Economics
The Department of Economics has earned an excellent reputation for providing rigorous training in Economics, and equipping students with practical skills required to apply their knowledge of economics. Our economics options focus on real-world problems, and the rigorous application of economic theory to their solution. Specialist areas include finance, health, labour, industrial and international economics, and economics of competition policy.
The particular advantage of studying economics at City is the wide variety of applied subjects available, all of which reflect the strong research and consultancy interests of the faculty. Students interested in a strong theoretical approach will also find substantial and challenging courses.
The Department of Economics has earned an excellent reputation for providing rigorous training in Economics, and equipping students with practical skills required to apply their knowledge of economics.
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EC1001 |
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EC1002 |
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EC1003 |
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EC1004 |
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EC1010 |
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EC1011 |
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| EC1012 | Introduction to Law | f |
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EC2009 |
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EC2010 |
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EC2011 |
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EC2012 |
not running 09-10 | |
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EC2013 |
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EC2014 |
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EC2015 |
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EC2016 |
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EC2017 |
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EC2018 |
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EC2019 |
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| EC2020 | Public Economics | f |
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EC3010 |
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EC3011 |
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EC3012 |
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EC3013 |
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EC3014 |
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EC3015 |
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EC3017 |
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EC3019 |
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EC3020 |
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EC3021 |
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EC3022 |
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EC3023 |
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| EC3025 | Company Law | s |
| EC3026 | Economics of European Integration | s |
E C1001 & EC1002 Introduction to Microeconomics and Introduction to Macroeconomics
This course assumes no previous background in economics. It is designed to show the way in which economists approach problems using certain basic techniques necessary for an understanding of how a modern economy functions.
Introduction:
The nature and techniques of economics
Microeconomics
Resource allocations; supply and demand; market price determination; theory of the firm; distribution and international specialisation.
Macroeconomics
The national accounting framework.
National output determination.
Money, the rate of interest and banking.
Aggregate demand, aggregate supply and the price level. Causes and cures of unemployment and inflation.
Economic growth and fluctuation.
Macroeconomic policy.
Balance of payments and national income.
The determination of rates of exchange.
EC1003 Topics in Applied Microeconomics
This module aims to demonstrate the application of microeconomic principles to topics in public and business policy.
The module provides an examination of the application of the microeconomic theory reviewed in EC1008 Introduction to Microeconomics to a range of topics in public and business policy issues. Students cannot take this module if they are not taking EC1008 Introduction to Microeconomics.
EC1004 Topics in Applied Macroeconomics
To demonstrate the application of macroeconomic principles to topics in public and business policy.
This module provides an examination of the application of the macroeconomic theory reviewed in EC1009 Introduction to Macroeconomics to a range of topics in public and business policy.
EC1010 & EC1011 Data Analysis 1 and 2
Aims:
To introduce students to statistical data analysis, so that they are able to analyse quantitative facts and draw qualitative conclusions. Also to familiarise students with statistical computing as a powerful tool of data analysis.
On successful completion, students should be able to:
- understand and explain statistical relationships between variables;
- understand the notion of correlation between two random variables,
- understand and apply the concept of the line of best fit that describes the inter-relationship of variables;
- understand and apply other routine operations using statistical software, Excel, and EVIEWS.
- recognize data patterns and frame simple statistical hypotheses of the kind that arise naturally in economics.
Content:
Classification and levels of measurement of data
Introduction to statistical computing (Excel and EVIEWS )
Data Representation:
Descriptive statistics:
Elements of probability theory:
Discrete and continuous probability distribution:
Sampling distribution:
Estimation:
Hypothesis testing:
Relationships between two random variables;
Index numbers
EC1012 Introduction to Law
This module aims to give you and understanding of the English Legal System and the principles of the law of contract.
Outline Content:
1) Outline of the English Legal System
Nature, origin and development of common law and equity
Case law
Statute law
The nature of contract, tort, crime and property
Remedies for breach of contract and for torts
Real and personal property
Legal persons, corporate personality and the doctrine of ultra vires
2) Law of Contract
Formation of contracts (offer and acceptance, intention to contract)
Consideration and form
Contractual capacity
Types of contract term
Mistake, misrepresentation and other vitiating factors
Discharge of contracts and remedies for breach
Privity and assignment of contracts
On successful completion of this module, a student will be expected to be able to:
Solve legal problems.
Adapt and apply their knowledge to case study situations.
