Instructor: J. Matias De Lucchi
E-mail: jdelucchi@levy.org
Meetings: Tuesdays, 1:30–4:50 PM | Room 203
Office Hours: Wednesdays, 2:00–4:00 PM and by appointment

Course Description

The primary objective of macroeconomic analysis is to understand the determinants of aggregate output and employment, and the causes of inflation. This course examines the intellectual foundations of macroeconomic thought and the evolution of competing theories and policy approaches. Particular attention is given to why aggregate economic phenomena require analytical frameworks that go beyond the study of individual households or firms. Students acquire the skills needed to identify the main theoretical and methodological differences among competing approaches, discuss the empirical evidence supporting each approach, and explain why particular policy instruments are considered appropriate (or inappropriate) for achieving macroeconomic stability.

Background Readings

Snowdon, B., & Vane, H. R. (2005). Modern macroeconomics: Its origins, development and current state. Edward Elgar Publishing.

Mitchell, W., Wray, L. R., & Watts, M. (2019). Macroeconomics. Bloomsbury Academic.

Blecker, R. A., & Setterfield, M. (2019). Heterodox macroeconomics: Models of demand, distribution and growth. Edward Elgar Publishing.

Lavoie, M. (2022). Post-Keynesian economics: New foundations (2nd ed.). Edward Elgar Publishing.

Evaluation

Course evaluation will be based on an in-class midterm exam, an in-class final exam, One-Pagers, and class participation.

Each week, selected students will be assigned readings to present and discuss in class. These will normally be drawn from the required course material.

For each assigned reading, the student will prepare a one-page summary (“One-Pager”) identifying its main argument, key takeaways, and questions for class discussion. One-Pagers must be submitted at least 24 hours before class. Late submissions will be penalized.

Students will introduce their assigned reading in class and lead the subsequent discussion.

Grading

Midterm Exam: 30%
Final Exam: 30%
One-Pagers: 30%
Class Participation: 10%

Week 01 | Sep 01 — Economics before Keynes

Key Topics

  • Epistemological Recap: Kuhn’s Paradigm Shifts
  • The Classical (Surplus) Approach vs. the Neoclassical (Marginalist) Approach
  • Keynes’s Critique of the “Classics”

Required Readings

Ricardo, D. (1951). On rent. In P. Sraffa (Ed.), The works and correspondence of David Ricardo (Vol. 1, On the principles of political economy and taxation, Ch. 2). Cambridge University Press.

Marshall, A. (1893). On rent. The Economic Journal, 3(9), 74–90.

Wicksell, K. (1907). The influence of the rate of interest on prices. The Economic Journal, 17(66), 213–220.

Keynes, J. M. (1936). The general theory of employment, interest and money. Macmillan. Chs. 1–2.

Background Readings

Mitchell, Wray, & Watts (2019), Chs. 11, 12, and 27.

Snowdon & Vane (2005), Chs. 2.2–2.4.

Optional Readings

Petri, F. (2021). Microeconomics for the critical mind: Mainstream and heterodox analyses. Springer. Chs. 1.1–1.6; 3.1–3.3; 3.13–3.14.

Kuhn, T. S. (2012). The structure of scientific revolutions (50th anniversary ed.). University of Chicago Press. Ch. 13, “Progress through Revolutions.”

Week 02 | Sep 08 — Keynes’s GT: Effective Demand

Key Topics

  • The Principle of Effective Demand
  • Consumption, Saving, and the Multiplier
  • Long-Term Expectations and the Marginal Efficiency of Capital

Required Readings

Keynes, J. M. (1936). The general theory of employment, interest and money. Macmillan. Chs. 3–12.

Background Readings

Mitchell, Wray, & Watts (2019), Ch. 13.

Snowdon & Vane (2005), Chs. 2.6–2.8.

Week 03 | Sep 15 — Keynes’s GT: Money, Interest Rates and Employment

Key Topics

  • Liquidity Preference and Interest Rate Determination
  • The Essential Properties of Money
  • Employment Determination

Required Readings

Keynes, J. M. (1936). The general theory of employment, interest and money. Macmillan. Chs. 13–24.

Keynes, J. M. (1937). The general theory of employment. The Quarterly Journal of Economics, 51(2), 209–223.

Background Readings

Mitchell, Wray, & Watts (2019), Ch. 14.

Snowdon & Vane (2005), Chs. 2.9–2.11.

Optional Readings

Keynes, J. M. (1937). Alternative theories of the rate of interest. The Economic Journal, 47(186), 241–252.

Grieve, R. H. (2014). ‘Right back where we started from’: From ‘the Classics’ to Keynes, and back again (Strathclyde Discussion Papers in Economics No. 14-01). University of Strathclyde.

