S1723 Macroeconomics and Economic Crises (Sustainable Development Sp. Track)

Borisov Kirill, Vymyatnina Yulia

Course description

The global economy is still under pressure to recover from the 2008-2009 economic and financial crisis that became the greatest shock to the global economy since the Great Depression. While the first wave of economic policy response was overwhelmingly similar throughout the world: fiscal stimulus and monetary easing, further reactions to the first signs of economic recovery were different. This course aims to provide the students with an understanding of the basic macroeconomic models and the current state of debates on issues of fiscal austerity, unorthodox monetary policy, and the reasons for economic and financial crises.

The course consists of two large parts: the first covers basic macroeconomic models (neoclassic, IS-LM, AD-AS) both for closed and open economy settings, and the second part discusses economic crises (their typology, main theories explaining these crises, applicability of the basic macroeconomic models to explaining crises and offering solutions).


The first part starts with an introduction to the main macroeconomic notions and relevant statistical concepts. The next stage is a discussion (more or less in historical order) of the main macroeconomic theories (in their modern versions) starting from the neoclassical macroeconomic model (taking a more or less long-term view) through Keynesian cross and IS-LM models to AD-AS model (encompassing the Phillips curve). All models are placed in their historical context and discussed in terms of the economic policy advice they offer. The second stage of the first part of the course takes students into the realm of open economy models by introducing exchange rates and balance of payments issues and re-formulating models for a more realistic scenario of external trade.


The second part of the course takes on the worst economic crisis of the 20th century – the Great Depression – and discusses views on: the reasons for it, the effectiveness of the introduced policies, and its effect on the economic profession. Discussion of the Great Depression is continued with orthodox and heterodox theories of economic and financial crises, including real business cycle school, Pigou and Keynesian effects, I. Fisher’s debt deflation, H. Minsky’s financial instability hypothesis, Kalecki’s investment theory and others. Then the crisis of 2008-2009 is discussed – its reasons, response from the governments and Central banks, the importance of international cooperation. The course ends with discussing the problems of globalization in relation to macroeconomic policy effectiveness and the latest suggestions for modifying the global monetary order.


Learning outcomes:

By the end of this course, students should be able to:

  • understand and correctly use key macroeconomic notions;
  • understand the main assumptions and limitations of the basic macroeconomic models;
  • use the basic macroeconomic models for explaining real-life macroeconomic phenomena;
  • critically discuss macroeconomic policy advice based on different macroeconomic theories and their relevance for particular situations;
  • critically discuss the main views on the reasons of economic and financial crises and corresponding policy advice;
  • provide their own opinion substantiated by economic theory on the reasons for the latest economic and financial crisis;
  • critically comment on the current debates concerning economic policy in the developed countries.


This course has no prerequisites. However, some basic mathematics, algebra, and graphing will be used.