Apply these judgments in answering legal problems.
Use argument(s) in answering legal problems.
Understand and apply legla principles to problem situations.
Have a clearer knowledge of statute law, common law, negligence, express, resulting and constructive trusts, tracing
process and contract.
Apply the above concepts.
Apply their knowledge, judgment and arguments to the banker/customer relationship.
Communicate effectively using legal principles.
Understand legal concepts.
Present and argue legal problems.
Utilise legal information technology and specialist web-sites to answer legal problems.
Understand the importance of policy in the development.
Demonstrate an awareness of the importance of law in society.
Indicative Reading List:
Card, R. and James, J., (2002) Law for Accountancy Studies. 7th Revised edition, OUP.
HESA
EC2009 International Trade
Pre-requisite: Recommended for those who have already studied some micro- and macro-economics at an introductory level
The main aim of the module is to expose students to the major theories regarding why countries trade with each other and what are the costs and benefits arising from trade. A secondary aim is to make students familiar with the concepts and tools of analysis used in trade theory. A third aim is to provide students with a critical overview of the motivations which lead countries to restrict trade and how modern multilateral institutions attempt to encourage free trade.
Syllabus:
The classical (Ricardian) model
The standard model
The neoclassical (Heckscher-Ohlin) model
The theory of protection
Customs unions
Political economy of trade.
GATT principles and the WTO.
Preparatory readings:
Dominick Salvatore: International Economics, Maxwell Macmillan, London, 8th Edition, 2004.
Paul Krugman and Maurice Obstfeld: International Economics: Theory and Policy, Addison Wesley, New York, 6th edition, 2003.
EC2010 Money and Banking
First we develop a theoretical understanding of the nature and the functions of the financial system of any economy. Secondly, we develop a perspective on the specific institutional context of the UK financial system, its characteristics and constraints. The theoretical survey is complemented with the incorporation of empirical evidence from several developed countries. We also study aspects of the internationalization of the capital market, such as capital mobility, and foreign exchange markets.
• The Financial system. An overview
• Understanding interest rates.
• The bonds market
• The term structure of interest rates
• Portfolio theory
• The Stock market
• The Banking system
• Asymmetric information and the financial structure
• Money supply and the Banking system.
• Monetary policy and the organization of the Central Bank
Preparatory Reading:
Mishkin, F.S., (2003), The Economics of Money, Banking and Financial Markets. 7th ed., Addison
Wesley.
Hubbard, G. (2002), Money, the Financial System and the Economy. 4th ed., Addison Wesley.
E C2011 Health Economics
Pre-requisite: Recommended for those who have already studied some micro- economics at an introductory level
This module demonstrates how theoretical and empirical microeconomics can be applied to health and health care to provide useful insights for health policy.
Syllabus:
In each topic, you will be introduced to the relevant theory, and empirical research, and consider the implications for policy.
1. Introduction to health economics
2. Demand for health and health care
3. Supply of health care: Estimating production and cost functions
4. Markets for health care
5. Market failure and the role of government
6. Regulation in health care: Health care systems
7. Regulation in health care: Pharmaceutical pricing and reimbursement
8. Economic Evaluation: Introduction
9. Economic Evaluation: Monetary measures of health improvements
10. Economic Evaluation: Valuing quality of life
Course Texts:
Morris S., Devlin N. and Parkin D. (2007) Economic Analysis in Health Care Wiley.
Note: The authors have agreed to make this book available to students on this module prior to its publication. Individual chapters will be provided to you free of charge via our e-learning facility
Folland S., Goodman A.C., Stano M (2004) The Economics of Health and Health Care, Pearson Education International, 4th edition. [available in the main library; shelfmark: 338.433621 FOL]
EC2012 The Scope and Methods of Economics
Pre-requisite: Recommended for those who have already studied some micro- and macro-economics at an introductory level
The module provides an introduction to the study of economic methodology, explaining both the role of methodology in assisting economists to address fundamental issues and the different approaches to methodology that are on offer. The module also provides pointers for those who would like to pursue the more specialist literature on economic methodology.
We begin with a discussion of the nature and scope of economics as a discipline and of the issues currently facing it, going on to introduce some of the central theoretical and empirical issues in economics and demonstrating the need for methodological awareness in approaching them. This is followed by a brief account of the methodological ideas that have influenced economics over the last two centuries and a detailed consideration of current methodological ideas, showing how they are discussed today in the field of economic methodology, and how these ideas are related to current practice in economics. We conclude with a discussion of what economics can reasonably be expected to do and what possible future directions the subject might take.