Week 04 | Sep 22 — Orthodox Macroeconomics after Keynes

Key Topics

  • The “Old Keynesians” and the Neoclassical Synthesis
  • The Monetarist Counter-Revolution
  • The “New Keynesians” and the New (Neo-Wicksellian) Consensus

Required Readings

Hicks, J. R. (1937). Mr. Keynes and the “classics”: A suggested interpretation. Econometrica, 5(2), 147–159.

Keynes, J. M. (1973). Letter to J. R. Hicks (March 31, 1937). In D. E. Moggridge (Ed.), The collected writings of John Maynard Keynes (Vol. 14, The General Theory and after: Defence and development, pp. 79–81). Macmillan. (Original work written 1937).

Friedman, M. (1968). The role of monetary policy. American Economic Review, 58(1), 1–17.

Lucas, R. E., Jr. (1972). Expectations and the neutrality of money. Journal of Economic Theory, 4(2), 103–124.

Romer, D. (2000). Keynesian macroeconomics without the LM curve. Journal of Economic Perspectives, 14(2), 149–169.

Taylor, J. B. (1993). Discretion versus policy rules in practice. Carnegie-Rochester Conference Series on Public Policy, 39, 195–214.

Background Readings

Snowdon & Vane (2005), Chs. 3.1–3.4; 4.1–4.3; 5.1–5.6; 6.1–6.10; 7.1–7.5; 7.7–7.14.

Mitchell, Wray, & Watts (2019), Chs. 17–18, 28–30.

Optional Readings

Hicks, J. R. (1980). IS-LM: An explanation. Journal of Post Keynesian Economics, 3(2), 139–154.

Friedman, M. (1969). The optimum quantity of money and other essays. Macmillan. Ch. 1, “The Optimum Quantity of Money.”

Sargent, T. J., & Wallace, N. (1981). Some unpleasant monetarist arithmetic. Federal Reserve Bank of Minneapolis Quarterly Review, 5(3), 1–17.

Plosser, C. I. (1989). Understanding real business cycles. Journal of Economic Perspectives, 3(3), 51–77.

Mankiw, N. G. (1989). Real business cycles: A New Keynesian perspective. Journal of Economic Perspectives, 3(3), 79–90.

Bindseil, U. (2014). Monetary policy operations and the financial system. Oxford University Press. Ch. 3, “Operational Target of Monetary Policy.”

Week 05 | Sep 29 — Heterodox Macroeconomics after Keynes

Key Topics

  • Post-Keynesian Economics
  • Sraffian Perspectives

Required Readings

Kalecki, M. (1954). Theory of economic dynamics: An essay on cyclical and long-run changes in capitalist economy. George Allen & Unwin. Ch. 1, “Costs and Prices.”

Lavoie, M. (1984). The endogenous flow of credit and the Post Keynesian theory of money. Journal of Economic Issues, 18(3), 771–797.

Davidson, P. (1988). A technical definition of uncertainty and the long-run non-neutrality of money. Cambridge Journal of Economics, 12(3), 329–337. doi.org

Minsky, H. P. (1978). The financial instability hypothesis: A restatement. Thames Papers in Political Economy. Hyman P. Minsky Archive, Bard Digital Commons.

Pivetti, M. (1991). An essay on money and distribution. Palgrave Macmillan. Chs. 3–4.

Background Readings

Mitchell, Wray, & Watts (2019), Chs. 10, 15–16, 25.

Lavoie (2022), Chs. 1.4; 3.5–3.7; 4.

Snowdon & Vane (2005), Ch. 8.

Optional Readings

Kaldor, N. (1970). The new monetarism. Lloyds Bank Review, 97, 1–17.

Fontana, G. (2003). Post Keynesian approaches to endogenous money: A time framework explanation. Review of Political Economy, 15(3), 291–314.

Crotty, J. R. (2017). Are Keynesian uncertainty and macrotheory compatible? Conventional decision making, institutional structures and conditional stability in Keynesian macromodels. In Capitalism, macroeconomics and reality: Understanding globalization, financialization, competition and crisis (Ch. 2, pp. 39–71). Edward Elgar Publishing.

Kriesler, P., & Lavoie, M. (2007). The New Consensus on Monetary Policy and its Post-Keynesian critique. Review of Political Economy, 19(3), 387–404.

Garegnani, P. (1979). Notes on consumption, investment and effective demand: II. Cambridge Journal of Economics, 3(1), 63–82.

Week 06 | Oct 06 — Macroeconomics after the Global Financial Crisis

Key Topics

  • A Neo-Wicksellian (Mis)interpretation of Keynes’s Liquidity Trap
  • The “Zero Lower Bound” and “Unconventional Monetary Policy”

Required Readings

Krugman, P. R. (1998). Japan’s trap. MIT.

