Department of Economics

Course Outline Fall (2013) ECON 313: Monetary Economics (3 Cr. Hrs.)
Instructor: Syed Ali Abbas Room: E Block, 2nd Floor, Room # 206 (B)

Contact: aliabbas@fccollege.edu.pk Consultation hours: Monday and Wednesday Tuesday and Thursday Prerequisite: ECON 202 12:00 13:00 hrs 10:00 13:00 hrs

Required Readings: Bain, K. and P. Howells. (2009) Monetary Economics: Policy and its Theoretical Basis, Palgrave, Macmillan. Belke, A. and T. Polleit (2009) Monetary Economics in Globalised Financial Markets, Springer Dordrecht Heidelberg London New York Mishkin, F.S. (2012) The Economics of Money, Banking and Financial Markets, Prentice Hall. Walsh, C.E. (2010) Monetary Theory and Policy, The MIT Press, Cambridge, Massachusetts Course Description: It is a theoretical course and focuses on the understanding of monetary economics. This course covers topics about monetary aggregates, money supply, money demand, role of financial institutions, theories and determinants of money demand, monetary transmission mechanism, price surprises, central banking and money supply. This course provides students a framework to understand the debates surrounding the monetary economics. Learning Goals: 1. To develop understanding about the monetary theory 2. To enable students to integrate the economic phenomena in terms of monetary variables. 3. To facilitate students to understand monetary theory transmission mechanism. 4. To enable students to give policy guidelines on the basis of monetary theory

Learning Outcomes: At the completion of this course, students will 1. Have general knowledge about the monetary theory 2. Have ability to integrate the economic phenomena in terms of monetary variables. 3. Be able to understand the monetary theory transmission mechanism. 4. Be able to give policy guidelines on the basis of monetary theory. Expectations from Students: Students are expected to attend class regularly. No alternative exam or quiz shall be undertaken if a student missed an exam or quiz. Assignments will not be collected after the due date. Students must turn their cell phones off in the class. For assignments, plagiarism will result in F grade. The definition for plagiarism includes copying of any kind without giving credit to the source of information, i.e. representing anothers work or ideas as ones own. Attendance: Students are required to attend all the lectures. Those students whose attendance falls below 80% will not be allowed to sit in the final examination. Course Evaluation: Grading will be based on: Assignments 10% Projects 10% Quizzes 15% Mid term Exam. 25% Final Exam. 40% Total 100% Your grade will be based upon your total percentage at the end of the course. Grade that will be assigned on the basis of percentage is given next. Grade A AB+ B BC+ Quality Points 4.0 3.7 3.3 3.0 2.7 2.3 %age 93% - 100% 90% - 92% 87% - 89% 83% - 86% 80% - 82% 77% - 79% Satisfactory 2 Good Meaning

Superior

C CD+ D F Syllabus and Tentative Schedule:

2.0 1.7 1.3 1.0 0.0

73% - 76% 70% - 72% 67% - 69% 60% - 66% Bellow 60% Pass Fail

The schedule is tentative because it is not possible to anticipate exactly how much time each topic will require. One thing is sure that once a topic is covered in the class session it becomes the responsibility of student to read it.
Week Topics Chapters B & H -1
M-3

1, 2

Introduction The various meanings of money Why is money Functions of money An overview of financial system Function of financial markets Structure of financial markets Financial intermediaries Function of financial intermediaries, Understanding interest rate Measuring interest rate Interest rates and returns Nominal and real interest rate Central bank structure Money supply process Bank balance sheets Bank reserves and money supply Determinants of money supply The base multiplier approach to money supply determination The flow of funds approach The two approaches compared, The theory of the demand for money Quantity theory of money

M-2

M-4

5, 6

B&H3 M-14, 15, 16

7, 8, 9

B&H5 B&P2 M-22

The Cambridge cash balance approach The general theory and the demand for money Interest rates and the transaction demand for money Introducing uncertainty into transactions-models for precautionary motive Tobins portfolio model of the demand for money Monetarism and the demand for money Microeconomics transactions models of the demand for money 10, 11 Evidence on the demand for money Problems in testing the demand for money Early demand for money studies Problems and responses since the 1970s Sceptical views of the stability of the demand for money function Tools of monetary policy Open market operations Discount policy Reserve requirements Conduct of monetary policy: goals and targets Goals of monetary policy Conflict among goals Central bank strategy: use of targets Choosing the targets Transmission mechanism of monetary policy Money and inflation Monetarist and Keynesian view about inflation Origins of in inflationary monetary policy High employment targets Budget deficits Empirical evidence on money, prices and output Long run relationships Short run relationships Estimating the effect of money on output
B&H6

12

B&H-7 M-17, 18, 26

13

M-27

14

W-1

B & H-1 means Bain and Howells chapter 1 B & P -1 means Belke and Polleit Chapter 1 M-1 means Mishkin Chapter 1 W-1 meas Walsh Chapter 1