FINAL CHALLENGE REVIEW IS UP. SEE BELOW.

HOMEWORK 3 SOLUTIONS ARE UP. SEE BELOW.

HOMEWORK 3 GRADES ARE HERE.

Course Description

The class will consist of three parts. In the first part, we will study money and related variables such as inflation and interest rates. This includes study of the banking system and various institutions such as the Federal Reserve. The second part of the course examines monetary policy. Once we understand the relationships between money, interest rates, and inflation, we can ask what the optimal interest rate policy is, and how to implement it. The third part of the course examines interesting monetary episodes in the US and across the world.

General Information

Course Meetings: Mondays and Wednesdays from 3:35 to 4:50 pm in room SB 308.

Office: Room 521B, Jenkins School of Business.

Office hours: Tuesdays at 2-3 pm (Dave is almost always around during business hours, but try to come during office hours if you can).

Contacts: Dave can be contacted via phone (8x3725) or email (dkelly@miami.edu).

Web Site: Dave has established a website (http://moya.bus.miami.edu/~dkelly/teach/eco403/index.html) for this course. At this site, you can download or view course material (homeworks, etc.), as well as a continuously updated syllabus.

Final Exam: Monday, May 7 from 2 pm to 4:30 pm (Section H).

Prerequisites

Textbooks

Dean Croushore, Money and Banking: A Policy Oriented Approach Houghton Mifflin Company, Boston, MA, 2007.

A few sections follow this book (again optional):

Bennett T. McCallum, Monetary Economics: Theory and Policy. Macmillan Publishing, NY, 1989.

Grades

You can now access your grades on line HERE!

Additional Notes

• Attendance is very important for this class. All exam material comes from class notes, and not all class notes are available in the book. Dave tries to reference every topic (whether in the book or elsewhere). However, the wily student usually aces the course by attending every class and taking careful notes.
• Dave likes to do an example problem or two at the beginning of class. These problems are not in the handouts, but are examples of what is on the quizzes and/or homeworks. Be sure to pay attention and write them down. LATE PEOPLE: Dave does not repeat these problems for those unable to wake up and get to class by 3:30.
• The two quizzes are Wednesday, February 22 and Wednesday April 4. Now is the time to mark your calendars. Only in the most dire emergencies can the student not take a quiz at the scheduled time. Even in dire emergencies, Dave does not allow a make-up, but instead counts the final double. STUDENTS MUST LET DAVE KNOW OF THEIR DIRE EMERGENCY BY NOON ON THE DAY OF THE QUIZ OR ELSE A ZERO IS AUTOMATICALLY RECORDED. LEAVING ME A MESSAGE OR EMAIL AND NOT SHOWING UP PUTS YOU AT GRAVE RISK OF YOUR DIRE EMERGENCY NOT BEING APPROVED, IN WHICH CASE A ZERO IS AUTOMATICALLY RECORDED.
• Homeworks are due in class, at the beginning of class. Showing up 20 minutes late because you didn't finish the homework on time is not acceptable. Putting a homework in my mailbox, under my door, etc. is also not acceptable. Emailing homework is only acceptable if done in advance. Only in the most dire emergencies can a student be excused from turning in a homework on time. Even in dire emergencies Dave does not allow the homework to be turned in late, but will instead weight the final more. Students must let Dave know of their dire emergency by noon on the day which the homework is due or else a zero is automatically recorded.
• Computers and Ipads are not allowed in class. 99% of what you need to write down in your notes is either math or graphs. Most definitions, etc. are in the notes Dave provides.
• Smart phones, texting, portable games, X-boxes, Wiis, etc. are not allowed, as seeing students text breaks Dave's mental flow. Therefore, each time Dave sees a student texting, he will subtract 1% from that student's final grade. WARNING: Dave can see you text even when done in the back of class or under the table.
• What they say about Dave on Rate My Professor:
  • "Can be an a-- if you procrastinate."
  • "God help you if you don't go to class."

Some Macro Links and Career Information

Course Outline

DC is the Dean Croushore book and BM is the the Bennett McCallum book.

1. Introduction (BM:1, January 18 - February 1).
1. Facts about the Monetary Economy (DC:1).
2. Money (BM:2, DC:3,8,15, DC:461-488)
1. Functions of Money (DC:3)
2. Measures of Money
3. Fiat vs. Commodity Money
4. The Banking System (DC:8)
5. The Federal Reserve (DC:15)
3. Inflation
4. Interest Rates (DC:p110-118,150-159)
2. HOMEWORK 1, DUE FEBRUARY 8
3. The Money Market (February 8-22)
1. Money Supply (BM:4.1-4.4, DC:p461-488)
2. Money Demand (BM:3.1)
1. Baumol-Tobin Model (BM:3.6, DC:307-315)
2. Velocity (BM:3.5)
3. Cagan Model (BM:7.1)
4. FIRST QUIZ FEBRUARY 22
4. The Inflation Tax (article, February 27 - February 29)
1. Seniorage
2. Welfare costs of the inflation tax
3. Budget Deficits and Inflation
4. Laffer Curve of Inflation Tax
5. Classical and Keynesian Models (BM:5, DC:12, March 5-21)
1. Aggregate Demand (BM:5.1-5.4)
2. Classical Aggregate Supply (BM:5.5)
3. Keynesian Aggregate Supply (BM:5.7, 5.8)
4. Neutrality and Policy in the Classical Model (BM:5.6)
5. HOMEWORK 2, DUE MARCH 21
6. Policy and policy effectiveness in the Keynesian Model (BM:5.8)
7. Phillips Curve (March 26-March 28)
1. Classical and Keynesian (BM:9.2, DC:512-516)
2. Lucas Monetary Misperceptions (BM:9.4, DC:516-520)
8. SECOND QUIZ, APRIL 4
6. Monetary Policy Implementation (April 2-18)
1. Policy Rules vs. Discretion (BM:12,11.3, DC:p494-512, DC:18)
2. Targeting
1. Interest Rate Targeting (BM:4.4)
2. Money Supply Targeting (BM:4.3)
3. Exchange Rate Targeting (BM:14.5-14.7)
4. Inflation Rate targeting (including asset price inflation, articles)
3. HOMEWORK 3, DUE APRIL 18
4. Commodity Standards (BM:13)
7. Interesting Monetary Episodes (April 23-25)
1. Recent episodes: Federal Reserve and the credit crises (articles)

LEARNING OBJECTIVES.

Class Handouts

Note: all handouts may be downloaded as Adobe Acrobat pdf files. If your computer cannot read acrobat files, download the reader for free HERE .

Homework 1, Due Wednesday February 8.

Homework 1, Solutions.

Review, First Quiz.

Review solutions, First Quiz.

First Quiz.

First Quiz, Solutions.

Homework 2, Due March 21.

Homework 2, Solutions.

Review, Second Quiz.

Second Quiz.

Second Quiz, Solutions.

Homework 3, Due April 18.

Homework 3, solutions.

Final Review

Notes, graphs, tables, etc.

Below are some notes for the class. I will add notes periodically throughout the semester. You will see that these notes, while helpful, are in an outline format and do not substitute for the notes taken in class.

Notes: Introduction (Section I)

Notes: Money Market and Inflation Tax (Section II, III)

Notes: Classical Model (Section IV)

Notes: Phillips Curve (Section V)

Notes: Monetary Policy Implementation (Section VI)

Velocity in the United States

Velocity in some high inflation economies

Liquidity Trap

intro graph

Up to Dave Kelly's homepage

Macroeconomics Links

Careers in Economics