Kregel, J. A. (2000). Krugman on the liquidity trap: Why inflation won’t bring recovery in Japan (Working Paper No. 298). Levy Economics Institute of Bard College.

Summers, L. H. (2015). Demand-side secular stagnation. American Economic Review: Papers and Proceedings, 105(5), 60–65.

Koo, R. C. (2011). The world in balance sheet recession: Causes, cure, and politics. Real-World Economics Review, 58, 19–37.

Background Readings

Mitchell, Wray, & Watts (2019), Ch. 31, Appendices 1–2; Ch. 32.

Lavoie (2022), Ch. 4.4.

Optional Readings

Rudebusch, G. D. (2018, December 3). A review of the Fed’s unconventional monetary policy. FRBSF Economic Letter, 2018–27. Federal Reserve Bank of San Francisco.

Borio, C., & Zabai, A. (2016). Unconventional monetary policies: A re-appraisal (BIS Working Papers No. 570). Bank for International Settlements.

Week 07 | Oct 13 — No Class / Fall Break

Week 08 | Oct 20 — Midterm Exam

Week 09 | Oct 27 — Functional Finance and Fiscal Policy

Key Topics

  • Functional Finance
  • Sovereign Currency and Fiscal Policy

Required Readings

Lerner, A. P. (1943). Functional finance and the federal debt. Social Research, 10(1), 38–51.

Forstater, M. (1999). Functional finance and full employment: Lessons from Lerner for today. Journal of Economic Issues, 33(2), 475–482.

Wray, L. R. (2025). Understanding modern money theory: Money and credit in capitalist economies. Edward Elgar Publishing. Ch. 8, “Sovereign Currency and Fiscal Policy,” pp. 175–205.

Tcherneva, P. R. (2010). Bernanke’s paradox: Can he reconcile his position on the federal budget with his recent charge to prevent deflation? (Working Paper No. 636). Levy Economics Institute of Bard College.

Background Readings

Mitchell, Wray, & Watts (2019), Chs. 9, 19, 21, 22.

Optional Readings

Tcherneva, P. R., & Tymoigne, E. (2024). Seismic shifts in economic theory and policy: From the Bernanke Doctrine to Modern Money Theory. Journal of Post Keynesian Economics, 47(4), 853–874.

Week 10 | Nov 03 — Inflation Theories

Key Topics

  • Demand-Pull Inflation
  • Cost-Push Inflation
  • Markup Inflation

Required Readings

Rowthorn, R. E. (1977). Conflict, inflation and money. Cambridge Journal of Economics, 1(3), 215–239.

Nersisyan, Y., & Wray, L. R. (2022). What’s causing accelerating inflation: Pandemic or policy response? (Working Paper No. 1003). Levy Economics Institute of Bard College.

Weber, I. M., & Wasner, E. (2023). Sellers’ inflation, profits and conflict: Why can large firms hike prices in an emergency? Review of Keynesian Economics, 11(2), 183–213.

Lavoie, M. (2024). Conflictual inflation and the Phillips curve. Review of Political Economy, 36(4), 1397–1419.

Background Readings

Lavoie (2022), Chs. 8.1–8.8.

Optional Readings

Stockman, S. (2026). The role of production networks in price stability (Working Paper No. 1118). Levy Economics Institute of Bard College.

Week 11 | Nov 10 — Supply-Led Growth Approaches

Key Topics

  • Classical-Marxian Growth (Goodwin Cycle)
  • Exogenous Neoclassical Growth (Solow Model)
  • Endogenous Neoclassical Growth (AK Model)

Required Readings

Marx, K. (1867). Capital: A critique of political economy (Vol. 1). Chapter 4, “The general formula for capital,” and Chapter 25, Section 1, “The increased demand for labour-power that accompanies accumulation, the composition of capital remaining the same.”

Goodwin, R. M. (1967). A growth cycle. In C. H. Feinstein (Ed.), Socialism, capitalism and economic growth: Essays presented to Maurice Dobb (pp. 54–58). Cambridge University Press.

Solow, R. M. (1956). A contribution to the theory of economic growth. The Quarterly Journal of Economics, 70(1), 65–94.

Background Readings

Snowdon & Vane (2005), Chs. 11.9, 11.10, 10.14.

Blecker & Setterfield (2019), Ch. 1.

Optional Readings

Romer, P. M. (1986). Increasing returns and long-run growth. Journal of Political Economy, 94(5), 1002–1037.

Week 12 | Nov 17 — Demand-Led Growth Approaches

Key Topics

  • Harrodian Instability
  • Neo-Kaleckian Growth
  • Sraffian Supermultiplier Growth

Required Readings

Kregel, J. A. (1976). Economic methodology in the face of uncertainty: The modelling methods of Keynes and the post-Keynesians. The Economic Journal, 86(342), 209–225.

