Money and Banking
Spring 2023
Assoc. Prof. Chris Ball
Economics Department
Email: christopher.ball@qu.edu
Office phone: +1 203 582 8745
Office Location: 4th Floor Rocky Top Student Center
QU Course Number: EC 341
Days: Tuesdays and Thursdays
Time: 11:00  12:15 PM
Location: TH 113
Office Hours: TBD and As Needed
COURSE OUTLINE

Syllabus: download

Required Textbooks :
Student Presentation Materials (Info and Schedules)

Monetary Policy Presentations: download

Countries and Central Banks

The minimum data we need: inflation and inflation target, unemployment, the nominal money supply (M2), government expenditures and the policy interest rate.

Ideally also get: real GDP, potential GDP, the natural rate of unemployment, and the natural real interest rate.

Bank of Canada (link)

Bank of England (link) and UK Office for National Statistics (link)

Bank of Japan (link)

Bank of South Korea (link)

IMF  IFS (link)


Monetary Policy Presentations #1: March 28th

Grade Sheet: First Country Presentation

Grade Sheet: Internal Group Grades


Monetary Policy Presentations #2: End Semester

Grade Sheets

Homework + Readings and Exam

Take Home Exam 1: download

Take Home Exam 2: percentages below

20% HW on NBER Paper: download

READING: NBER 2022 Paper "The Fed Funds Mkt Pre and Post 2008"


20% HW on FED Paper: download

READING: FED 2020 Paper on "The Fed's AmpleReserves Approach to Implementing
Monetary Policy"

 20% Central Banking 101 Bk Reading Ch 1 & 2 HW: download

20% Central Banking 101 Bk Reading Ch 3, 4, & 5 HW: download

20% Bernanke Book Reading HW: download

Outline, Readings, and Notes
TRADITONAL MONETARY THEORY
Section 1: Crash Course in Basic Macroeconomic Tools and Analysis

Review Supply and Demand Model

Practice Problem Set: Supply and Demand


Review ASAD Model (with time paths)

ASAD Basics/Review and Adding time paths

Notes: Handout

Example of ASAD to Time Paths and Gaps: Handout

Practice Problem Set: ASAD and Time Paths Forward and Backward


The Phillips Curve

Phillips Curve wikipedia (Note we use something like the "New classical version")

Phillips Curve Basics 1: Mon Policy AS AD  Pt 1_ Phillips

Phillips Curve Basics 2: Mon Policy AS AD  Pt 2_ Loosing Control

Global Economics: It's baaack! The Phillips Curve Conversation

Global Economics: Who's Afraid of the 1970s.



Taylor Rules

Basics

Calculations:

Fed Chair Yellen on balanced approach and using Okun's Law:


Taylor Determinacy

Notes: Handout


Other Readings

Atlanta FED Taylor Rule Utility: link

Practice Problem Set: Phillips Curves and Interest Rate Rules



Open Economies

Nominal Exchange Rates and interest rates

"Dynamic" PPP (in rates of change)

Section 2: Traditional Policy and Theory

MV = Py in levels and rates

Money Markets and Interest Rates (with time paths)

Money Market Basics

Changes in M

Announcement Effects

Credibility

Casting Policy in Terms of Interest Rates

Practice Problem Set: TBD



Monetary Policy Evolution

Monetary Aggregates and Friedmantype Money Growth Rules

From "M" to "i": 1970s, 1980s, 1990s, early 2000s


What Determines "M"?

Banks as Businesses

Max Profit = TR  TC > MR = MC

MR = $ earned per unit of output. Bank "investment". Traditional "lending"

MC = $ paid per unity of input. Banks' sources of funding . Traditionally "deposits"

Other inputs



Money, the Banking System and Money Multipliers

Read Joseph Wang's Central Banking 101

Practice Problem Set: Chapters 1 (Types of Money) and 2 (The Money Creators)

Practice Problem Set: Chapters 3, 4, and 5.


Open Market Operations

Traditional Banking System and Money Multipliers

The Discount Window. Listen to Odd Lots Podcast on the topic (link) "Why Banks Are Suddenly Borrowing From the Fed's Discount Window".

Bank Panics

Balance Sheets: Private Banks and the Central Bank

Basel IIII: Capital ratios (risk weighted) and Leverage Ratios (nonrisk weighted)


Market for Bank Reserves (or the Interbank Market)

Traditional Analysis


Bond Markets

Basics

Yields

Bond and Money Markets

Term Structure of Interest Rates

Practice Problem Set: Prob Set 4 Bonds and Interest Rates

Answer Key: Excel Sheet Key

EXAM 1  TBD
MODERN MONETARY PRACTICE and THEORY

Interest on Reserves

Breaking MV = Py, Money Markets and Traditional Models


Modern Banking and Modern Central Banking

Money Creation in a Modern Economy, Bank of England

New Facilities

Quantitative Easing

Quantitative Tightening

The Modern Market for Reserves and the Fed's "Ample Reserve Framework"

(Optional) FED Guy's Bank Balance Sheet FREE Course: https://www.centralbanking101.com/courses/bankbalancesheetconstraint

Do Loans Generate Deposits?

FED Explaining RRP’s: https://www.newyorkfed.org/markets/rrp_faq.html

Current RRP: https://fred.stlouisfed.org/series/RRPONTSYD



The Fiscal Theory of the Price Level

Euler Economics: What Interest Rates Can and Can't Do
EXAM 2  TBD
Other Notes and General Topics

Building (Bond) Markets and Interest Rates (Mishkin, Chap 5)

The Term Structure of Interest Rates (Mishkin, Chap 6)

NOTES: My lecture notes.

READING: List of Countries By Credit Rating Agencies (wikipedia)

READING: My 3 Articles from 2019 on Interpreting US Yield Curve Inversion  Part 1, Part 2, and Part 3


Basics of Banking (Mishkin, Chap 9)

Reading: Bitcoin original paper

Changes since 2008

In January 2019, the FOMC announced its intention to implement monetary policy in an ample reserves regime. Reserve requirements do not play a significant role in this operating framework. CRAZY! FED Board of Governors 2020 Announcement that Required Reserves are ZERO. "

In light of the shift to an ample reserves regime, the Board has reduced reserve requirement ratios to zero percent effective on March 26 (2020), the beginning of the next reserve maintenance period. This action eliminates reserve requirements for thousands of depository institutions and will help to support lending to households and businesses."


HAND WRITTEN NOTES Chap 15 The Tools of Monetary Policy inlcuding Ample Reserves

READING! FED Board of Gov Policy Paper (February 2020): The Fed's "AmpleReserves" Approach to Implementing Monetary Policy

These notes are based on Chapter 15 of Mishkin's book and the FED Paper below. You should really read both the textbook and the Fed Paper.


HAND WRITTEN NOTES Taylor Rules (Chap 16 and more)