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Macroeconomics: imperfections, institutions and policies

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Wendy Carlin, David Soskice
Oxford University Press (2006)

The distinctive feature of this book is that it provides a unified framework for the analysis of short- and medium-run macroeconomics. This gives students a model that they can use themselves to understand a wide range of real-world macroeconomic behaviour and policy issues. The authors introduce a new graphical model (IS/PC/MR) based on the 3-equation New Keynesian model used in modern macroeconomics. The three equations are

  • the IS curve
  • the Phillips curve and
  • an interest rate-based monetary policy rule.

The use of a common framework throughout for closed and open economies helps readers develop the economic intuition with which to address a diversity of macroeconomic problems. Applied chapters show how the models can be used to analyse performance in OECD economies over the past twenty-five years. The chapters on growth present an in-depth coverage of the Solow-Swan, endogenous and Schumpeterian models that allow the reader to understand how these approaches can be used to answer the big questions of growth: why some countries are rich and others, poor; why some catch up and others do not.

Since the book is based on the mainstream 3-equation model used at the research frontier, the book gives students the economics background necessary for accessing advanced macroeconomics. It is also designed to appeal to graduate students, non-specialists in macroeconomics, professional economists and those from related disciplines who want a guide to the complexities of modern macroeconomics and to understand contemporary policy debates.

  • Wendy Carlin is professor of economics at University College London and research fellow of the Centre for Economic Policy Research
  • David Soskice is research professor of political economy at Duke University and at the Wissenschaftszentrum, Berlin, and centennial professor at the European Institute, LSE

Recommendations

'At last, an advanced undergraduate book which maps theory to facts. The theory, from the new Keynesian model of fluctuations to Schumpeterian models of growth, is sound. The applications, from European unemployment to the Japanese slump, highly revealing. You will enjoy every chapter, and become a good macroeconomist in the process.'
Olivier Blanchard, Class of 1941 Professor, Massachusetts Institute of Technology

'The best way to learn economics is to have a textbook which develops a theoretical framework interactively with practical questions. Macroeconomics does just this. The book is based on the mainstream monetary macro model which is now widely used by both academics and policy-makers...it shows how this model can be used to address an enormous variety of practical questions...This is modern macroeconomics for undergraduates, post-graduates and business economists alike.'
Stephen Nickell, School Professor of Economics, LSE, and member of the Monetary Policy Committee of the Bank of England

'When teaching intermediate macroeconomics in Harvard during the past years, I deeply felt that the existing textbooks were all lacking: 1) proper microeconomic foundations linking important notions such as the Keynesian consumption function, the investment accelerator, the Phillips curve, the possibility of persistent (involuntary) unemployment, to precise sources of imperfections in the product, labour, or financial markets; 2) a suitable treatment of growth theory that can shed light on observed convergence and divergence patterns across countries and also on how growth policies should be designed...in various countries at different stages of development. 

'Being the first comprehensive attempt at filling these gaps, the Carlin-Soskice macroeconomics textbook should be used by any instructor who wants to bring her students to the frontier of modern macroeconomics while at the same time remaining fully accessible to a broad undergraduate audience.'
Philippe Aghion, Robert C Waggoner Professor of Economics, Harvard University

'Imperfect competition, knowledge-based growth, inflation targeting central banks and many other central features of modern economic systems have recently been integrated into the heart of macroeconomic theory. Carlin and Soskice do the profession a great service by writing a textbook that makes these developments accessible to undergraduates. The book presents macroeconomics at its best - as a useful framework for analysing important questions.'
Peter Howitt, Lyn Crost Professor of Social Sciences, Brown University

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