union and b) a country not in such a union.