Nicolas Crouzet

What drives the global economy? How does government policy affect economic and financial conditions? This course focuses on the economic forces and the policy responses relevant for business, investment, and growth strategies.

Measurement underlies all analysis, so we begin by learning how to interpret data on national and international economic activity, with particular attention to the measurement of output and inflation. We then study patterns of economic growth in the long run, including the status of advanced economies, and growth in emerging markets.

Our focus then turns to two key markets: the market for labor, and the market for capital. We study key trends and cyclical changes in labor markets, connecting them to rising inequality. Credit and financial markets play a crucial role in the process of capital accumulation but are also prone to crises. We study their role in both driving growth, and propagating downturns.

We then shift attention to economic policy, starting with monetary policy. Monetary policy has been transformed by the global financial crisis of 2009 and the COVID-19 crisis, and the rapid onset of inflation that followed. We study monetary policy decisions and their effect on financial institutions and credit markets. This includes both conventional policies and quantitative easing (QE) as implemented by Central Banks around the world.

We then turn to fiscal policy. Fiscal policy is the other main tool of macro policy, which also directly interacts with financial markets through sovereign debt, such as the Treasury market, the largest and (usually) most liquid market in the world. We consider government spending and the revenue programs that fund it, plus the government liabilities that result when revenues fall short of expenditures. The sustainability of sovereign debt is a key issue, as budget deficits have ballooned since 2020. We analyze the issue in detail.

Since these markets are global, capital flows, trade balances, and the relative strength of currencies are behind all these discussions. We look at these considerations explicitly as we pull together the topics at the conclusion of the course.

The course provides a high-level overview to aid business planning, investment strategies, and policy analysis. FINC 473 counts toward the Finance major and is on the short list of classes for the Analytic Finance major.

Our focus then turns to business cycles. We discuss what recessions are, how to forecast them, and what impact they have on firms and workers. Credit and financial markets play a crucial role in the process of capital accumulation but are also prone to crises. We study their role in both driving growth, and propagating downturns.

We then turn to fiscal policy. Spending by government is the first main tool of macro policy. It directly interacts with financial markets through sovereign debt, such as the Treasury market, the largest and (usually) most liquid market in the world. We consider government spending and the revenue programs that fund it, plus the government liabilities that result when revenues fall short of expenditures. The sustainability of sovereign debt is a key issue, as budget deficits have ballooned since 2020.

Central banks are the other main locus of macro policy. Monetary policy has been transformed by the global financial crisis of 2009 and the COVID-19 crisis, and the rapid onset of inflation that followed. We study monetary policy decisions and their effect on financial institutions and credit markets. This includes both conventional policies and quantitative easing (QE) as implemented by Central Banks around the world.

Finally, we focus on international goods and capital markets. Globalization was a key underpinning of global growth up to the global financial crisis of 2009. Since then, it has encountered several challenges. We pull together tools from the class to analyze this reversal and discuss its potential consequences.