Class 01

how we doing? goal is to work into core issues we will work on this term

• syllabus – capstone, the nature of that project; modern macro; data

• output: major paper; occasional short (1-2) papers or HW exercises; blogging including discussion

• normative aspects: what should we care about

• policy: what might we be able to do?

• policy: will it work?

– theory

– empirical

• policy: what are the tradeoffs?

• data

• theory

• econometrics

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data issues: time series – we’ll explore other issues again

seasonality – not something you worry about with micro data

→ use moving averages with dummies, and fancy correction for days per month etc

PPI for initial blog post with Jier

normative issues: maybe inflation is good! – hyperinflation is one thing, but who does 4% inflation harm? are there other side effects?

finding data: FRED as a portal (which provides links to the original data source). “calendar” provides current releases, though you can access data several hours earlier if you go directly to BLS rather than wait for FRED to upload

don’t just look, use / explain

eg gold graph → ties to theory: commodity prices (gold) and interest rates

data: what’s been happening to interest rates?

data show long-run decline

ties to theory: is there a “natural” rate of interest? [jargon, as macroeconomists we don’t say “normal”]

compensation for inflation? yes, but have inflation expectations fallen 7 percentage points?

interest rates should be the return on capital [did not expand on that … but if you’re going into business, it’s a sobering thought!]

so then: natural rate = ? = growth rate + inflation (nominal GDP growth). it’s a good opportunity cost measure: surely you ought to be able to earn that much!

ties back to theory: Solow model is the first we’ll explore. 

what determines growth?

are changes therein commensurate with what we see happening to interest rates?