Harrod, R. F. (1939). An essay in dynamic theory. The Economic Journal, 49(193), 14–33.

Serrano, F. (1995). Long period effective demand and the Sraffian supermultiplier. Contributions to Political Economy, 14(1), 67–90.

Setterfield, M. (2019). Long-run variation in capacity utilization in the presence of a fixed normal rate. Cambridge Journal of Economics, 43(2), 443–463.

Background Readings

Snowdon & Vane (2005), Ch. 11.9.

Blecker & Setterfield (2019), Chs. 3, 4, 7.5.

Optional Readings

Serrano, F., & Freitas, F. (2017). The Sraffian supermultiplier as an alternative closure for heterodox growth theory. European Journal of Economics and Economic Policies: Intervention, 14(1), 70–91.

De Lucchi, J. M. (2024). Fiscal supermultiplier and endogenous money in the United States: The COVID-19 pandemic vs. the global financial crisis. Review of Political Economy, 36(5), 1775–1800.

Week 13 | Nov 24 — Open-Economy Macro with Monetary Sovereignty

Key Topics

  • Mundell-Fleming Model
  • Post-Keynesian International Finance

Required Readings

Mundell, R. A. (1963). Capital mobility and stabilization policy under fixed and flexible exchange rates. Canadian Journal of Economics and Political Science, 29(4), 475–485.

Minsky, H. P. (1988). Money manager capitalism, fiscal independence and international monetary reconstruction. Hyman P. Minsky Archive, 431.

Sardoni, C., & Wray, L. R. (2007). Fixed and flexible exchange rates and currency sovereignty (Working Paper No. 489). Levy Economics Institute of Bard College

Lavoie, M. (2021). Two post-Keynesian approaches to international finance: The compensation thesis and the cambist view. In B. Bonizzi, A. Kaltenbrunner, & R. A. Ramos (Eds.), Emerging economies and the global financial system: Post-Keynesian analysis (pp. 14–27). Routledge.

Background Readings

Mitchell, Wray, & Watts (2019), Chs. 20, 23, 24.

Lavoie (2022), Chs. 7.1–7.5.

Optional Readings

Habermeier, K., Kokenyne, A., Veyrune, R., & Anderson, H. (2009). Revised system for the classification of exchange rate arrangements (IMF Working Paper No. 09/211). International Monetary Fund.

Harvey, J. T. (2009). Currencies, capital flows and crises: A Post Keynesian analysis of exchange rate determination. Routledge.

Week 14 | Dec 01 — Open-Economy Macro with Limited Monetary Sovereignty

Key Topics

  • Latin American Structuralism and Thirlwall’s Law
  • Foreign-Currency Debt, Currency Crises, and Hyperinflation
  • Currency Boards, Dollarization, and Monetary Unions

Required Readings

Prebisch, R. (1950). The economic development of Latin America and its principal problems. United Nations Economic Commission for Latin America.

Thirlwall, A. P. (1979). The balance of payments constraint as an explanation of international growth rate differences. BNL Quarterly Review, 32(128), 45–53.

Bresciani-Turroni, C. (1968). The economics of inflation: A study of currency depreciation in post-war Germany, 1914–1923. George Allen & Unwin. Ch. 2, “The Helfferich Explanation of the Depreciation of the Mark,” pp. 42–XX. (Original work published 1931).

Vernengo, M. (2006). Money and inflation. In P. Arestis & M. Sawyer (Eds.), A handbook of alternative monetary economics (pp. 471–489). Edward Elgar Publishing.

Bastian, E. F., & Setterfield, M. (2020). Nominal exchange rate shocks and inflation in an open economy: Towards a structuralist inflation targeting agenda. Cambridge Journal of Economics, 44(6), 1271–1299.

Eichengreen, B., Hausmann, R., & Panizza, U. (2003). Currency mismatches, debt intolerance and original sin: Why they are not the same and why it matters (NBER Working Paper No. 10036). National Bureau of Economic Research

Background Readings

Mitchell, Wray, & Watts (2019), Chs. 31.4–31.5.

Optional Readings

Vernengo, M. (2021). The consolidation of dollar hegemony after the collapse of Bretton Woods: Bringing power back in. Review of Political Economy, 33(4), 529–551.

Nikiforos, M., Papadimitriou, D. B., & Zezza, G. (2016). The Greek public debt problem (Working Paper No. 867). Levy Economics Institute of Bard College.

De Lucchi, J. M. (2013). Endogenous money and public foreign debt during the Argentinean convertibility. Review of Keynesian Economics, 1(3), 322–346.

De Lucchi, J. M. (2025). A balance of payments model with non-reserve currency: Long-run real stability and short-run financial instability. Review of Evolutionary Political Economy, 6(3), 689–722.

Week 15 | Dec 08 — Final Exam