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Modelling the Australian Macroeconomy (ECOM40005)

HonoursPoints: 12.5On Campus (Parkville)

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Year of offer2017
Subject levelHonours
Subject codeECOM40005
Semester 2
FeesSubject EFTSL, Level, Discipline & Census Date

This subject examines the use of open economy macroeconomic models in economic policy analysis. Topics include important Australian macroeconomic data sets; the design of macroeconometric and VAR models of the Australian economy; the derivation of policy multipliers; policy simulation techniques and sensitivity analysis of economy-wide models; recent developments in the theory of economic growth; and an examination of some current issues in macroeconomic policy.

Intended learning outcomes

On successful completion of this subject students should be able to:

  • Explain the limitations of static comparative-equilibrium analysis (including IS-LM) for policy formation and evaluation;
  • Evaluate the role of Walras' Law in macroeconomic modelling;
  • Apply models to capture dynamic elements in markets and ensure a consistent relationship between stocks and flows;
  • Identify recursive elements of models involving a number of structural equations;
  • Apply numerical algorithms to solve non-linear and simultaneous models;
  • Describe the differences between short and long run policy multipliers;
  • Express a system of linear equations in matrix form and solve the system for relevant multipliers;
  • Describe and evaluate alternative models of the equilibrium rate of unemployment;
  • Describe and evaluate alternative models of the demand for stocks of financial assets, including money;
  • Explain models of household consumption behaviour;
  • Explain and evaluate competing models of production and economic growth;
  • Identify the various rules used to solve both static and dynamic economic models;
  • Analyse the documentation that accompanies models of the Australian economy;
  • Perform policy simulations and analyse the results.

Generic skills

  • High level of development: statistical reasoning; application of theory to practice; interpretation and analysis; critical thinking; synthesis of data and other information; receptiveness to alternative ideas.

  • Moderate level of development: oral communication; written communication; collaborative learning; problem solving; evaluation of data and other information; use of computer software.

  • Some level of development: team work; accessing data and other information from a range of sources.

Last updated: 16 August 2017