Macroeconomic Fluctuations and Policies

"Born out of 15 years of teaching by Edouard Challe at institutions in France, the UK, and US, this textbook presents the basic tools for analyzing macroeconomic fluctuations and policies. Intended for students who will either go on to graduate study in economics or move directly to real-world jobs in banking, business, or government, the book applies these tools to a number of concrete issues that are encountered today. Challe uses a unified New Keynesian framework, used most commonly by academic researchers and central bankers. After a general introduction presenting some empirical and methodological elements, the book is divided into four parts. Part I provides the foundations of the modern theory of business-cycle fluctuations through the notions of aggregate demand and aggregate supply. Part II turns to the regular business cycle: it first examines how aggregate demand and supply interact and propagate the impact of macroeconomic shocks, and then pays special attention to the workings of the labor market over the business cycle. Part III is devoted to conventional macroeconomic policies: monetary policy and fiscal policy. Part IV, on the liquidity trap and unconventional macro