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Econ 411 Fall 2015
Syllabus: Economics 411 Money & Banking
Fall 2015
Tuesday and Thursday 1PM to 2:15PM
White Hall 205
Sheila Tschinkel
Rich Building 311B
Office Hours: Tuesdays and Thursdays 2:30PM-4:00 PM. And by appointment
and text to 678-427-1336
This is a great time to be taking Economics 411!
The financial environment is very different than it was a few years ago. We now need to understand “shadow banks” as well as banks. The past several years have demonstrated how central banks in developed economies can influence but not control the money supply.
Think about how you and your family pay for things. People use debit cards to access money market funds to make payments, even though money market funds are not banks. Not all “funds” in money market funds are considered “money”. Some spenders use Bit coins, which are computer algorithm generated and not subject to government control. In fact, it is hard to measure what money is in practice, even if we know what it is in theory.
The financial crisis of 2007-2009 also changed things. The Federal Reserve (the Fed), the US central bank, has kept its policy interest rate at zero for six years and has used unconventional methods to carry out its policy. The European Central Bank (the ECB) also began using similar unconventional methods.
The Fed has indicated it hopes to raise its policy interest rate this semester. This interest rate has been at essentially zero for over six years. When the Fed does finally move, it will implement its interest rate policy in new ways. Recent turbulence in global financial markets has everybody rethinking the timing of a Fed move.
Financial regulation has also changed and the US Congress is considering legislation that would undo some of the changes made in the wake of the financial crisis.
Textbook: M and B, by Dean Croushore
Cengage Learning ISBN-13-978-1-285-16796-1
Articles: Money in the Modern Economy: An introduction
Money Creation in the Modern Economy by Michael McLeay, Amar Radia and Ryland Thomas
Bank of England Quarterly Bulletin 2014 Q1 (Download from Blackboard or the Bank of England)
The first article is an easy read and does not even require the prerequisites for Econ 411. The second article is more complicated and you can wait until we start discussions of financial intermediation (banks) in October.
Other Readings: Articles from newspapers, magazines, central banks, the IMF and other sources will be assigned and posted on Blackboard. You should follow financial market news regularly. Some commentators have no idea what they are talking about and you will learn how to decide this for yourself during the semester.
Attendance Policy
Attendance is mandatory. Individual review sessions are not an alternative.
I do not repeat the textbook and I do introduce other material and ideas. It is much harder to do well in the course if you miss classes.
You will sign an attendance sheet each time and the percentage of your attendance counts for 5% of your grade. You can be excused in advance if you have an excellent reason or, afterwards, a note from the infirmary.
Please decide no later than class on September 3 where you will sit during the semester. Keep in mind that I may shift people if you cluster in the back rows. Taking the same seat will help me get to know you more quickly.
Please do not make me remind you to turn off phone rings and messaging.
Grading Policy
Two midterms will count for 25 percent each and the comprehensive final will count for 45 percent.
Attendance will count for 5 percent.
Exams will not require the use of calculators, phones, tablets or laptops.
The exams I give are usually difficult, even if they are mainly multiple-choice questions. I grade on a “curve” but have no preset numbers for each grade. My experience has been that there are obvious “groupings” and it is easy to form them without a lot of calculations. I distribute a histogram with the results showing the groups and grade distribution.
Make-Up Exams will only be given under extraordinary circumstances and only if I receive written request from your dean.
Please see policy information from the Office for Undergraduate Education.
Outline of Classes:
This outline may be adjusted based on class interest and developments during the semester. Readings will be added to the textbook chapters and class sessions will not cover all of the material in each text chapter. The “Applications” at the end of most chapters will not be required unless noted specifically. The “Policy Perspectives” will usually be assigned or newer readings, posted on Blackboard, will cover the same area.
I have also omitted the text chapter on foreign exchange rates. If there is time and interest, we will work on how different economies are linked through exchange rates and interest rates.
