1. Semester: II
2. Number of Credits: 4

Preamble
Macroeconomics-II goes beyond the Neo-classical synthesis to separately consider the New Classical and New Keynesian frameworks as alternative macroeconomic paradigms. Growth analysis is explicitly introduced in inter-temporal optimising models. The mathematical techniques required are of a higher order and some of the prerequisites are expected to be built up within Module 1. Romer’s Advanced Macroeconomics will be used as a bridge between Dornbusch, Fischer and Startz, Macroeconomics (used for Macroeconomics-I) and Blanchard and Fischer, Lectures in Macroeconomics (used for Macroeconomics – II). Issues in policy analysis are explicitly considered in Module 4.

Module 1: Growth Analysis and Inter-Temporal Models (12 sessions)
Solow-Swan Model – Infinite Horizon (Ramsey-Cass-Koopmans) model – Basics of Overlapping-Generations (Diamond) Model

Module 2: New Classical Macroeconomics and Real Business Cycles (12 sessions)
Rational Expectations Equilibrium Models – Lucas Critique – Incomplete Information Models – Persistence of Output Fluctuations – Nelson-Plosser and Campbell-Mankiw Tests – Search and Matching Models – Real Business Cycle Theory

Module 3: New Keynesian Theories of Business Cycles and Unemployment (12 Sessions)
Nominal Rigidities and Economic Fluctuations – Real Rigidities in Goods, Labour and Credit Markets

Module 4: Macroeconomic Policy Issues (12 Sessions)
Macroeconomic Policy Issues – Targets, Indicators and Instruments – Activist Policy – Gradualism versus Shock Therapy – Rules versus Discretion – Role of Credibility – Dynamic Inconsistency Problem – Inflation Targeting – Seignorage – Barro-Ricardo and  Blinder-Solow Hypotheses – Political Economy of Stabilisation and Adjustment

1.	David Romer, Advanced Macroeconomics, 2e, McGraw-Hill International Edition, 2001.
2.	Olivier Jean Blanchard and Stanley Fischer, Lectures on Macroeconomics, Prentice-Hall of India Pvt. Ltd.,
	New Delhi, 2000
3.	Ben J. Heijdra and Frederick Van Der Ploeg, Foundations of Modern Macroeconomics, Oxford University
	Press, Oxford, 2002.