Syllabus:
1. Introduction to Economic Methodology
2. Theoretical Issues in Economics
3. Empirical Issues in Economics
4. The Scope and Purpose of Economics
5. Progress in Economics
6. Understanding Economics
7. Understanding the Economy
8. Issues for Methodology and Economics
Preparatory Reading:
Sheila Dow (2002) Economic Methodology: An Inquiry Oxford University Press
Roger E Backhouse (ed) (1994) New Directions in Economic Methodology Routledge
EC2013 Intermediate Microeconomics 1
Pre-requisite(s): EC1008 Introduction to Microeconomics
The Intermediate Microeconomics courses formalise the fundamental concepts that form the basis of modern microeconomics. The main objective is to acquire the analytical skills and tools that are necessary for economic analysis. After this course the student will be better equipped to appreciate and to assess the economic issues in the society.
This course is devoted to the theory of the behaviour of individual agents in the economy. In particular, we will study the behaviour of consumers and firms, and how they interact in competitive markets. Complex economic relations will be synthesized into simple and manageable theoretic models.
(a) Introduction to Microeconomics
• Analyzing Economic Problems
• Supply and Demand Analysis
(b) Consumer Theory
• Consumer Preferences and the Concept of Utility
• Consumer Choice
• The Theory of Demand
(c) Production and Cost Theory
• Inputs and Production Functions
• Costs and Cost Minimization
• Cost Curves
(d) Perfect Competition
• Perfectly Competitive Markets
• Competitive Markets: Applications
Preparatory Reading:
The textbook is 'Microeconomics' by David Besanko and Ronald R. Braeutigam, 2nd edition, Wiley,
2005 (BB) It is recommended that the students also read from 'Intermediate Microeconomics' by
John. D. Hey, McGraw Hill, 2003 (H)
Another good book is 'Microeconomic Theory' by Richard Layard and Alan Walters, New York-
McGraw Hill, c1978
EC2014 Intermediate Microeconomics 2
Pre-requisite(s): EC1008 Introduction to Microeconomics and EC2013 Intermediate Microeconomics 1
The Intermediate Microeconomics courses formalise the fundamental concepts that form the basis of modern microeconomics. The main objective is to acquire the analytical skills and tools that are necessary for economic analysis. After this course the student will be better equipped to appreciate and to assess the economic issues in the society. This course is an extension of Intermediate Microeconomics, Part 1. Topics will include the analysis of the different market structures, monopoly and monopsony and oligopoly. To understand the latter, a brief introduction to game theory will be offered. Further topics should include risk and information, general equilibrium and externalities and public goods.
• Monopoly and Monopsony
• Oligopoly and Introductory Game Theory
• Risk and Information
• General Equilibrium
• Externalities and Public Goods
Preparatory Reading:
The textbook is 'Microeconomics' by David Besanko and Ronald R. Braeutigam, 2nd edition, Wiley,
2005 (BB) It is recommended that the students also read from 'Intermediate Microeconomics' by
John. D. Hey, McGraw Hill, 2003 (H)
Another good book is 'Microeconomic Theory' by Richard Layard and Alan Walters, New York-
McGraw Hill, c1978
EC2015 Intermediate Macroeconomics 1
Pre-requisite(s): EC1009 Introduction to Macroeconomics
A core module in intermediate macroeconomics, builds upon Introduction to Macroeconomics (EC1009) by covering each of the main theoretical models of macroeconomics in the context of both closed and open economies.
• National income accounting.
• The Keynesian cross.
• Aggregate demand and the IS-LM approach.
• General equilibrium and the AS-AD approach.
• Phillips curve
• Open economy macroeconomics.
Preparatory Reading:
Blanchard, O, "Macroeconomics", 3rd ed., Prentice-Hall, 2003. (Or later edition)
Abel, A and B. Bernanke, "Macroeconomics" 4th ed., Addison Wesley, 2001. (Or later edition)
Mankiw, N.G., "Macroeconomics", 5th ed. Worth, 2003. (Or later edition)
Burda, M and C. Wyplosz, "Macroeconomics: A European Text", Oxford, 1993.
