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Money and Banking
Spring 2025

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:  3:30 - 4:45 PM

Location:  TH 305

Office Hours: TBD and As Needed

My Substack Column:
https://globalecon.substack.com/

Our QU Econ Research Team:
https://www.globaleconomics.net/


Note: Substack columns are FREE. There's an option to pay monthly to support my work, but I would never ask my students to do that. If you sign up, please just stay on for free!

COURSE OUTLINE

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Course Objective: Our aim is to understand the modern money and banking system in order to understand monetary monetary policy.  This is interesting in itself but also allows us to predict what policy makers will likely do and therefore make some predictions about what the economy will do.

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Project Data and PDF (NEW!)

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Review of Principles of Economics and Intro to Money & Banking Topics

  • Supply and Demand

    • Laws of supply and demand, factors and shifting curves, diagramatic analysis, "answers" and time paths.

    • Law of One Price

    • Price (Non)Adjustment: Ceilings, Floors and Fixes

      • We use this review to also cover how the Bank Reserves, or, Federal Funds, Market works.

      • My notes - download

  • Aggregate Demand - Aggregate Supply

    • Review Notes AS-AD Basics - download

    • Review Notes AS-AD to Time Paths - download

    • The next notes use the broad AS-AD framework to tell the history of monetary and macroeconomic policy thinking. Topics include: Classical and Keynesian thinking, the Phillips Curve, Okun's "Law", The Natural Rate of Unemployment, Full Employment, Expectations-Augmented Phillips Curve, Rational Expectations, the Lucas Critique and Rules versus Discretion.

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HOMEWORK 1 (DUE Thurs, March 20th): Law of One Price, Fixed Prices and AS-AD Analysis

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Monetary Theory Overview

  • Traditional View: MV=Py: download​

  • The Real Money Market: downloa

  • The Velocity of Money: download

  • The Bond Market Basics: download​​

  • Taylor rules and determinacy​ - New Keynesianism: download​​​​​

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Policy Implementation and Monetary Institutions

  • Brief History and the US Fed

    • Gold and bi-metallic standards​, banking panics and crises, etc. (link to my 2024 column)

    • 1913/14 FED to mitigate banking crises (Discount Window, Lender of Last Resort)

    • 1977 The FED's Dual Mandate (link)

    • Readings:

      • Milton Friedman "Monetary History of USA and FED up to 1960": download

      • Ben Bernanke "Monetary History of USA and FED up to 2020": download

  • Monetary Mechanisms

    • Federal Reserve Methods Over Time: download

    • Traditional Open Market Operations

      • Putting Money Into the Economy Pt 1: download​

      • Putting Money Into the Economy Pt 2: download

      • Putting Money Into the Economy Pt 3: download

    • Traditional Money Multiplier, Banks and Balance Sheets

      • Money Multiplier Pt 1 - Banking Multiplier: download​

      • Money Multiplier Pt 2 - Counting Money: download​

      • Money Multiplier Pt 3 - Full Multiplier: download​

      • Mankiw's "Ch 4 Monetary System" notes: download

      • The Basic Business of Banking: download​

    • Bank Panics and the Problem of Leverage

      • Bank Panics 1 - The Fragile System: download​

      • Bank Panics 2 - Solutions and Problems: download

      • Bank Panics 3 - The Problem of Leverage: download

    • Traditional Money Multiplier, Banks and Balance Sheets

      • Money Multiplier Pt 1 - Banking Multiplier: download​

      • Money Multiplier Pt 2 - Counting Money: download​

      • Money Multiplier Pt 3 - Full Multiplier: download​

      • Mankiw's "Ch 4 Monetary System" notes: download

      • The Basic Business of Banking: download​

      • The USA Central Bank, The FED - download

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HOMEWORK 2: Traditional OMOs and the Money Creation Process

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Modern Monetary Policy in Theory and Practice

  • What Banks Do: download

  • Mehrling Lectures (#1 - #3 as well as videos for all lectures at bottom of page)

  • Bank of England

    • BOE's (2014) "Money Creation in the Modern Economy" (download)

  • ​US Fed's Ample Reserve Framework​

  • Theoretical Implications New Frameworks

    • The Four Theories of the Price Level: download​

    • Fiscal Theory of the Price Level: download​

    • Readings:​

      • Cochrane (2014) "Interest on Reserves" (Read 1 Intro and 2.3 Mapping to our world ): download​​

  • Further Implications of New Frameworks

    • Cleveland Fed Chair Loretta Mester, 2024, "Fed Ample Reserve Isn't as Simple As It Looks": web/download

    • 2022 Swanson "Fed Funds Market Pre_Post 2008" NBER: download

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HOMEWORK 3: Money Mechanics and the Fed's New Framework

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FINAL PROJECT: Details

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Some recommended books/sites for further reading:

  • Taylor Rules

    • My notes: download

    • John Taylor (1993) "Discretion versus Policy Rules in Practice" (download)​

    • John Taylor (1999) "A Historical Analysis of Monetary Policy Rules" (download)

  • The Great Financial Crisis

    • 2008 Financial Crisis: wiki​

    • Subprime Crisis: wiki

    • Shadow Banking: wiki

    • Government policies and the subprime mortgage crisis: wiki

  • US FED's Ample Reserve Framework

  • FED St. Louis Main Page on Teaching Modern Money and Banking

    • Main site page: website

    • Reading: (2020) "Closing the Monetary Policy Curriculum Gap: A Primer for Educators Making the Transition to Teaching the Fed's Ample-Reserves Framework" (website)

  • US FED Papers

    • 2018 "Regulatory and Mon Policy Nexus in Repo Mkt" FED Board WP​ (download)

  • Bank of England

    • BOE's (2014) "Money Creation in the Modern Economy" (download)

  • Reserve Bank of Australia (2025 articles)

    • "Unconventional Monetary Policy" (website)

    • "Causes of Inflation" (website)

    • "Bonds and the Yield Curve" (website)

    • "How the Reserve Bank Implements Policy" (website)

  • Other Readings

    • ​2011 IMF "Central Bank Balances and Reserve Requirements" (download)​​

    • 2012 IMF "The Chicago Plan Revised" (download)

    • 2016 "Controversial Treatment of Money and Banks in Macro" (download)

    • 2017 Deutsche Bundesbank "Money Creation Process" (download)

    • 2013 Standard & Poor's "Banks Cannot and Do Not Lend Out Reserves" (download)

  • Mehrling Lectures on Modern Money Creation​

  • Book: Central Banking 101 by Joseph Wang (Amazon)

    • This is short and simple but provides lots of details about the mechanics  (or "plumbing") of the system.  Very understandable.  Great reference book​

  • Book: 21st Century Monetary Policy by Ben S. Bernanke (Amazon)

    • Prof. Bernanke is a top economics scholar. He wrote "the" book on the great depression and "the" book on inflation targeting. He was chair of the Fed during the Great Financial Crisis. This is an accessible book and great to understand what was actually happening during the crisis and what people were thinking at the time.​

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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)

    • European Central Bank (link)​

    • IMF - IFS (link)

  • Monetary Policy Presentations #1: March 28th

  • Monetary Policy Presentations #2: End Semester

    • Grade Sheets

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Homework + Readings and Exam

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Outline, Readings, and Notes

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TRADITONAL MONETARY THEORY

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Section 1: Crash Course in Basic Macroeconomic Tools and Analysis

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Section 2: Traditional Policy and Theory

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EXAM 1 - TBD

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MODERN MONETARY PRACTICE and THEORY

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EXAM 2 - TBD

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Other Notes and General Topics​

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