Post Graduate Programme in Management

2016-17
TERM: VI
TITLE OF THE COURSE: GROWTH AND INFLATION IN DEVELOPING ECONOMIES
CREDITS: 2

COURSE: ELECTIVE

No. of Section: 1

Instructor:
Email:
Tel. Number Faculty Block and Room No.
Prof. Subhasankar Chattopadhyay subhasankarc@iimidr.ac.in 549
B-205

COURSE DESCRIPTION
Growth and Inflation are topics in Macro-policy that never cease to attract public
discourse, but too little attention is given to the underlying economic models that can
potentially uncover the link between them. The issue is particularly troublesome for
developing economies like India, for these economies still have deep structural
features that often pose difficulty in aggregation that can be safely done for advanced
economies.
The course aims to critique the well-accepted concept of growth-inflation trade-off in
the context of developing economies, with a particular reference to India. Is there
always a trade-off? Is inflation a short-run or a long-run phenomenon? Is there a tradeoff between short- and long-run inflation? Is inflation an inexorable outcome of growth
and structural change? These are some of the questions that the course would try to
answer by explicit theorization through macro-models suitable for developing
economies. The theories are however closely grounded in reality as the models deal
with theoretical advances provoked by what we know about the world and what we
observe around us.
COURSE OBJECTIVES
To develop understanding of

Structural change and what drives such changes

Stagnation to Growth
The theory of long-run inflation
The theory of short-run inflation

PEDAGOGY/TEACHING METHOD
The course is primarily lecture based.

EVALUATION
Class Participation
Quiz
End Term
Total

Weightage
10%
40%
50%
100%

SCHEDULE OF SESSIONS
Module I
Structural Change and Growth
Module Objective
1.
To understand how production and demand composition changes over the course
of development
2.
To understand the process of stagnation to growth
Sessions and Objective
Session 1: What is structural change?
Objective: To introduce the concept of structural change.
Reading: Chapter 1, pp 33 42, Development Economics by Debraj Ray, OUP India
Session 2: Structural change (with specific reference to India)
Objective: To observe historical facts on structural change
Reading: Illustration using data from different sources (RBI, CSO etc.)
Session 3: Stagnation
Objective: To understand persistence of poverty
Readings:
1.
Chapter 2, pp 17 33, Analytical Development Economics by Kaushik Basu, OUP
India
2.
Poverty Traps by Kiminori Matsuyama
(http://faculty.wcas.northwestern.edu/~kmatsu/Poverty%20Traps.pdf)
Sessions 4 and 5: Short-run and Long-run Growth
Objective: To understand what drives growth in the short and in the long run
Readings:
1.
Analytics of changing growth rates, A Bose and S Chattopadhyay, Economic and
Political Weekly, 2010
2.
Solow model
http://qed.econ.queensu.ca/pub/faculty/clintonk/econ223/3%20Solow%20growt
h%20model.pdf
Module II
Growth and Inflation: Long run
Module Objective
To understand how sectoral dynamics drives growth and inflation in the long run
Sessions and Objective
Sessions 6 and 7: The structure of and dynamics in Lewis Model
Objective: To explore the analytics of Lewis model
Reading: Chapter 7, pp 151 161, Analytical Development Economics by Kaushik Basu,
OUP India

Module III
Growth and Inflation: Short run
Module Objective
To explore macro-models suitable for analysis of growth and inflation in developing
economies in the short run
Session 8: Theory of structural inflation
Objective: To explore Kaleckis two-sector model
Reading: Chapter 4, pp 65 72, Analytical Development Economics by Kaushik Basu, OUP
India
Sessions 9 and 10: Structural disequilibrium and persistent inflation
Objective: To understand how structural disequilibrium may lead to chronic inflation
Reading: Chapter 4, pp 72 81, Analytical Development Economics by Kaushik Basu, OUP
India
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