ECO2003 : Economic Modelling
- Offered for Year: 2017/18
- Module Leader(s): Dr Roxana Radulescu
- Demonstrator: Dr Xueqi Dong
- Lecturer: Professor Colin Wren, Dr David Barlow, Dr Grega Smrkolj
- Owning School: Newcastle University Business School
- Teaching Location: Newcastle City Campus
|Semester 1 Credit Value:||10|
|Semester 2 Credit Value:||10|
To equip the learner with framing skills for modelling the economy; and to develop learners' problem solving abilities in the context of both macroeconomics and microeconomics.
This is a core second-year module in economic analysis. It is a pre-requisite for several final-year modules in Economics, and complements the learning undertaken in ECO2004 and ECO2005 (Microeconomic Analysis and Macroeconomic Analysis). A structured series of core economic models are introduced to the learners, familiarising them with modelling techniques and the intellectual demands of constructing economic models with which to analyse the economy. The syllabus includes frameworks typical of intermediate level economics: for example, students develop skills in constructing and using the IS-LM framework for analysing the closed and open economy in the short run; and using micro-models to analyse situations in which economic agents both produce and consume, such as the general equilibrium model.
A key emphasis is placed on understanding the relevance of different frameworks/models for different contexts. The material builds on economic principles typically covered at Stage 1 but it demands a much higher degree of conceptualisation, a greater reliance on analysis and use of mathematical training undertaken in prior studies.
It is a core module, as it covers economic techniques that are essential to modern economic analysis at Stage 3 of economics programmes.
Outline Of Syllabus
1. AN INTRODUCTION TO MODELLING THE WHOLE ECONOMY
• A basic classical model of national income
• The distribution of national income to the households
• How fiscal policy influences the allocation of resources between consumption, investment and government purchases.
2. UNDERSTANDING THE AD/AS FRAMEWORK
• Goods market equilibrium – IS – in the short run
• Money market equilibrium – LM – in the short run.
• IS-LM – benchmark model for the short run.
• Deriving the AD/AS framework
• Labour market equilibrium and the Phillips curve
3. THE OPEN ECONOMY
• The trade balance and the exchange rate
• Aggregate demand in the open economy
• Fixed vs. flexible exchange rates
4. THE DYNAMIC AGGREGATE DEMAND AND AGGREGATE SUPPLY
• Inflation targeting central banks
• A simplified DSGE
5. PRODUCTION AND CONSUMPTION
• Robinson-Crusoe economy.
• Robinson-Crusoe and Man Friday economy.
• The Edgeworth-Bowley box and the production possibility curve.
• Application to international trade.
• Application to inter-temporal choice.
6. GENERAL EQUILIBRIUM THEORY
• Model set-up: the 2 x 2 x 2 model and the Walrasian general equilibrium.
• General equilibrium: diagrammatic treatment.
• Properties of equilibrium: Walras Law, and existence, uniqueness and stability of equilibrium.
7. WELFARE ECONOMICS
• Value judgements, inter-personal utility comparisons and ethical judgements
• The Pareto criteria: Pareto improvements and efficiency.
• Welfare maximization.
• Fundamental theorems of welfare economics.
• Criticisms of Pareto: alternative welfare systems, utilitarianism and Rawls.
• Market failure.
8. MARKET FAILURE
• Introduction, market failure and the nature of government intervention.
• Pure public goods, and possible solutions
• Externalities, the Coase theorem and other solutions.
|Scheduled Learning And Teaching Activities||Lecture||24||1:00||24:00||N/A|
|Guided Independent Study||Assessment preparation and completion||1||64:00||64:00||N/A|
|Guided Independent Study||Directed research and reading||1||50:00||50:00||N/A|
|Scheduled Learning And Teaching Activities||Small group teaching||8||1:00||8:00||N/A|
|Scheduled Learning And Teaching Activities||Drop-in/surgery||4||1:00||4:00||N/A|
|Guided Independent Study||Independent study||1||50:00||50:00||N/A|
Teaching Rationale And Relationship
Lectures provide a structured, in-depth guide to the course material and help learners develop their understanding of economic modelling. They will provide the structure through which learners develop familiarity with and understanding of a range of economic models.
Seminars facilitate small group interaction with peers and the seminar leader to reinforce learning: seminar worksheets structure the student learning activity prior, during and after each seminar. The seminars will support learners to construct and use appropriate frameworks (models) for the analysis of particular contexts.
Drop-in/Surgery to provide a forum for consolidation of understanding and deal with specific problems experienced by students.
Private study facilitates review and understanding of lecture material and problem sets.
The format of resits will be determined by the Board of Examiners
|Written Examination||90||1||A||50||Compulsory section testing fundamentals and essay question|
|Written Examination||90||2||A||50||Two essay questions|
Assessment Rationale And Relationship
The unseen examinations at the end of Semester 1 and 2 are designed to encourage study and test understanding across a range of fundamentals for constructing economic models and to give students opportunity to demonstrate their depth of understanding of particular economic modelling framework.