Docstoc

ECONOMICS 425

Document Sample
ECONOMICS 425 Powered By Docstoc
					ECONOMICS 425
TOPICS IN MONETARY ECONOMICS
Spring Quarter 2010




Prof. Michael G. Hadjimichalakis
Office: Savery 339
Email address: mhadjimi@u.washington.edu
Home Page: http://www.econ.washington.edu/user/mhadjimi/
Class Hours: Tue & Th., 1:30 - 3:20, SAV 264
Office Hours: Tue & Thu 3:30 - 4:30
LEARNING TOOLS

Required Materials:
    1. Michael G. Hadjimichalakis, Topics in Monetary Economics: Course
   Pack Vol. 1. This course pack, available at the University Book Store,
   reproduces the five required chapters from Hadjimichalakis and
   Hadjimichalakis, Contemporary Money, Banking, and Financial Markets:
   Theory and Practice. If you have a copy of this book, do not buy course
   pack 1.
   2. Michael G. Hadjimichalakis, Topics in Monetary Economics: Course
   Pack Vol. 2. This course pack, available at the University Book Store,
   contains all other readings on the syllabus: four chapters of course notes,
   articles, etc.
   3. Michael G. Hadjimichalakis, Economic Commentary
       http://www.econ.washington.edu/user/mhadjimi/blog/
       and
       http://moodle.econ.washington.edu/course/view.php?id=17
    4. Professor’s Web Site. http://www.econ.washington.edu/user/mhadjimi/
        This site contains resources for the course, including NARRATED
        PRESENTATIONS that are coordinated with the textbook, and previous
        exams. Also, access to the Economic Commentary.

Narrated Slides by Karma Hadjimichalakis to Accompany Selected
Chapters of the Textbook:
Accessed from http://www.econ.washington.edu/user/mhadjimi/

Following Money and Financial Markets in the Financial Press and on the
World Wide Web:

      The Wall Street Journal. The "Credit Markets" column, a daily column
       appearing in Section C of The WSJ, is relevant for this course. For other
       pertinent articles, check the daily summary, "What's News -- Business
       and Finance" that appears on page A1. The url for the online edition is
       http://online.wsj.com/home/us
       http://news.ft.com/home/us/ Home page of The Financial Times,
    published in
       Great Britain and the United States.
       http://www.economist.com/ The Economist, the business news weekly
    published in Great Britain that covers the globe, is of a high quality, and is
    widely read.
    World Wide Web. This class incorporates reports and data from the Federal
     Reserve's web sites (as well as other sites) www.federalreserve.gov. The
     web site of the Board of Governors of the Federal Reserve System contains
     an introduction to the Federal Reserve System, speeches and testimony of
     the chairman and other governors, the semiannual monetary policy reports to
     Congress, other policy statements, and the Fed's statistical releases. It also
     has links to the web sites of the 12 district Federal Reserve Banks, such as
     the Federal Reserve Bank of San Francisco (http://www.frbsf.org/), and to
     foreign central banks, such as the Bank of Japan (http://www.boj.go.jp/en/
    Additional Recommended Web Sites. See the recommended list accessed
     from my home page at http://www.econ.washington.edu/user/mhadjimi/

Exam Schedule and Grading:

1.    Midterm Exam: Tuesday, May 4, 2010, Weight = 40%.

2.    Final Exam: Friday, June 11, 2010, 2:30-4:20. Weight = 50%

3.    Discretionary Factor: Class participation may count for up to 10% of your grade.

Course Outline and Readings
     1. Monetary Policy and Financial Markets
        a. The Market for Reserves
           Read:
               (1) FRBSF Economic Letter, “U.S. Monetary Policy: An Introduction, Parts 1-4,
                   2004” January-
                  February 2004, http://www.frbsf.org/publications/economics/letter/index.php
               Vol. 2.

                (2) Course Notes, Chapter 1, “The Market for Reserves,” Vol.2.
                (3) Course Notes, Chapter 2, “The Policies and Practices of the Federal Reserve
                    and the Money Supply Process,” Vol.2
                (4) William Dudley, “The Economic Outlook and the Fed’s Balance Sheet: The
                    Issue of “How” versus “When,” Federal Reserve Bank of New York, July
                    29, 2009, Vol. 2
                (5) Ben Bernanke, “Federal Reserve’s Exit Strategy,” Board of Governors of the
                    Federal Reserve System, February 10, 2010, Vol. 2
  b. A Five-Asset Model
     Read:
         1. Hadjimichalakis and Hadjimichalakis, Chapter 23, “The Structure of Rates
           of Return,” pages 509-14 , Vol. 1.
         2. Ben S. Bernanke and Vincent R. Reinhart, “Conducting Monetary Policy at
            Very Low Short-term Interest Rates,” Federal Reserve Board, January 3, 2004.

  c. The Term and Default Structure of Interest Rates
     Read:
           Hadjimichalakis and Hadjimichalakis, Chapter 23, pp. 496-509, Vol. 1.

