Macroeconomic Policy


Course Objective

The objective of the course is to introduce students to the theory and
practice of macroeconomic and monetary policy, including regulation of
the financial system.

Specific learning outcomes upon completion of this curricular item are:
• Ability to apply macroeconomic concepts and theories to analyse
problems of employment and inflation and measurement of Business Cycles
• Capability to analyse the role of macroeconomic policymakers in
managing money, banking and the business cycles
• An understanding of the policy problems facing central banks, with a
focus on monetary policy
• An understanding of the policy problems facing governments, with a
focus on fiscal policy
• Ability to interpret recent macroeconomic empirical work about the
whole financial sector
Understand the origin economic crises, mostly if debt driven, and the
effects of fiscal and monetary policy

Course Content

The course discusses Macroeconomic policies intended to affect and
dampen the business cycles. We discuss the roles of different
authorities in conducting macroeconomic policies. Relevant topics are
for instance: money creation, control of the interest rates, central
banking and the stabilizing role of fiscal policy.
We investigate the origin and approach to the financial crisis looking
at this issue from different perspectives. So, we debate the common
narrative (the banks were guilty) but also the microeconomic view on the
role of indebtedness (we did it!). Which explanation will convince you
the most?

Teaching Methods

This course consists of a series of 12 lectures and 6 tutorials in small
groups of two hours each.
The lectures (each week 2 lectures of 2 hours each) aim at informing
students about the content of the course. The traditional set up is
interrupted by short discussions using different multimedia devices.
The tutorials (small size, each week 1 lecture of 2 hours each) aim at
stimulating active participation of the students, in group but also
individually. These are typically arranged in the form of debates, round
table discussions or the simulation of an academic conference.
Participation in the tutorial is compulsory. Students prepare individual
assignments these are (partly) handed in before the tutorial (deadlines
change depending on the tutorial, check on Canvas).
Group discussions on reading material, presentations in which insights
are applied, reflect on and explain own decisions based on theoretical
frameworks are partly evaluated during tutorials. Solution of problem
sets, and discussion of economic data are part of the tutorials too.

Method of Assessment

Exams will take place around mid-December and a re-sit opportunity is
offered in the second half of March. For details, please check
information disseminated on VU Net or posted on the website Exams last 2 hours and 45 minutes.
Course grade is determined as follows: exam grade needs to be 5.0 or
higher – in that case: 30% from hand-in assignments, 70% from written
exam; else: exam grade. To those who participate into less than 4
(compulsory) tutorials and/or do not deliver their tutorial work, one
point will be subtracted from the tutorial grade.

Entry Requirements

Basic knowledge of math and statistics, as provided in the academic core
of any academic program at the Vrije Universiteit Amsterdam or


• Acemoglu, Daron, David Laibson and John A. List, 2016, Economics.
Harlow, Essex: Pearson Education Ltd. ISBN13: 978-1-292-07920-2
This book should be familiar from earlier Minor Economics courses

The compulsory sections in this book are, among others, in chronological
order: 26.1 / 26.2,/ 21.1 / 21.2 / 21.3, 24.1/ 25.1/ 25.2 / 25.3 / 24.2
/ 24.3 / (partly 25.4) / 27.2 / 27.3 / 23.1 / 23.2 / 23.3 /23.4/ 26.3.

The lecture slides and the handouts posted are always compulsory
reading. As for the three guest lectures there is no additional reading,
the slides are the only piece of information that you will receive. As
slides are a short summary of the guest lectures your presence during
these events is required in order to be prepared for the exam.

Various academic papers, specific material and ancillary textbook
chapters will be announced on Canvas Compulsory list** of readings are:

James Stock & Mark Watson (1999): Business Cycle Fluctuations in US
Macroeconomic Time Series, Ch. 1 in Handbook of Macroeconomics.
Amsterdam: Elsevier/North Holland. To read: sections 1-3.

