Course Syllabus

Course Name Macroeconomics 2

Author (Authors) Mariam Kharaishvili

Lecturer (Lecturers) Mariam Kharaishvili

e-mail: m.kharaishvili@iset.ge
Office hours: by appointment

Course Code

1. TSU Faculty of Economics and Business

Course Status 2. Level: Bachelor’s Degree
3. Obligatory

This course gives an in-depth overview of the major concepts and

Course Goals
Number of credits and
distribution of hours based
on students activities (ECTS)
theories of open economy macroeconomics. In this class students will
learn about the structure of nation's balance of payments; why and
how nations borrow and lend from each other; the implications of
high external debt. How government stabilization policies function in
an open economy; optimal exchange rate regimes; nature and causes
of financial crises, international financial systems and capital flows.
5 Credit - 125 hours:
Interactive work (lecture/seminar) – 45 hours; Student’s individual
work – 80 hours, among them:
*preparation for the midterm exam - 30 (15+15) hours
*preparation for seminars – 15 hours
*consultations – 5 hours
*Preparation for the final exam – 30 hours.

Macroeconomics 1
Course Pre-requisite
Course Results Knowledge and understanding:

The student will know:

 The structure of the national balance of payments accounts

 Evolution of current account deficits: why and how nations
borrow and lend from each other.
 How external debt position might affect the country’s
economic prospects
 Nature and causes of financial crises
 The general equilibrium model of an open economy – how
various types of shocks affect the open economy
 Exchange rate regimes: pros and cons of fixes and flexible

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 exchange rate arrangements.
 Macroeconomic stabilization policies in an open economy.
 International financial architecture – then and now.

Practical Skills:

The Student will be able to:

 Understand national balance of payments system

 Understand the concept of external debt, debt overhang, learn
about the rules of thumb for assessing sustainability of a
country’s debt.
 Use IS-LM-BP framework to show how various shocks might
affect prices, wages, employment in an open economy.

Conclusion skills:

The Student will be able to:

 Analyze the pros and cons of various exchange rate
regimes
 Analyze short-term policy options to combat business
cycle fluctuations in an open economy
 Understand the global financial architecture, causes of
financial crises and policy options to avoid them.
The Student will be able to:

 Formulate ideas clearly and concisely; use theoretical

models and emprical evidence to support their argument.
 Discuss and analyze macroeconomic policies in an open
economy context, and related issues, such as current
account deficit, debt sustainability, optimal exchange rate
regime, currency and banking crises.
Course Outline The course will start with an in-depth look at the national balance of
payments accounts, discuss the national savings and investment
identity in an open economy context. Build the theoretical
foundations behind the open economy IS-LM-BP general equilibirum
model; look at the macroeconomic policy options available to the
government of a small open economy in the face of real and monetary
shocks. Discuss the issues of borrowing, external debt and debt
sustainability.
The following methods used during the lecture:
Teaching/Learning Methods
Interactive Lecture
Lectures will be conducted by course instructor twice per week.
Lecture attendance is mandatory. Lectures will be given to the entire
class.

Seminars (recitations)
Each week students will participate in a Seminar/Recitation

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 conducted by teaching assistants. Students will be split in small group
to facilitate discussion and close working within the groups.

Consultation (with the TAs and the lecturer)

School policy foresees regular office hours offered to students by
course instructor and the TAs .

Independent work – Homework assignments

Students are expected to work hard on their own to learn and practice
material covered in this course.

Discussions
This course is very interactive and it stimulates student participation
in the discussions.

Case Studies
Several case studies will be reviewed during the course to link theory
to real life situations and macroeconomic policies that deal with those
situations.

Verbal / oral presentation of the material

As part of the course students will be assigned various readings which
they have to critically evaluate and present for a joint discussion in
class.

Evaluation Criteria Student assessment has following grading scale:

Five types of positive assessment:
(A) Excellent – 91% and over of maximum requirement
(B) Very Good – 81-90%of maximum requirement
(C) Good – 71-80%of maximum requirement
(D) Satisfactory – 61-70%of maximum requirement
(E) Sufficient – 51-60%of maximum requirement
Two types negative assessment:
(FX) Marginal Fail – 41-50% of maximum requirement meaning student
needs to work more to pass and is given one more chance to take exam and to
prepare for it independently.
(F) Fail – 40% and less of maximum requirement meaning students efforts are
not sufficient enough for him to pass and needs to study the subject over;
Student with the score of FX (41-50 % -marginal fail) will be given a chance
to retake exam during the same semester; The period between final and
additional exam should not be less than 10 calendar days.

Homework assignments - 10 %
Quizzes -10%
Midterm Exam (test format)-40%
Final exam (test format) – 40 %

Homework assignments
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 Three homework assignments will be given throughout the semester;
one with the lowest grade will be dropped. Each homework consists
of several open-ended questions.

Quizzes
Three quizzes will be given throughout the semester; one with the
lowest grade will be dropped. Quizzes are being conducted online.
Each quiz consists of 10 multiple-choice questions. Dates of quizzes
will be posted on moodle 48 hours prior to the quiz. Each quiz will be
given twice. There are no makeup quizzes.

The midterm Exam

There is 1 midterm exam that will test on understanding of material
covered in the corresponding section of the course.

The final Exam

The final exam will be a test of comprehensive understanding of
course material and will be given during the session period of the
semester.
The Key literature Krugman, Paul and Maurice Obstfeld, International Macroeconomics,
Theory and Policy, 6th edition, Addison-Wesley.
Additional readings will be assigned by the lecturer to illustrate
Additional literature and important concepts/debates/issues in macroeconomics as they are
other learning materials relfected in the national and international media.

Additional
information/Conditions

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 Appendix

Course Outline

Topic (lecture/working group/ practical work, Laboratory work and Materials (including the
№ etc.) page numbers)

1 Introduction: National Income Accounting and the Balance of Chapter 12

Payment
2 Introduction: National Income Accounting and the Balance of Chapter 12
Payment
3 Exchange rates and the foreign exchange markets Chapter 13

4 Exchange rates and the foreign exchange markets Chapter 13

5 Price levels and the exchange rate in the long run Chapter 15

6 Price levels and the exchange rate in the long run Chapter 15

7 Output and exchange rate in the short run Chapter 16

8 Output and exchange rate in the short run Chapter 16

9 The midterm exam

10 Fixed exchange rate and foreign exchange intervention Chapter 17
11 Fixed exchange rate and foreign exchange intervention Chapter 17
12 Macroeconomic policy and coordination and floating exchange rate Chapter 19
regime

13 Macroeconomic policy and coordination and floating exchange rate Chapter 19

regime
14 The global capital market: performance and policy problems Chapter 21

15 Developing countries: growth, crises and reform Chapter 22

Sessional period