Professor Francis W. Ahking
|Office: Mont. 336||Office hours: MW: 9:30 - 11:00, and by appointment||Office telephone: 6-3026||e-mail: email@example.com|
There is no required text for this course. Most of the lectures will come from my own notes. The following texts are useful, however, and I have a copy of all of them. We will also cover some materials from the two books that I have used in Macroeconomics I:
"Modeling Monetary Economies", 2/e, by Bruce Champ and Scott Freeman, and
"Macroeconomics", 3/e, by Stephen D. Williamson.
The following two books are also highly recommended. They are, however, dated and out-of-print but you can still get a used copy relatively inexpensively from amazon.com or booksprice.com, which is a textbook price comparison service.
"Demand for Money: Theories, Evidence & Problems", 4/e, David Laidler
"Monetary Economics: Theory and Policy", Bennett McCallum
Writing papers is an important part of the training for any economist. All of you in graduate school have to write papers. Those of you in the M.A. program must write a M.A. paper as part of the graduation requirement. Writing a good paper requires practice. It involves identifying a research idea, researching the idea, gathering data (if necessary), organizing the idea, and finally, writing and rewriting the paper. All these will take time, and it is important that we start early. In this class, we will start on the process of learning how to write a paper.
You are free to write on any topic that you choose, provided it is in the broad domain of monetary/macro/international finance. A paper with an empirical content would be preferred but not required.
You paper should be:
• Typed with a word processor, double-spaced
• Approximately 10 - 15 pages long, excluding the title page
• Have a title page
• Divided into sections, starting with an introduction and ending with a summary and conclusion
• Footnotes and references should follow the format of a journal, e.g., AER, JPE, JME, etc.
• Cannot have only internet references
We will adhere to the following timetable for the completion of your paper:
1. A short, 2-3 pages, research proposal submitted for approval by the middle of the semester, but no later than Friday, March 5. In this proposal you need to clearly state (i) your research topic; (ii) how you proposed to carry out your research (if you are doing any empirical work, you need also to tell me what and where you intend to get the data from); (iii) a short list of references.
2. On the last day of class, you will have 15-20 minutes to present your research to the class.
3. The final paper is due on Wednesday, April 29.
I will be more than happy to read a preliminary draft of you paper, give you comments so that you can rewrite your paper before the final due date. I also encourage and highly recommend that you keep me informed of the progress of your paper, and discuss with me frequently when you have questions.
Since this class is small and it is also an applied graduate class, I'll want to conduct the class more as a seminar. As such, class participation by students in the form of in-class presentation is an important learning/teaching tool. In-class presentation is 10% of your final grade. In addition to presenting your research project at the end of the semester, you will also be asked to do two more in-class presentations. All presentations must be done with PowerPoint or similar software, since it has now become the standard.
You will be graded on your:
• Substance of your presentation
• Handling of questions during the presentation
This course focuses on the monetary or the nominal side of the economy. Although there is considerable overlap with Macroeconomics, monetary economics is a distinct field by itself, i.e., there is a body of literature that is quite unique to monetary economics. The objective of this class is to introduce you to this broad and unique body of literature. Thus, there is blend of historical review and a survey of more recent development. Much of the recent literature is rather technical, both mathematically and statistically speaking. We will develop some of the more technical literature in class, and my expectations are that you are familiar with the materials covered in mathematical economics, and statistics, which are required of all our first year M.A. students.
The following contains a reading list rather than a syllabus. What this means is that I have chosen and organized the topics that needed to be covered in this course. I have provided a list of readings for each topic. The list contains many important contributions to the literature that I hope all of you will have a chance to read. I will not lecture on every item in the list, and in some cases, I will simplify the materials to make them more accessible. Yet in other cases, I will simply leave them up to you to read.
Explaining Monetary Facts
McCandless and Weber: “Some Monetary Facts” reprinted in Quarterly Review of the Federal Reserve Bank of Minneapolis, Fall 2001.
The Money Supply Process
Any undergraduate Money and Banking text. For example, Chapter 17 in “Money, Banking, and Financial Markets” 2/e, by
McCallum: chapter 4
Money Demand and Econometric Evidence
Laidler: chapters 4 – 13
Edward L. Whalen: "A Rationalization of the Precautionary Demand for Cash" in The Quarterly Journal of Economics, v. 80, No. 2 (May, 1966), pp. 314-324.
Friedman: "The Quantity Theory of Money - A Restatement" in Studies in the Quantity Theory of Money, The University of Chicago Press, 1956. pp. 3 - 21.
J. Tobin: "Liquidity Preference as Behavior Towards Risk" in The Review of Economic Studies, v. 25, No. 2 (Feb., 1958), pp. 65-86
McCallum: chapter 3
Clower: "A Reconsideration of the Microfoundations of Monetary Theory" in Western Economic Journal, v. 6, 1967, pp. 1 - 9.
Williamson: chapter 10
Ahking: “Model Mis-specification and Johansen’s Cointegration Analysis: An Application to the U.S. Money Demand” in Journal of Macroeconomics, v. 24, 2002, pp. 51 – 66
Introduction to Overlapping Generations Model of Money
Champ and Freeman: chapters 1 - 2
Money and Interest Rates
M. Friedman: "Factors Affecting the Level of Interest Rates", reprinted.
Money and Inflation
Champ and Freeman: chapter 3
McCallum: chapter 7
Money and Ouput
(1) Keynesian Theory
Williamson: chapter 12
McCallum: chapter 5
(2) Real Business Cycle Theory
Williamson: chapter 12
(3) Monetary Models of Business Cycles
McCallum: chapter 8 - 10
Lucas: “Some International Evidence on Output-Inflation Tradeoffs” in American Economic Review, June 1973, pp. 326 –
Fischer: “Long-Term Contracts, Rational Expectations, and the Optimal Money Supply Rule” in Journal of Political Economy,
February 1977, pp. 191 – 206.
Classnotes on "sticky-price/wage" monetary rational expectations models.
B. Monetary Policy
McCallum: chapters 11 – 12
Poole: “Optimal Choice of Monetary Policy Instrument in a Simple Stochastic Macro Model” in Quarterly Journal of Economics, May 1970, pp. 197 – 216.
Barro and Gordon: “A Positive Theory of Monetary Policy in a Natural Rate Model” in Journal of Political Economy, August 1983, pp. 589 – 610.
B. Bernanke and F. Mishkin, “Inflation Targeting: A New Framework for Monetary Policy?” Journal of Economic Perspectives, vol. 11, No. 2. (Spring) 1997, 97-116.
John B. Taylor: "Discretion Versus Policy Rules in Practice" in Carnegie-Rochester Conference Series on Public Policy, vol. 39, December 1993, pp. 195 - 214.
Edward Nelson: "Friedman and Taylor on Monetary Policy Rules: A Comparison" in Review of the Federal Reserve Bank of. St. Louis, vol. 90, March/April 2008, pp. 95 - 116.
Revised January 2010