Shanghai Jiao Tong University · Summer School 2026
EC108 Macroeconomics
EC108 introduces macroeconomics through models and data, using Charles I. Jones (6th ed.) as the main text. The course asks why economies grow, why inflation and unemployment move, how recessions and financial crises occur, and how monetary and fiscal policy affect output, prices and debt.
Course overview
Macroeconomics studies GDP, consumption, saving, investment, inflation, unemployment, interest rates and government debt, and how these variables move over time. The course is organised in four blocks: the long run, the three numbers of output, unemployment and inflation, the short-run model, and the government.
Each lecture sets out a model, compares it with evidence and discusses its limits. Figures are built live from public series, including FRED, the World Bank, the IMF and the OECD. The course uses real episodes such as the Great Depression, the 1970s, the 2008 financial crisis, Covid-19, the Volcker disinflation and current global debt.
Learning outcomes
- measure the economy, including GDP and the identity Y = C + I + G + NX, real versus nominal values, price indices, unemployment and inflation, and read data on a ratio (log) scale;
- explain long-run prosperity with the production, Solow, and Romer–Jones models, and decompose income differences into capital and total factor productivity;
- analyse the labour market and the natural rate of unemployment, and the causes and costs of inflation (the quantity theory and the Fisher equation);
- use the short-run model, including the IS, MP and Phillips curves and the AS/AD framework, to trace how shocks and monetary policy move output and inflation;
- interpret financial crises, the zero lower bound, deflation, and quantitative easing within the model, and in real episodes (1929, 2008, Covid-19);
- analyse government budgets and debt dynamics, including the (r − g) snowball, sustainability and debt crises, and evaluate fiscal policy and current global debt and imbalances;
- work fluently with real macroeconomic data and connect models to the evidence.
Teaching & assessment
Teaching. A 2-hour-40-minute class each day, Monday to Friday, for three weeks; in addition, the teaching assistants run roughly 3 hours 20 minutes of discussion sessions per week. Teaching combines lectures, guided discussion, worked problems, and a group project, with live data work throughout. No programming is required, though Python examples are provided.
Assessment. The final grade combines attendance (12%), three quizzes (20%), a midterm (20%), a group project and presentation (18%), and a final examination (30%). Quizzes are short and held at the start of class; Quiz 1 (Lectures 1–3) on Thursday 2 July, Quiz 2 (Lectures 4–6) on Wednesday 8 July, and Quiz 3 (Lectures 7–8) on Monday 13 July. The midterm (Lectures 1–6) is on Friday 10 July; the group presentations on Thursday 16 July; and the final (Lectures 7–10) on Friday 17 July.
Weekly schedule
| Day | Session | Readings |
|---|---|---|
| Week 1: Foundations & the long run | ||
| Mon 29 Jun | Lecture 1: What is Macroeconomics? A Tour of the Global Economy | Jones 1–2 |
| Tue 30 Jun | Lecture 2: Measuring Well, and the Facts of Growth | Jones 2–3 |
| Wed 1 Jul | Lecture 3: A Model of Production and the Solow Model | Jones 4–5 |
| Thu 2 Jul | Quiz 1 (Lectures 1–3) · Lecture 4: Growth and Ideas | Jones 6 |
| Fri 3 Jul | Lecture 5: The Labour Market, Wages, and Unemployment | Jones 7 |
| Week 2: The three numbers & into the short run | ||
| Mon 6 Jul | Lecture 6: Inflation | Jones 8 |
| Tue 7 Jul | Lecture 7: An Introduction to the Short Run | Jones 9–10 |
| Wed 8 Jul | Quiz 2 (Lectures 4–6) · Lecture 8: The IS–MP–Phillips Model | Jones 11–12 |
| Thu 9 Jul | Review & midterm preparation (Blocks A–B) | Jones 1–8 |
| Fri 10 Jul | Midterm Examination (Lectures 1–6) | |
| Week 3: The short-run model in action & the government | ||
| Mon 13 Jul | Quiz 3 (Lectures 7–8) · Lecture 9: Stabilisation Policy, AS/AD and Financial Crises | Jones 13–14 |
| Tue 14 Jul | Lecture 10: The Government and the Macroeconomy, Deficits, Debt and Fiscal Policy | Jones 18 |
| Wed 15 Jul | Review & exam preparation (Blocks C–D) | Jones 9–18 |
| Thu 16 Jul | Group Project Presentations | |
| Fri 17 Jul | Final Examination (Lectures 7–10) | |
Lecture overview
What is Macroeconomics? A Tour of the Global Economy
What macro is and how it works; GDP three ways and the expenditure identity; real vs nominal and the ratio (log) scale; a first look at unemployment, inflation, and the global economy.
Key idea: the identity Y = C + I + G + NX and the ratio scale are the tools we reuse all term.
Measuring Well, and the Facts of Growth
The index-number problem (Laspeyres, Paasche, Fisher) and chain weighting; PPP vs market exchange rates; the hockey stick of growth and the central growth-vs-level scatter.
Key idea: on a ratio scale, US output is a near-straight ~2% line for 150 years. The growth-vs-level scatter is the field's central question.
