On April 13, Economics Student Society (ESS) held a coffee chat with Dr. Tao Zha at Kaldi’s. The format of the coffee chat followed a very casual format, and the event lasted two hours. The turnout of the event was great as more than 10 students attended the event, and the students asked many thoughtful questions.
Dr. Zha is an economics professor at Emory University. He currently teaches Intro to Macroeconomics, and he works at the Federal Reserve Bank of Atlanta as executive director of the Center for Quantitative Economic Research. He is also working with the National Bureau of Economic Research as a research associate. During the coffee chat, Dr. Zha mainly talked about three topics: his thoughts on the current macroeconomics, the Chinese economy, and how higher education affects one’s intellectual advancement.
The Importance of Macroeconomics
Introductory macroeconomics courses emphasize the importance of comprehending the macroeconomic connections among different sectors in the economy. Dr. Zha also pinpointed the significance of understanding macroeconomic fluctuations when discussing the 2008 financial crisis. The crash of the housing market dates back to a vicious cycle of people’s purchasing decisions derived from the changes in house prices and house market. People did not fully anticipate the effects of falling house prices on the overall economy. Banks issued loans without properly examining an individual’s credit score and financial history. Additionally, a major factor that exacerbated the financial situation was the Gramm-Rudman Act, which facilitated issuing securities by using home loans as collateral for other investments. Many homeowners didn’t have enough income to pay off loans and mortgages, so they defaulted. People didn’t understand that the interaction of macroeconomics and finance drives the economy.
After briefly discussing the background of the 2008 financial crisis, Dr. Zha suggested a general way how the economy can overcome the recession. During a recession, people must be encouraged to consume. The government needs to spend as a way to stimulate people to borrow and continue consuming at a constant rate, thus increasing the aggregate demand and prompting the economy to grow. During the time the government tries to revive the economy, there’s a tendency for the government’s and households’ debts to grow. Dr. Zha concluded this brief discussion by highlighting an interesting issue that affects every nation’s economy when trying to overcome a recession: “How much debt can the government uphold? What’s the optimal leverage of debt?”
The Chinese Economy
Given the nature of coffee chats, topics of discussion arose from students’ questions. Consequently, there wasn’t a general these to the discussion. After Dr. Zha addressed a student’s question about the importance of macroeconomics, another student brought up a relevant topic: the Chinese economy. Dr. Zha’s input sounded very interesting as he stated that the Chinese economy needs more technological innovations to maintain the current rate of economic growth, and households are the key as an increase in consumption is needed for China’s economic growth. An economic shock in the household sector would have a more impact on China’s overall economy. If households reduce their spending, producers would be directly affected as their products would not be purchased, which in turn would slow down economic growth.
Emory’s PhD Program in Economics
Toward the end of the chat, one of the students asked about a different topic and posed the following question: “What are you most proud of in the PhD program?”
Dr. Zha’s answer centers around the value of higher education and its outreach in society. He stated that higher education is always important for the United States. Emory’s PhD program contributes to academics, government, and firms. Dr. Zha shared his belief that a university has a social obligation to provide society with high-quality goods. The PhD program, and the students it produces through rigorous courses, are among the contributions of higher education.
Moreover, Dr. Zha addressed the impacts of a PhD program on the university’s undergraduate population. Having a postgraduate program increases the quality of teaching for undergrad students. PhD students usually work for professors as their teaching assistants (TAs), and their role is to help undergraduate students. TAs are well prepared and have a wide range of knowledge in their field, which can be shared with younger students. Consequently, the quality of education is improved enormously when a university provides PhD programs. Without it, the material quality would decline as the TAs would not be as qualified.
**The views expressed by Dr. Zha are his own and do not reflect the views of the Federal Reserve Bank of Atlanta, the Federal Reserve System, or the National Bureau of Economic Research.
