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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Syllabus: download
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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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Full site with all links and info: https://www.globalmacrodata.com/index.html
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Download the data here: https://www.globalmacrodata.com/data.html
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The Main Paper in PDF: https://www.globalmacrodata.com/research-paper.html
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Documentation: https://www.globalmacrodata.com/documentation.html
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Review of Principles of Economics and Intro to Money & Banking Topics
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Supply and Demand
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Laws of supply and demand, factors and shifting curves, diagramatic analysis, "answers" and time paths.
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Review - download​
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Law of One Price
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We use this review to also discuss bond markets, the term structure of interest rates​ and Yield Curves.
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My notes - download
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Price (Non)Adjustment: Ceilings, Floors and Fixes
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We use this review to also cover how the Bank Reserves, or, Federal Funds, Market works.
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My notes - download
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Readings:
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Reading on Australian Central Bank's "Corridor System" (website)
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US Fed's Ample Reserve Framework (simple-version-website or simple-version-PDF or complete-version-PDF)
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Reading from Australian Central Bank on "Yield Curves" (website)
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Aggregate Demand - Aggregate Supply
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Review Notes AS-AD Basics - download
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Review Notes AS-AD to Time Paths - download
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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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My Notes AS-AD Macro Econ History Part 1: class Zoom video download PDF
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My Notes AS-AD Macro Econ History Part 2: download​​
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My Notes Dangerous Expectations: download
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Additional Notes on AS-AD to Phillips Curves: download
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Additional Notes on Losing Control: download
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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
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Traditional View: MV=Py: download​
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The Real Money Market: downloa
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The Velocity of Money: download
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The Bond Market Basics: download​​
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Taylor rules and determinacy​ - New Keynesianism: download​​​​​
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Policy Implementation and Monetary Institutions
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Brief History and the US Fed
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Gold and bi-metallic standards​, banking panics and crises, etc. (link to my 2024 column)
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1913/14 FED to mitigate banking crises (Discount Window, Lender of Last Resort)
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1977 The FED's Dual Mandate (link)
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Readings:
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Monetary Mechanisms
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Federal Reserve Methods Over Time: download
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Traditional Open Market Operations
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Traditional Money Multiplier, Banks and Balance Sheets
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Bank Panics and the Problem of Leverage
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Traditional Money Multiplier, Banks and Balance Sheets
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HOMEWORK 2: Traditional OMOs and the Money Creation Process
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Modern Monetary Policy in Theory and Practice
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What Banks Do: download
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Mehrling Lectures (#1 - #3 as well as videos for all lectures at bottom of page)
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Bank of England
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BOE's (2014) "Money Creation in the Modern Economy" (download)
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​US Fed's Ample Reserve Framework​
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Theoretical Implications New Frameworks
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The Four Theories of the Price Level: download​
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Fiscal Theory of the Price Level: download​
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Readings:​
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Cochrane (2014) "Interest on Reserves" (Read 1 Intro and 2.3 Mapping to our world ): download​​
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Further Implications of New Frameworks
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Cleveland Fed Chair Loretta Mester, 2024, "Fed Ample Reserve Isn't as Simple As It Looks": web/download
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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:
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Taylor Rules
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The Great Financial Crisis
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US FED's Ample Reserve Framework
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FED St. Louis Main Page on Teaching Modern Money and Banking
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US FED Papers
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2018 "Regulatory and Mon Policy Nexus in Repo Mkt" FED Board WP​ (download)
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Bank of England
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BOE's (2014) "Money Creation in the Modern Economy" (download)
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Reserve Bank of Australia (2025 articles)
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Other Readings
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​2011 IMF "Central Bank Balances and Reserve Requirements" (download)​​
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2012 IMF "The Chicago Plan Revised" (download)
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2016 "Controversial Treatment of Money and Banks in Macro" (download)
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2017 Deutsche Bundesbank "Money Creation Process" (download)
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2013 Standard & Poor's "Banks Cannot and Do Not Lend Out Reserves" (download)
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Mehrling Lectures on Modern Money Creation​
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Mehrling Lec-01-The-Four-Prices-of-Money: download videos​
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Mehrling Lec-02-The-Natural-Hierarchy-of-Money: download videos
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Mehrling Lec-03-Money-and-the-State-Domestic: download videos
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Mehrling Lec-04-The-Money-View-Micro-and-Macro: download videos
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Mehrling Lec-05-The-Central-Bank-as-a-Clearinghouse: download videos
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Mehrling Lec-06-Federal-Funds-Final-Settlement: download videos
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Mehrling Lec-07-Repos-Postponing-Settlement: download videos
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Book: Central Banking 101 by Joseph Wang (Amazon)
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This is short and simple but provides lots of details about the mechanics (or "plumbing") of the system. Very understandable. Great reference book​
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Book: 21st Century Monetary Policy by Ben S. Bernanke (Amazon)
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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)
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Monetary Policy Presentations: download
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Countries and Central Banks​
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The minimum data we need: inflation and inflation target, unemployment, the nominal money supply (M2), government expenditures and the policy interest rate.
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Ideally also get: real GDP, potential GDP, the natural rate of unemployment, and the natural real interest rate.