2. The Transmission Mechanism of Monetary Policy to the Real Sector: I
     a. The Quantity Theory of Money and the Velocity of Circulation
        Read:
              (1) Course Notes, Chapter 3, “The Laws of Asset Demand,” Vol. 2.
              (2) Hadjimichalakis and Hadjimichalakis, Chapter 16, Targeting Monetary
                  Aggregates: Theory and Experience, pp. 329-341, Vol. 1.


     b. The Behavior of the Velocity of Circulation across Time
        Read:
               (1) Hadjimichalakis and Hadjimichalakis, Chapter 16, pp. 341-350, Vol 1.
               (2) Milton Friedman, “The Fed’s Thermostat,” The Wall Street Journal,
                       August 23, 2003
               (3) Michael Hadjimichalakis, “The New Financial Environment: The
                       End of Monetarism?” from The Federal Reserve, Money, and
                       Interest Rates: The Volcker Years and Beyond (in course pack
                       Vol. 2)
              (4) Ben Bernanke, “Monetary Aggregates and Monetary Policy at the
                       Federal Reserve: A Historical Perspective,” Federal Reserve
                       Board, November 10, 2006, Vol. 2
               (5) Milton Friedman, “Why Money Matters,” The Wall Street Journal,
                       November 17, 2006, Vol. 2.

  3. The Transmission Mechanism of Monetary Policy to the Real Sector:
  II
      Tobin’s Q in a 5-Asset Model
      Read:
            Hadjimichalakis and Hadjimichalakis, Chapter 23, pp. 514-516, Vol. 1.
MIDTERM EXAM: Tuesday, May 4, 2010

4. The Dynamics of Monetary Policy
   a. Liquidity Effect, Income Effect, Price Level Effect, Inflation Effect
      Read:
                       1. Course Notes, Chapter 4, “The Effects of Monetary Policy in
                            the IS-LM Model” Vol. 2

                     2. Hadjimichalakis and Hadjimichalakis, Chapter 10, “A
                        Framework for the Economy: The Real and Financial
                        Sectors” Vol. 1.
   b. The Trajectory in an IS-LM Model
           In-class Handout.

 5. Monetary Policy Under Fixed vs. Flexible Exchange Rates
   a. The IS-LM-BP Model
      Read:
      1. Course Notes, Chapter 5, “The Foreign Exchange Market,” Vol. 2.
      2. Hadjimichalakis and Hadjimichalakis, Chapter 30, “Economic Policy in an
         Open Economy,” Vol. 1


    b. Application
       Ben S. Bernanke, “The Global Savings Glut, and the U.S. Current Account
       Deficit,” Federal Reserve Board, March 10, 2005

    c. Application of the Model Across Countries
       In-class Handout.

6. Inflation and Monetary Policy
  a. Inflation Targeting
      Read:
       1. William Poole, “Inflation Targeting,” Federal Reserve Bank of St. Louis
          Review, May/June 2006, Vol. 88, No. 3, Course Pack Vol.
       2. Ben Bernanke, “A Perspective on Inflation Targeting,” Federal Reserve
              Board, March 25, 2003, Vol. 2
  b. The Bernanke Fed
      Read:
      1. Ben S. Bernanke and Vincent R. Reinhart, “Conducting Monetary Policy at
         Very Low Short-term Interest Rates,” Federal Reserve Board, January 3,
         2004.
      2. Ben S. Bernanke, “Federal Reserve Programs to Strengthen Credit Markets
         and the Economy,” Federal Reserve Board, February 10, 2009

7. The Four Major Central Banks and their Policies: The Fed; the
European Central Bank (ECB); Bank of Japan (BOJ); The People’s Bank
of China (PBOC)
  Read:
          Current articles from the financial press to be assigned
Economics 425, TOPICS IN MONETARY ECONOMICS
Objectives and Expected Outcomes

This is a course on monetary theory and policy, using a variety of models and real-world
settings. It is both analytical and factual.

       Upon completion of the first topic, you will have learned (a) the policies and practices of
        the Federal Reserve as it operates in the market for reserves, and (b) how the Fed’s
        actions affect financial markets, including the stock market.
    Upon completion of the second topic, you will have learned how monetary policy is
        transmitted via the financial sector to the real sector, affecting inflation and output
        growth. You can contrast the approaches followed by two Nobel Prize winners: Milton
        Friedman—transmission via velocity of circulation, and James Tobin—transmission via
        “Tobin’s Q.”
    Upon completion of the third topic, you will have learned the dynamics of monetary
        policy in two ways: first by seeing the liquidity effect, the income effect, and the inflation
        effect, of monetary policy; and, second, by drawing the trajectory, the path, that the
        economy follows after monetary policy disturbs an initial equilibrium.
    Upon completion of the fourth topic, you will have learned how monetary policy also
        affects the foreign exchange market, in addition to interest rates, inflation and growth.
        And you will have learned it in two settings used across time and across countries: fixed
        exchange rates and flexible exchange rates.
    Upon completion of the fifth topic, you will have learned about Fed Chairman Ben
        Bernanke’s preferred approach to monetary policy, inflation targeting, and how the
        ongoing financial crisis led the Fed to traditional and nontraditional tools and programs.
    Upon completion of the sixth topic, you will know about the practices and policies of the
        world’s four major central banks: the Fed; the European Central Bank, ECB; the Bank of
        Japan, BOJ; and the People’s Bank of China, PBOC.
This is a rigorous course, yet accessible to students with different backgrounds.
Econ 425 Student Vita                   Spring 2010

Name: ...................................................................................

Status: .................................

Major: ...........................................



Economics Courses:

Course Name/Number                                                Professor's Name




Math Courses:

Course Name/Number

				
DOCUMENT INFO
Shared By:
Categories:
Tags:
Stats:
views:1
posted:11/7/2011
language:English
pages:8