A Model of Production and the Solow Model
The Cobb–Douglas production function, diminishing returns, and competitive factor pricing; development accounting and total factor productivity; the Solow model, its steady state, transition dynamics, and convergence.
Key idea: income gaps split into capital and TFP. The Solow steady state has zero long-run growth, which is why the course turns to ideas.
Growth and Ideas
Why Solow is not enough; nonrivalry and increasing returns; the Romer model and its scale effect; the Jones fix and the result that long-run growth is tied to population growth, not policy.
Key idea: nonrivalry makes ideas the engine of growth; long-run growth follows population growth, while policy moves levels.
The Labour Market, Wages, and Unemployment
The competitive labour market and why unemployment is never zero; the bathtub natural rate; wage rigidity, efficiency wages, and search frictions; the return to education and inequality; Okun's law.
Key idea: a market that clears predicts zero unemployment; the natural rate ū = s̄/(s̄+f̄) is why it never is.
Inflation
The quantity theory MV = PY and money neutrality (long-run only); π = gM − gY; the Fisher equation; the costs of inflation and of deflation; seignorage and the fiscal roots of high inflation.
Key idea: inflation is a monetary phenomenon in the long run; the Fisher equation i = R + πe ties money to interest rates.
An Introduction to the Short Run
Potential output and the output gap; the three premises of the short-run model; the anatomy of a financial crisis (leverage and the accelerator); 2008 versus Covid-19.
Key idea: a recession is an output gap Ỹ < 0; sticky prices make money non-neutral in the short run.
The IS–MP–Phillips Model
The IS curve and the multiplier; the MP curve and the zero lower bound; the Phillips curve and the sacrifice ratio; the model run on three shocks; the Taylor rule and the Volcker disinflation.
Key idea: IS, MP, and Phillips together determine output and inflation; the Taylor principle is what keeps the system stable.
Stabilisation Policy: AS/AD and Financial Crises
Collapsing IS-MP-Phillips into the AS/AD framework; shock dynamics and rules versus discretion; the risk-premium wedge, the ZLB, deflation and quantitative easing; crises in the model.
Key idea: AS/AD puts the short run in one graph. A risk-premium wedge at the ZLB can turn a recession into a near-depression.
The Government and the Macroeconomy
The budget constraint and the debt-GDP law of motion; the (r − g) snowball and sustainability; self-fulfilling debt crises; current global debt, imbalances and fiscal policy.
Key idea: debt/GDP rises when (r − g)b exceeds the primary surplus. The currency denomination of the debt affects whether high debt is manageable or a crisis.
Textbook, reading & data
The course is taught with data; figures are built live from public series, and students are encouraged to reproduce them and to run the growth and debt arithmetic on their own country.
- Required text. Jones, Charles I. Macroeconomics. 6th ed. New York: W. W. Norton & Company, 2024.
- Blanchard, Olivier. Macroeconomics. 8th ed. Pearson, 2021. Supplementary.
- Mankiw, N. Gregory. Principles of Macroeconomics. 8th ed. Cengage, 2017. Supplementary.
- Growth & ideas: Solow (1956); Romer (1990); Jones (1995; 2022); Bloom, Jones, Van Reenen & Webb, "Are Ideas Getting Harder to Find?" (2020); Hall & Jones (1999).
- Labour & inequality: Goldin & Katz, The Race between Education and Technology (2008); Diamond–Mortensen–Pissarides (search & matching).
- Money & inflation: Friedman; Cagan (1956); Sargent, "The Ends of Four Big Inflations" (1982); Fisher.
- Short run & crises: Okun; Phillips; Taylor (1993); Kydland & Prescott (1977); Diamond & Dybvig (1983); Reinhart & Rogoff, This Time Is Different (2009); Bernanke, the "global saving glut" (2005).
- Government & debt: Barro, tax smoothing (1979); Calvo (1988); Cole & Kehoe, "Self-Fulfilling Debt Crises" (2000); De Grauwe (2012); IMF, Global Debt Monitor (2025).
- FRED, Federal Reserve Bank of St. Louis. fred.stlouisfed.org. Series used:
GDPC1, GDPPOT, NROU, UNRATE, USREC, PAYEMS, CPIAUCSL, PCEPILFE, MICH, FEDFUNDS, GS10, BAA, MORTGAGE30US, REAINTRATREARAT10Y, HOUST, CSUSHPINSA, M2SL, WALCL, GFDGDPA188S, FYPUGDA188S, FYFSGDA188S, FYOINT, GGGDTA{JP,US,GB,DE}A188N. - World Bank, World Development Indicators. data.worldbank.org. Series used:
SL.UEM.TOTL.ZS, SL.UEM.1524.ZS, FP.CPI.TOTL.ZG, FM.LBL.BMNY.ZG, BN.CAB.XOKA.GD.ZS, NY.GDP.MKTP.KD.ZG. - Other sources: the IMF (WEO; Global Debt Monitor; Fiscal Monitor); the OECD; US BEA & BLS; Eurostat; NBER recession dates; Our World in Data; the Maddison Project & Penn World Table.
