This blog pertains to topics in
Unit 5 of ‘Advance Macroeconomics’ course of M.Sc.(Economics)
Units 1 to 4 of in ‘International Finance’ course of M.Sc. (Economics)
Unit 3 of ‘International Trade’ course of M.Sc. (Economics)
Unit 2 of ‘Institutional Economics’ course of M.Sc. (Economics)
Unit 2 of Ph.D. (Commerce) Discipline Specific Course I of coursework
What is macroeconomics? What are its perspectives? Which questions pertaining to COVID-19 period can or cannot it answer?
Macroeconomics as a course in a degree programme on Economics provides theories, principles and tools to (i) examine the level of standard of living of the populace or nation in terms of income, consumption and savings on aggregate or per capita basis, (ii) design strategies of policy intervention with a view to improving the above standard of living and (iii) develop criteria to compare the nations of the world in terms their wealth or quality of life. In both of undergraduate and post graduate degree programmes macroeconomics is a compulsory course after microeconomics. The undergraduate level of the course is basic whereas its post graduate level is advanced. There are a number of areas as offshoots that flow from macroeconomics e.g. financial markets, international trade, international finance and institutional economics. Each of these reflects a unique perspective of the course and accordingly the learner obtains a direction toward choice of profession and prospective workplaces. Every perspective reflects a separate dimension and plays the role of a spectacle with a pair of glasses of a unique colour through which the learner looks upon macroeconomics and finds it in that colour and accordingly starts planning her course of actions, i.e. studying and applying and/or researching. Poised in the specific relevant perspective macroeconomics can answer the variety of upcoming queries like why the central bank reduces monetary policy rates, why the State Bank of India reduces deposit rates, why Jio Platforms Limited looks toward the international markets for raising capital or what is the nature of relationship between India and USA during COVID-19 period.
Perspective of Financial Markets
The course on financial markets can answer why the State Bank of India reduces deposit rates nowadays. This course focuses on interplay of the milieu of macroeconomic and financial information in decision making regarding choices of avenues and volumes of funds (i) to deploy in terms of acquiring assets through lending and investing, and (ii) to procure or raise through borrowing or creating liabilities through issuing securities and also, on part of the regulator, the choice of the mode of regulation of economic agents in the financial markets, e.g. investors, issuers, brokers, platform providers and investment banks. Investments in financial markets traces from the investment component of the national income identity. The places of making aforesaid decisions are (i) the divisions of analytics, treasury, risk management, asset liability management and regulatory compliance in business conglomerates e.g. Reliance Industries Limited Treasury, banks e.g. HDFC Bank Treasury, non-banking financial companies e.g. Life Insurance Corporation of India Treasury, clearing agencies e.g. Clearing Corporation of India Limited and ancillary companies of research and consultancy e.g. Dun and Bradstreet and rating companies e.g. Credit Information Bureau of India Limited (CIBIL), (ii) the divisions of supervision and research of regulatory institutions e.g. Reserve Bank of India (RBI) and (iii) divisions of research in self regulatory bodies e.g. Federation of Indian Chamber of Commerce and Industry (FICCI). A blend of lessons from the courses on financial markets, econometrics and data science can pave the learner’s way to higher studies or the doorstep of corporate research cells of the prospective workplaces e.g. National Stock Exchange of India Limited. The orientation of the course is toward processing secondary financial and macroeconomic data in lieu of macroeconomic theory.
Perspective of International Trade
The International trade course focuses on the bridge between the domestic and the international macroeconomic systems when the countries or nation states of the world are compared on the basis of their gross national products rather than gross domestic prodcuts or simply on the basis of their foreign exchange reserves, which is an important parameter in rating and judging the country’s repaying capacity in the case it goes for international borrowing. It deals with examining the determinants of the prices of exportables, prices of importables and exchange rates and designing the policies of encouraging or discouraging exports and imports, choosing an exchange rate regime and choosing a block or group of the nations for the purpose of smoothly carrying out the activities of exporting and importing and facilitating movement of capital to and fro between home and foreign destinations. Specialization in foreign trade with a blend of knowledge on International Relations can lead the learner to higher studies or employment in research institutes like Indian Council for Research on International Economic Relations (ICRIER). This blend can explain the nature of relationship between India and USA during the corona pandemic period.
Perspective of International Finance
The International Finance course can answer why Jio Platforms Limited looks toward international markets for raising capital. This course focuses on financial operations caused by underlying macroeconomic considerations through the role of exchange rates between home currency and international currencies e.g. US Dollar in determining the volume of net exports i.e. exports minus imports and the role of association of the home country with a block or group of other countries in determining own balance of payments. As a result the International Finance course embraces the topics on international financial markets e.g. currency derivatives and regulatory guidelines on external commercial borrowing. A blend of this course with the courses on International Business, International Banking, Risk Management and Derivatives can place the learner in the international branches, foreign treasuries and risk management divisions of the banks and investment banks and international financial institutions like the World Bank Group and the Hong Kong Exchanges and Clearing Limited Group. The command over historicity and evolution of the international monetary system would provide add on strength if the learner aims higher studies.
Perspective of Institutional Economics
The Institutional Economics course can answer why the RBI reduces the monetary policy rates during the corona pandemic period. This course focuses on rules and norms guiding the behaviour of the public, of which one of the outcomes is macroeconomics. Every transaction at micro level and the following aggregation at macro level are guided by some rules administered by some group of people or an institution and accepted by the masses. For example any sale of goods is a contract between the buyer and the seller and governed by relevant laws. These laws are enacted by a house of legislators, i.e. a legal institution. Similarly every macroeconomic variable is under the control of some institution, e.g. inflation is under the control of the RBI, i.e. a regulatory institution. So implementation of macroeconomic theories is undertaken by institutions. Institutional economics deals with how macroeconomic behaviour of people or group of people on the one hand and institutions and laws on the hand influence each and as such evolve side by side. One can see that on the one hand regulations shape behaviours of banks and financial institutions but on the other hand some specific behaviour of the latter reflecting moral hazard but without violating the extant regulation give birth to some new regulations, e.g. Basel guidelines. Institutions as topics of study play important roles as financial regulators e.g. Securities and Exchange Board of Indi (SEBI) in the Financial Market course and trading blocs, e.g. European Union-North American Free Trade Agreement (EU-NAFTA) in the International Trade course, whereas legal and regulatory provisions like the Foreign Exchange Management Act (FEMA) are important topics in the International Finance course. Specialization in institutional economics combined with a strong hold on History of Economic Thought and Political Economy can lead the learner to policy research, economic journalism and higher studies.
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