Course Catalogue

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This course seeks to explore both the causes and consequences of the high levels of government debt observed in many developed economies in recent years.

Lectures: 10 x 2-hour lectures

Additional 2 hours revision lecture outside normal hours.

University of Glasgow students must have achieved Subject Honours entry requirements as detailed below to enrol on this course. Permission is required for non-Economics students to take this course as an outside option.

A GPA of 12 (average C3) in Economics 2A and 2B with no course grade below D3, attained at the first attempt. A minimum grade of D3 in both ECON1012, Introductory Mathematics for Economists and ECON1013, Introductory Statistics for Economists unless exemptions were agreed on the basis of other courses taken in year 1. Refer to course specifications for details. These grades may be achieved at the second attempt.

ILOs

Reassessments are normally available for all courses, except those which contribute to the Honours classification. For non Honours courses, students are offered reassessment in all or any of the components of assessment if the satisfactory (threshold) grade for the overall course is not achieved at the first attempt. This is normally grade D3 for undergraduate students and grade C3 for postgraduate students. Exceptionally it may not be possible to offer reassessment of some coursework items, in which case the mark achieved at the first attempt will be counted towards the final course grade. Any such exceptions for this course are described below. 

The aim of the course is to

■ review the analytics of the government budget constraint and in doing so, reveal the potential interactions between monetary and fiscal policy which are often ignored.

■ critically discuss the implications of government debt for optimal policy, firstly by exploring the benchmark of Ricardian Equivalence, before considering the policy of tax smoothing which applies in an environment where taxes are distortionary. 

■ analyse these basic theoretical results with the empirical results on the real effects of fiscal policy, particularly the debate on the impact on private consumption of public consumption and whether or not fiscal consolidation can result in a boom. 

■ critically discuss the political economy of budget deficits and why government debt may be sub-optimally high as a result of imperfections in the political/policymaking process.

■ assess the appropriate response to the currently high levels of government debt observed in many developed economies.

By the end of this course students will be able to:

1.Analyse the analytics of the government's budget constraint.
2.Analyse the interactions between monetary and fiscal policy.
3.Explain and evaluate the benchmark theories of Ricardian Equivalence and Tax Smoothing.
4.Outline and assess new political economy explanations of the postwar increase in government debt and its distribution across economies.
5.Describe and explain the empirical evidence on the macroeconomic effects of fiscal policy and the macroeconomic consequences of fiscal consolidations.

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