E C2016 Intermediate Macroeconomics 2
Pre-requisite(s): EC1008 Introduction to Microeconomics AND EC1009 Introduction to Macroeconomics AND EC2015 Intermediate Macroeconomics 1
A core module in intermediate macroeconomics, builds upon Intermediate Macroeconomics 1 (EC2015) by applying the main theoretical models of macroeconomics to important applied areas such as the macroeconomics of economic growth and the micro foundations of macroeconomics.
• Economic growth: capital accumulation, technical progress, and the labour market.
• Micro foundations: consumption, investment, and money and financial markets.
Preparatory Reading:
Blanchard, O, Macroeconomics, 3rd ed., Prentice-Hall, 2003. (Or later edition)
Abel, A and B. Bernanke, Macroeconomics, 4th ed., Addison Wesley, 2001. (Or later edition)
Mankiw, N.G., Macroeconomics,5th ed. Worth, 2003. (Or later edition)
Burda, M and C. Wyplosz, Macroeconomics: A European Text,Oxford, 1993.
E C2017 Introductory Econometrics
The module builds on the material covered in Data Analysis at Part 1, and provides a theoretical foundation for the topics to be found in Applied Econometrics at Part 3
An introduction to econometrics, building on the classical linear regression model, to study the estimation and inference problems arising in empirical economics. The theory is presented at an intermediate technical level, the practical motivation being that students should be able to use and understand modern computer software. Matrix algebra and a little calculus are used to derive a number of important results, the EVIEWS program to analyse data.
• Illustrations of Econometric Problems
• Revision of / Introduction to Probability
• Revision of / Introduction to Statistical Inference
• Two-variable Regression and Analysis of Variance
• Properties of Estimators
• Classical Linear Regression Model I
Some matrix algebra and Classical Linear Regression Model II
EC2018 Intermediate Mathematical Methods
Pre-requisite(s): EC1010 Data Analysis 1 and EC1011 Data Analysis 2 AND
Either: MA1653 and MA1654 Mathematics for Economists Post GCSE 1 and 2 OR
MA1658 and MA1659 Mathematics for Economists Post A-level 1 and 2
Mathematical analysis of Economic principles usually leads to a more rigorous understanding of the theories involved. Moreover, the techniques of mathematical economics can often be employed in other areas of social and behaviour science. This module aims to teach the students how economic theory can be learnt using a rigorous and often elegant way of analysis.
At the end of the course the student should be able to formulate and analyse the principles of micro and macroeconomics, especially within the context of partial or general equilibrium models such as the model of Perfect Competition and the IS-LM model.
In the first few weeks we shall be discussing Economic Applications of One-Variable Calculus, discussing the principles of optimisation among other topics. We shall then move onto Economic Applications of Multivariate Calculus. Our final topic is that of Comparative Statics in models of One and Two Variables with and without Optimisation.
Preparatory Reading:
The textbook is 'Introductory Mathematical Economics' by D. Wade Hands, 2nd edition, Oxford
University Press, 2004 (DWH). It is recommended that the students also read from `Intermediate
Microeconomics: A Modern Approach, by Hal Varian, 6th Edition, W.W. Norton AND Co, 2002
(V)
This is an intermediate level course that assumes knowledge of introductory economics. Students wishing to do some background reading are advised to have a look at (among others)
'ECONOMICS' by Dornbusch, Begg and Fischer;McGraw-Hill , 7th edition, 2002.The online help is extremely useful to brush up the basics.
EC2019 Global Financial Markets
To develop a theoretical understanding of the nature and functions of financial markets, financial intermediaries and financial instruments in an international context. The module looks at the institutional context of the US, UK, other advanced economies¿ financial systems, their characteristics and constraints. The theoretical framework will be complemented by empirical evidence and by analysis of real-world financial instruments and financial policy issues.
The aim of this course is to develop a coherent theoretical understanding of the nature and functions of the financial system in the economy. The course is centred around the US, UK, Japanese and German financial systems, comparing their characteristics and relative merits. The overall objective of the module is to familiarise students with the key issues that relate to financial markets and the range of financial instruments available on such markets. The course looks at the use of debt and equity markets as a means of obtaining finance. The final part of the course also looks at derivative instruments such as futures and options and explains how these instruments can be used by to manage financial risks.
EC2020 Public Economics
This module studies welfare states, i.e. state intervention in poverty alleviation, unemployment benefits, retirement pensions, health care, and education. It provides students with efficiency and equity arguments for understanding the shape of welfare states (in particular in the UK) and assessing the desirability of this type of state intervention.
On successful completion of the module, a student will be expected to be able to:
- Understand the main efficiency and equity arguments for the existence of welfare states.
- Recognise key issues in government intervention and understand how these can be analysed and interpreted.
- Be familiar with the main characteristics of welfare states, with an emphasis in the British case.
EC3010 Corporate Finance
Prerequisite: Recommended for economics or business majors who have already studied economics at the intermediate level.
We study how companies invest and how they raise funds in the financial markets to pay for these investments. We cover the principles of financial management and techniques to evaluate different investment projects and alternative sources of funds. We also study the major sources of corporate financing, mergers, dividend policy, etc.
Syllabus:
1. Investment decisions and techniques for capital budgeting
2. Measures of risk and mean-variance analysis
3. Capital Asset Pricing Model (CAPM) and Arbitrage Pricing Theory (APT).
4. Capital structure and the cost of capital. Debt, equity and the Modigliani and Miller approach.
5. Dividend policy. Theory and empirical evidence.
6. Problems of asymmetric information: ownership and control.
7. Signalling theory: capital structure and dividend policy.
8. Mergers and corporate control.
Preparatory reading:
R.Brealey and S.C.Myers (2003). Principles of Corporate Finance. McGraw Hill 7th edn.
Copeland, T.E., Weston, J.F. and K. Shastri (2005). Financial Theory and Corporate Policy. Pearson Education, International Edition, 4th edn.
Grinblatt, M and S. Titman “Financial Markets and Corporate Strategy” (McGraw-Hill International Editions, 1998).
EC3011 Introduction to Financial Derivatives
Prerequisites: Recommended for econonics or business majors who have already studied economics at the intermediate level.
This course presents an overview of the main characteristics of financial instruments and trading practice, with an emphasis on quantitative aspects of options, futures, and other derivatives. On successful completion of this module a student will be expected to able to understand the differences between the main derivatives contracts and their use for hedging, understand the principles of valuation based on the absence of arbitrage, and understand simple probabilistic methods involved in the valuation of derivatives contracts.
Syllabus:
1 Overview of Financial Markets:
Function of financial markets. Classification of financial markets. Market efficiency. Trading mechanisms. Intermediaries. Brief history. Major world's markets. Indexes.
2 Interest rates and bonds pricing:
Compounding frequencies. Spot and forward rates. Term structure of interest rates. Cash flow evaluation. Bond Markets. Bonds evaluation.
3 Forward and Futures:
Generalities. Forward price on a security that provides no income. Forward price on a security that provides a known cash flow. Forward price on a security that provides a known dividend yield. Forward contract on currencies. Forward contract on commodities. Stock index futures.
Spot and forward price. Forward and futures prices. Hedging with futures: basis risk and optimal hedging ratio. Hedging with Stock Index futures.
4 Swaps:
Forward rate agreements. Mechanics of swaps contracts and comparative advantage argument.
Valuation: relation of swaps to bonds and to FRAs. Interest rate swaps. Currency swaps.
5 Options:
Generalities. Trading strategies involving options: spread and combinations. Upper and Lower bounds for option prices (no dividends). Put-Call parity (no dividend) : European, American.
Upper and Lower bounds for option prices (with dividends). Put-Call parity (with dividend): European, American. Early exercise. Binomial model for option pricing. Exotic options
Preparatory Reading:
J. Hull (2005), Fundamentals of Futures and Option Markets. 5th edition, Prentice-Hall. ISBN: 0131445650
EC3012 International Finance
Pre-requisites: Recommended for economics or business majors who have already studied economics at the intermediate level.
This course covers the functioning and organisation of the international financial market. We study the different assets exchanged in the international market and the effect of international capital flows on the economy. We emphasise policy relevance, for example the effect of government intervention in the foreign exchange market. The unit begins by looking at the organisation of the international capital market, followed by the study of standard models of exchange rate determination, and an evaluation of attempts to test them empirically. We apply these models to understand the interaction between financial markets and the whole economy.
Syllabus:
1 Introduction: The organization of the international capital market.
2 The determination of the exchange rate in the international financial markets.
Monetary policy and the exchange rates. An independent central bank in an open economy.