Branson (2014), A Return to Old-Time Religion? The Glass-Steagall Act,
the Volcker Rule, Limits on Proprietary Trading, and Sustainability,
Legal Studies Research Paper Series Working Paper No. 2014-39

** this list can be modified depending on necessities arising during the

Cited reading (examples / not compulsory)

• Christina D. Romer (undated): Business Cycles. Concise Encyclopedia of
Economics. Available at
• Hilary Hoynes, Douglas L. Miller, and Jessamyn Schaller (2012): "Who
Suffers During Recessions?," Journal of Economic Perspectives, 26(3),
27-48. (to read: pages 27-35, available through VU library).
• James Stock & Mark Watson (1999): Business Cycle Fluctuations in US
Macroeconomic Time Series, Ch. 1 in Handbook of Macroeconomics.
Amsterdam: Elsevier/North Holland. To read: sections 1-3. (attached)
• Timothy Taylor (2012):
• Allen, Franklin and Douglas Gale, 2000, Journal of Political Economy,
Vol. 108, No.1, pp.1-11
• Amel, D., Barnes, C., Panet ta, F. and Salleo, C. (2004),
"Consolidation and efficiency in the financial sector: A review of the
International evidence" , Journal of Banking and Finance, 28, pp.
• Anderson, R.W. and Joeveer, K. (2011), "What are the economies of
scale in wholesale banking?" , working paper.
• Baxter, T.C. and Somner, J.H. (2005), "Breaking up is hard to do: An
essay on cross-border challenges in resolving financial groups" , in
Evanoff, D. and Kaufman, G.G. (eds), Systemic Financial Crises:
Resolving Large Bank Insolvencies , Singapore: World Scientific
• Boot A.W.A. (2000), Relationship Banking: What Do We Know?, Journal of
Financial Intermediation 9, 7–25
• Brewer, E. and Jagtiani, J. (2009), "How much did banks pay to become
Too-Big-To-Fail and to become systemically Important?" , Federal Reserve
Bank of Philadelphia, working paper
• Cole, R., Goldberg, L., and White, L. (2004), "Cookie cutter vs.
character: The micro structure of small business lending by large and
small banks" , Journal of Financial and Quantitative Analysis, 39, 2,
pp. 227- 251
• Flannery, M.J., Kwan, S.H. and Nimalendran, M. (2010), "The 2007-09
financial crisis and bank opaqueness" , Federal Reserve Bank San
Francisco Working paper.
• Greenspan, Michael A. "Sect ion 20 of the Glass-Steagall Act ," The
Review of Banking & Financial Services, Vol. 9, No. 18 (October 27,
1993), pp. 179-84
• Haldane, A., Brennan, S. and Madouros, V. (2010), "The contribution of
the financial sector: Miracle or mirage?" , taken from The Future of
Finance: The LSE Report , July
• Kiff, J., Jennifer Elliot t , Elias Kazarian, Jodi Scarlata, and
Carolyne Spackman Credit Derivatives: Systemic Risks and Policy Opt
ions? IMF Working Paper November 2009
• McAllister, P.H. and McManus, D. (1993), "Resolving the scale
efficiency puzzle in banking" , Journal of Banking and Finance, 17, pp.
• Randall S. Kroszner and Raghuram G. Rajan, 1994, “ Is the
Glass-Steagall Act Justified? A Study of the U.S. Experience with
Universal Banking Before 1933” The American Economic Review, Vol. 84,
No. 4 (Sep., 1994), pp. 810-832
• Van Rijckeghem, C, and Beat rice Weder, 2003, Spillovers through
banking centers: A panel data analysis, Journal of International Money
and Finance, 483–509
• Von Thadden, E. L. (1995). Long-term contracts, short -term investment
and monitoring, Rev. Econ. Stud. 62, 557–575.
• Saunders, Anthony. "Banking and Commerce: An Overview of the Public
Policy Issues," Journal of Banking and Finance, Vol. 18, No. 2 (January
1994), pp. 231-54
• Tabarrok, A. 1998. The Separation of Commercial and Investment
Banking: Morgans Vs Rockefellers. The Quarterly Journal of Austrian
Economics 1 (1):1-18
• Wagner, W. (2010), "Diversification at financial institutions and
systemic crises" , Journal of Financial Intermediation, 19, 3, pp.
• White E. (1986) "Before the Glass-Steagall Act : An Analysis of the
Investment Banking Activities of National Banks." Explorations in
Economic History, January 1986, 23(1), pp. 33-55.

Additional Information

Participants benefit from participating in the course Microeconomic
Policy of the Minor Economics.

Explanation Canvas

The Canvas link to the course is:
The Manual can be found under "Modules"

General Information

Course Code E_ME_MAEP
Credits 6 EC
Period P2
Course Level 300
Language of Tuition English
Faculty School of Business and Economics
Course Coordinator dr. M. Mastrogiacomo
Examiner dr. M. Mastrogiacomo
Teaching Staff dr. M. Mastrogiacomo

Practical Information

You need to register for this course yourself

Last-minute registration is available for this course.

Teaching Methods Study Group, Lecture
Target audiences

This course is also available as: