Monetary Theory and Policy: Modelling and Evidence
After some background on the Fisherian Neoclassical and Keynesian traditions, we will set out current policy and that of the post Great Recession Period. Then a set of three Lost Decades are examined in terms of history and policy. The we will introduce some simple math in describing government finance and money supply use for it. Next into money demand, velocity and the welfare cost of inflation, first from the partial equilibrium literature and then from the money in utility function general equilibrium literature.
Exchange economies in general equilibrium are worked through next, first without resource use being devoted to exchange and then with an exchange technology that uses resources, such as "shopping time" models and other related ones. The microfoundations of a banking approach to resource use to exchange is presented, and then the decentralization of this banking problem is done in order to bring out the implicit interest rate spreads that have implications for modeling the liquidity effect, the equity premium and the term structure of interest rates. Endogenous growth with ination and investment is explored with findings about the "Tobin" effect of inflation. Then a derivation of a "Taylor rule" through equilibrium conditions in a monetary economy is done using the exchange economies already developed. And finally real business cycle facts are presented with extension to monetary facts.
10% Attendance, 30% Three Weekly Homework Sets, 30% Three (weekly) Short Essays, 30% Final Exam