3 Efficient market hypothesis and the exchange rate
4 Exchange rate regimes: fixed vs. floating exchange rates
5 Speculative attacks and international financial crises.
6 The evolution of the international monetary system from Bretton Woods to the Euro. Proposals to reform the international monetary system
Preparatory Reading:
Copeland, L. (2005), Exchange Rates and International Finance. 4th edition Prentice Hall
Hallwood, P. and MacDonald, R. (2000), International Money and Finance. 3rd edition. Blackwell
Krugman, P. and Obstfeld, M. (2000), International Economics. 5th edition. Addison
EC3013 Financial Economics
Prerequisites: Recommended for economics or business majors who have already studied economics at the intermediate level.
This module will provide students with a basic grounding in the fundamentals of finance. The module focuses on a series of topics in financial economics, emphasizing both policy relevance and recent research. The module begins by examining theories and techniques of project appraisal in financial decision making and continues with models of portfolio selection and asset evaluation. The efficient market hypothesis and the theory of options and futures pricing are also introduced. We apply these models to understand the interaction between the financial markets and the wider economy.
Syllabus:
1. An Introduction to Financial Market Theory. Investment decision making, risk and return.
2. The Investment Decision. NPV and IRR, Cash Flows and Applications, Credit rationing, taxation, the role of inflation
3. Modern Portfolio Theory. Risk, risk aversion, the Markowitz model, the capital asset pricing model, arbitrage pricing theory, empirical evidence on asset pricing models.
4. Empirical Evaluation of Asset Pricing Models. Testing CAPM and APT, methodological problems.
5. Market Efficiency. Weak, semi-strong and strong forms, implications of efficient markets for investment policy, empirical evidence and market anomalies.
6. An Introduction to Options and Futures. Option characteristics, Binomial model, Black-Scholes option pricing model, option strategies, Futures contracts, pricing futures, and hedging.
Preparatory Reading:
Arnold, A., (1998) Corporate Financial Management. FT Pitman Publishing,
Radcliffe R., Investments: Concepts, Analysis, Strategies. Addison Wesley Longman Publishing.
Blake D., Financial Market Analysis. Wiley.
EC3014 Monetary Economics
Pre-requisite: Recommended for economics or business majors who have already studied economics at the intermediate level.
This module offers students a comprehensive exposure to the historical development and current state of monetary economics. It aims to provide a stylised history of the field, an evaluation of the major debates concerning the macroeconomic role of money and an explanation of how these debates have influenced the design and conduct of contemporary monetary policy.
Preparatory Reading Suggestions:
Lewis and Mizen (2000), Monetary Economics, Oxford University Press.
Hicks, J. "Mr Keynes and the Classics: A suggested interpretation" Econometrica 5, 1951, 147-159.
Barro, R.J. and Gordon, D.B., "Rules, discretion and reputation in a model of monetary policy" Journal of Monetary Policy 2, 1976, 1-32.
Friedman, M., "The role of monetary policy" American Economic Review 58(1), 1968, 1-17.
Lucas, R.E., "Expectations and the neutrality of money" Journal of Economic Theory 4, 1972, 103-124.
Goodhart, C.A.E., "What should central banks do? What should be their macroeconomic objectives and operations" Economic Journal 104, 1994, 1424-1436.
EC3015 Economics of Competition and Regulation
Prerequisites: Recommended for those who have studied intermediate level microeconomics
The module provides a grounding in the economic analysis that underpins competition policy and regulatory policy towards network utilities.
Syllabus:
1 Benefits of the competitive market system. Monopoly welfare losses. Sources of monopoly. Natural monopoly. Williamson trade –off. X-inefficiency.
2 Market structure and market definition.
3 Nationalisation as traditional solution. Problems with public ownership. Privatisation reasons, benefits, and experience. Alternative forms of liberalisation. Competition policy.
4 Brief history of competition policy. Competition Policy in relation to cartels, anticompetitive behaviour, horizontal mergers, vertical mergers approach, other concerns.
5 Incentives under regulated monopoly: a) efficiency b) investment. The regulators incentives a) capture b) opportunism. Costs and effectiveness of different approaches.
Implications for the design of systems. Fair Rate of Return, RPI-X and other forms of regulation. Price discrimination in regulated industries.
6 Operating and capital expenditure costs in regulation. Theory of benchmark competition. Benchmark and the case of yardstick competition in practice.
7 Role of cost of capital in setting price controls. Weighted average cost of capital. Risk and return. The CAPM. Examples of cost of capital in practice.