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Bank of Canada (link)
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Bank of England (link) and UK Office for National Statistics (link)
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Bank of Japan (link)
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Bank of South Korea (link)
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IMF - IFS (link)
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Monetary Policy Presentations #1: March 28th
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Grade Sheet: First Country Presentation
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Grade Sheet: Internal Group Grades
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Monetary Policy Presentations #2: End Semester
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Grade Sheets
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Homework + Readings and Exam
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Take Home Exam 1: download
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Take Home Exam 2: percentages below​
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20% HW on NBER Paper: download
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​READING: NBER 2022 Paper "The Fed Funds Mkt Pre and Post 2008"​
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20% HW on FED Paper: download
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READING: FED 2020 Paper on "The Fed's Ample-Reserves Approach to Implementing
Monetary Policy"​
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- 20% Central Banking 101 Bk Reading Ch 1 & 2 HW: download
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20% Central Banking 101 Bk Reading Ch 3, 4, & 5 HW: download
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20% Bernanke Book Reading HW: download
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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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Review Supply and Demand Model
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Practice Problem Set: Supply and Demand
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Review AS-AD Model (with time paths)
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AS-AD Basics/Review and Adding time paths​
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Notes: Handout
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Example of AS-AD to Time Paths and Gaps: Handout
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Practice Problem Set: AS-AD and Time Paths Forward and Backward
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The Phillips Curve
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Phillips Curve wikipedia (Note we use something like the "New classical version")
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Phillips Curve Basics 1: Mon Policy AS AD - Pt 1_ Phillips
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Phillips Curve Basics 2: Mon Policy AS AD - Pt 2_ Loosing Control
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Global Economics: It's baaack! The Phillips Curve Conversation
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Global Economics: Who's Afraid of the 1970s.
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Taylor Rules​
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Basics​
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Calculations:
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Fed Chair Yellen on balanced approach and using Okun's Law​:
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Taylor Determinacy
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Notes: Handout​
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Other Readings
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Atlanta FED Taylor Rule Utility: link​
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Practice Problem Set: Phillips Curves and Interest Rate Rules
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Open Economies​
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Nominal Exchange Rates and interest rates
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"Dynamic" PPP (in rates of change) ​
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Section 2: Traditional Policy and Theory
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MV = Py in levels and rates
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Money Markets and Interest Rates (with time paths)​
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Money Market Basics
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Changes in M
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Announcement Effects
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Credibility
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Casting Policy in Terms of Interest Rates
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Practice Problem Set: TBD​
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Monetary Policy Evolution​
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Monetary Aggregates and Friedman-type Money Growth Rules
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From "M" to "i": 1970s, 1980s, 1990s, early 2000s
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What Determines "M"?
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Banks as Businesses
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Max Profit = TR - TC --> MR = MC
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MR = $ earned per unit of output. Bank "investment". Traditional "lending"
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MC = $ paid per unity of input. Banks' sources of funding . Traditionally "deposits"
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Other inputs​
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Money, the Banking System and Money Multipliers​
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Read Joseph Wang's Central Banking 101
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Practice Problem Set: Chapters 1 (Types of Money) and 2​ (The Money Creators)
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Practice Problem Set: Chapters 3, 4, and 5.
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​Open Market Operations
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Traditional Banking System and Money Multipliers​
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The Discount Window. Listen to Odd Lots Podcast on the topic (link) "Why Banks Are Suddenly Borrowing From the Fed's Discount Window".​
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Bank Panics
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Balance Sheets: Private Banks and the Central Bank
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Basel IIII: Capital ratios (risk weighted) and Leverage Ratios (non-risk weighted)
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Market for Bank Reserves (or the Interbank Market)
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Traditional Analysis
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Bond Markets
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Basics
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Yields
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Bond and Money Markets
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Term Structure of Interest Rates
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Practice Problem Set: Prob Set 4 Bonds and Interest Rates
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Answer Key: Excel Sheet Key
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EXAM 1 - TBD
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MODERN MONETARY PRACTICE and THEORY
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Interest on Reserves
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Breaking MV = Py, Money Markets and Traditional Models​
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Modern Banking and Modern Central Banking
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Money Creation in a Modern Economy, Bank of England
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New Facilities
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Quantitative Easing
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Quantitative Tightening
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The Modern Market for Reserves and the Fed's "Ample Reserve Framework"
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(Optional) FED Guy's Bank Balance Sheet FREE Course: https://www.centralbanking101.com/courses/bank-balance-sheet-constraint
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Do Loans Generate Deposits?
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FED Explaining RRP’s: https://www.newyorkfed.org/markets/rrp_faq.html
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​Current RRP: https://fred.stlouisfed.org/series/RRPONTSYD
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The Fiscal Theory of the Price Level
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Euler Economics: What Interest Rates Can and Can't Do
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EXAM 2 - TBD
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Other Notes and General Topics​
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Building (Bond) Markets and Interest Rates (Mishkin, Chap 5)​​
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The Term Structure of Interest Rates (Mishkin, Chap 6)
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NOTES: My lecture notes.
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READING: List of Countries By Credit Rating Agencies (wikipedia)​
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READING: My 3 Articles from 2019 on Interpreting US Yield Curve Inversion - Part 1, Part 2, and Part 3
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Basics of Banking (Mishkin, Chap 9)
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Reading: Bitcoin original paper
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Changes since 2008
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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.​ "
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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."
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HAND WRITTEN NOTES Chap 15 The Tools of Monetary Policy inlcuding Ample Reserves
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READING! FED Board of Gov Policy Paper (February 2020): The Fed's "Ample-Reserves" Approach to Implementing Monetary Policy​
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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.
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HAND WRITTEN NOTES ​Taylor Rules (Chap 16 and more)​