August 27 / Chapters 1 and 2 / Introduction and OverviewSeptember 1 / Chapter 2 / What is Money?
September 3 and 8 / Chapter 1 / Financial Intermediation, the Functions of Financial Markets, Central Banks
September 10 and 15 / Chapter 4 and 5 / Interest rates and asset prices. Differences in interest rates. How the prices of debt instruments are affected by interest rate changes.
September 17 / Chapter 5 and 6 / The term structure of interest rates. The real interest rate and how inflation affects nominal interest rates and the term structure.
September 22 and 24 / Chapter 6 continued and Chapter 7 / Market efficiency and what it implies. We will not cover individual investment decisions and asset allocation (portfolio theory).
September 29 / Supplementary reading on financial assets, markets and financing. / Asset Price Bubbles
Asset financing if time.
October 1 and 6 / Chapter 8: Parts a. and b. / Information Asymmetry and how it relates to banks and other intermediaries.
Review
October 8 / First Midterm
October 15 and 20 / Chapter 8 / Banks and a little history of the US system. This class will pay more attention to large systemically important institutions. Balance sheet management by banks and shadow banks (financial intermediaries in general)
October 22 and 27 / Chapter 9 / Banking industry regulation and supervision. Bank holding company structure and subsidiaries. Shadow banks.
October 29 / Chapter 10 / Economic growth and business cycles
November 3 / Chapter 11-Parts / Money and the demand for money.
Consideration of how “money” is created.
November 5 / Chapter 12 / Macroeconomic models: AS-AD and large econometric models
November 10 / Chapter 13 / The Lucas critique and a little on DSGE models
Review
November 12 / Second Midterm / Exam is comprehensive
November 17 / Chapter 15 / The Federal Reserve; Structure and operations
November 19 / Chapter 15, Parts of 16 and newer readings for Chapters 15-18 / Federal Reserve Operations; How the money supply is influenced by the Federal Reserve and also by private economic behavior. A critique of the “money multiplier”.
November 24 / Chapter 17 / Monetary Policy Objectives
December 1 / Chapter 18 / Rules versus Discretion for monetary policy. What do we mean by a policy rule?
December 3 / Review
December 8 / Review
December 16 / Final Exam 3-5:30PM / White Hall 205 Exam covers entire semester
Power-Point presentations are used in class. Most are new for this semester. I make every effort to make them available on a timely basis. Often I edit them and make changes and tell you newer versions are available. Please comment on these presentations so that I can improve them.
The order and coverage of topics may change when we turn to monetary theory and policy. The content of sessions will be shaped to include emerging developments.
In addition, I will try to set up an optional visit to the Federal Reserve Bank of Atlanta. This will give you an opportunity to meet with the CEO and staff involved in monetary policy, as well as to see money counting and the money museum. It is not on the schedule because I do not know when or even if this will happen.
HONOR CODE
The honor code is in effect throughout the semester. By taking this course, you affirm that it is a violation of the code to cheat on exams, to plagiarize, to deviate from the teacher’s instructions about collaboration on work that is submitted for grades, to give false information to a faculty member, and to undertake any other form of academic misconduct. You agree that the teacher is entitled to move you to another seat during examinations, without explanation. You also affirm that if you witness others violating the code you have a duty to report them to the honor council.
Office for Undergraduate Education
The Office for Undergraduate Education (OUE) central office is located in White Hall 300
Please visit or call 404.727.6069 with questions about academic affairs, concerns or policies.
All Emory College of Arts and Sciences policies may be found in the College Catalog: http://college.emory.edu/home/academic/catalog/index.html
For a full list of Religious Holidays can be found here:
http://www.religiouslife.emory.edu/pdf/Religious%20Holidays%202013-14.pdf
Students with Special Needs
Please provide me with the needed documentation if you are registered with ADSR. It will make it easier to make sure the exams work out. Also, if a note taker is required, I can arrange for this as well.