Preparatory Reading:
L. Cabral (2000), Introduction to Industrial Organization. MIT Press.
David Newbery (2002), Privatization, Restructuring and Regulation of Network Utilities. MIT Press.
Armstrong Cowan and Vickers (1994), Regulatory Reform. MIT Press.
Viscusi, Vernon and Harrington (2000), Economics of Regulation and Antitrust. 3rd edition, MIT Press.
Massimo Motta (2004), Competition Policy: Theory and Practice. Cambridge.
EC3017 Applied Econometrics
Pre-requisite: Recommended for students who have completed an introductory course in econometrics.
Building on the material studied at Part 2, introducing applications mostly motivated by problems in Finance. We cover a range of techniques widely used in modern applied econometric work, and demonstrate how these techniques are applied to specific areas of economic enquiry. Students will be able to interpret the results of common econometric techniques, understand the main lines of argument in a number of contemporary published empirical econometric studies, and use appropriate computer software to conduct econometric analysis.
Syllabus:
1 Linear regression analysis: hedonic pricing models applied to housing in London, CAPM estimation.
2 Simple dynamic models, and “general to specific” methods.
3 Simultaneous equations estimation, exogeneity testing: trading volume vs bid-ask spread.
4 Vector Autoregressions and causality: modelling stock returns across Asian markets.
5 Modelling the long run: cointegration and unit roots: estimating a money demand function, testing PPP, revisiting Asian stock markets.
6 ARCH and GARCH models of volatility: Basics, Asymmetry, leverage effects, time-varying hedge ratios.
7 Diagnostic testing: applied in all the above settings
Preparatory Reading:
C. Brooks (2002) Introductory Econometrics for Finance CUP.
Maddala, G.S. (2001). Introduction to Econometrics. Wiley, 3rd edition.
Verbeek, M. (2000). A Guide to Modern Econometrics. Wiley.
EC3019 Labour Economics
Pre-requisite: Recommended for students who have studied micro- and macro-economics at the intermediate level.
Topics covered will include a selection of: The supply and demand of labour; human capital and search theoretic modification to the conventional analysis; wage structure; government intervention in the labour market (equal pay, anti-discrimination, etc); the micro and macro-economics of unemployment; wage inflation; incomes policy.
EC3020 Economics of Addiction
Pre-requisite: Recommended for economnics or business majors who have already studied economics at the intermediate level.
Module Description:
The primary course objective is for the student to understand analytical and empirical issues in the domain of the economics of addiction. We will examine substance abuse of illegal drugs mostly but we will also cover topics related to addiction to cigarettes, alcohol and gambling. Demand, supply, and costs associated with substance abuse. We will study and discuss Economic evaluation of substance abuse treatments and policy alternatives. The main tasks for the student are: 1) to read the assigned chapters and research articles, 2) to discuss the points of each reading during class, 3) to prepare for examinations based on the texts and class discussion, and 4) to complete the in-class presentation and the coursework.
Syllabus:
1 Introduction to drug use and abuse. Relevance from and an economic point of view. Main types of illegal drugs. Chronological perspective of substance abuse.
2 Models of substance use and abuse: Modelling addictive behaviour. Addiction and temporal preferences.
3 Models of substance use and abuse: Demand estimation. Demand Elasticities.
4 Supply of addictive substances: Models of firm behaviour in markets with addiction. The average price of an illicit drug.
5. Supply of addictive substances: Drug and crime. Gangs’ financial structure. Effects of illegal drug selling on urban profiles.
6 The costs of substance abuse: The effects of substance abuse on productivity and other labour market outcomes.
7 Economic evaluation of substance abuse treatments
8 Policy alternatives: prohibition, regulation and taxation. Treatment. Prevention through education.
9 First part: Addiction to Gambling I. Second part: In class presentations on selected topics.
10 First part: Addiction to Gambling I. In class presentations on selected topics.
Preparatory Reading:
Becker G.S. and K. M. Murphy, “A Theory of Rational Addiction”, Journal of Political Economy, 96, 1988.
Bretteville-Jensen A.L., “Addiction and discounting”. Journal of Health Economics, 18, 393-407. 1999.
Saffer H. and F. Chaloupka, “Demographic differentials in the demand for alcohol and illicit drugs”, National Bureau of Economic Research. Working paper # 6432, February 1998.
EC3021 Development Economics
Pre-requisite: Recommended for economics or business majors who have already studied economics at the intermediate level.
Development economics has undergone major changes in the last couple of decades. This is partly because of greater global awareness of and interest in the problems of developing countries and partly because mainstream economics has matured over this period, creating new ways of relating economic theory to the real world, such as through the economics of imperfect markets and incomplete information, which are better suited for analysing the problems facing developing countries than the perfect markets paradigm was able to. This course intends to cover some of these new developments; in particular in the fields of growth, income distribution, poverty, gender relations and North-South relations.
Syllabus:
1. Overview of development.
2. Growth and inequality.
3. Rural-urban dichotomy.
4. Informal credit markets.
5. Gender and development.
6. Trade relations and institutions.
Preparatory Reading:
1) Debraj Ray, Development Economics, Princeton University Press, 1998.
2) Kaushik Basu, Analytical Development Economics: The Less developed Economy Revisited, MIT Press, 1997.
EC3022 Industrial Organisation
A grounding in the economic analysis of the functioning of markets and industries and the behaviour of firms within them. We study the factors that determine the conduct of firms in terms of their price setting, advertising, R&D and other strategic decisions, and the economic analysis that underlies competition policy. The approach is mainly theoretical but incorporates empirical aspects as and when appropriate.
• The traditional theory of the firm. Perfect competition. Monopoly, oligopoly and the S-C-P paradigm. Alternative theories of the firm.
• Detecting and measuring market power. Profitability and market structure. The collusion versus the differential efficiency debate. Empirical attempts to resolve the debate.
• Barriers to entry. Limit pricing and entry. Strategic barriers to entry. Contestable markets.
• Horizontal product differentiation. Spatial competition. Vertical product differentiation.
• Innovation and market structure. Technical change and uncertainty. Diffusion of technology.
The economics of patents.
Preparatory Reading:
L. Cabral (2000), Introduction to Industrial Organisation. the MIT Press.
D.W. Carlton & J.M. Perloff (1999), Modern Industrial Organisation (3rd edition). Addison
Wesley Longman.
A. Griffiths & S. Wall (2000), Intermediate Microeconomics; Theory and Applications. (2nd Ed.),
Pearson Education Limited.
J. Lipczynski & John Wilson (2001), Industrial Organisation; an Analysis of Competitive Markets.
FT-Prentice Hall.
L. Pepall, D.J. Richards and G. Norman (1999), Industrial Organisation: Contemporary Theory and
Practice. South-Western, ITP.
EC3023 History of Economic Thought
Pre-requisites: Recommended for those who ahve already studied economics at an internediate level
The module provides a pluralist introduction to the contribution of some of the most important economists of the twentieth century, explaining both their enduring relevance in setting the historical context of current economic practice, and the variety of interpretations available for appraising their contribution. The module also provides pointers for those who would like to pursue the more specialist literature in the history of economic thought.
Central to the module will be a consideration of John Maynard Keynes and Friedrich Hayek, as well as Milton Friedman and Robert Lucas. Additional theorists will include a selection from Marshall, Menger, Sraffa, Walras, Nash, Veblen, Pareto, von Neumann, Sweezy and Kalecki.
Syllabus:
1 John Maynard Keynes: the General Theory
2 Friedrich Hayek and the Austrian school: the emergence of spontaneous orders
3 Veblen and institutionalism
4 Pareto and Walras: the roots of the neoclassical school
5 Milton Friedman and Robert Lucas: the modern neoclassical school
6 Nash, von Neumann and game theory in economics
7 Sraffa, Sweezy and Kalecki: post-Keynesian, Ricardian and Marxian trends.
Preparatory Reading:
Michel Beaud and Gilles Dostaler (1995) Economic Thought since Keynes Routledge
Robert B Ekelund and Robert F Hébert (1997) A History of Economic Thought and Method McGraw-Hill
Harry Landreth and David C Colander (1994) History of Economic Thought Houghton Mifflin
EC3026 Economics of European Integration
This module studies the main characteristics of the European integration process in the light of the tools of economic theory. Microeconomic tools are used to better understand the possible efficiency and growth effects of European integration, together with its labour market impact. Macroeconomic tools are used to study policy making under the European Monetary Union, together with the pro and cons of monetary integration.
On successful completion of the module, a student will be expected to be able to:
-Understand the main economic arguments behind economic integration.
-Recognise key issues in European integration and understand how these can be analysed and interpreted.
-Understand that economic integration can take different forms and can be implemented to different extents in different dimensions.
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