ChrisBALL

COURSE OUTLINE

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• Syllabus: download

• Required Textbooks :

  • Central Banking 101 by Joseph Wang (Amazon)

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

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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

  • Grade Sheet: First Country Presentation

  • Grade Sheet: Internal Group Grades

• Monetary Policy Presentations #2: End Semester

  • Grade Sheets

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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 Ample-Reserves 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

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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

• Review Supply and Demand Model

  • Practice Problem Set: Supply and Demand

• Review AS-AD Model (with time paths)

  • AS-AD Basics/Review and Adding time paths​

    • Notes: Handout

    • Example of AS-AD to Time Paths and Gaps: Handout

    • Practice Problem Set: AS-AD 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​

    • Taylor Rule Wikipedia​

      • Taylor's (1993) original paper

      • Taylor's (1999) overview of policy rules

    • Calculations:

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

        • 2012 Speech (see footnotes 4 and 5)

        • 2017 Speech (see footnotes 12 and 13)

      • Okun's Law wikipedia

  • 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) ​

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Section 2: Traditional Policy and Theory

• MV = Py in levels and rates

  • "The Equation of Exchange" Wikipedia

  • "The Quantity Theory of Money" Wikipedia

  • Notes: Handout​

• Money Markets and Interest Rates (with time paths)​

  • Money Market Basics

  • Money Demand Wikipedia

  • Money Supply Wikipedia

  • Changes in M

  • Announcement Effects

  • Credibility

  • Casting Policy in Terms of Interest Rates

    • Practice Problem Set: TBD​

• Monetary Policy Evolution​

  • Monetary Aggregates and Friedman-type 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

    • Putting Money Into the Economy_ Part 1​

    • Putting Money Into the Economy_ Part 2 Gifts via Helicopter

    • Putting Money Into the Economy_ Part 3 Domestic OMO

    • Putting Money Into the Economy_ Part 4 International OMO

  • Traditional Banking System and Money Multipliers​

    • The Money Multiplier Part 1 The Banking Multiplier

    • The Money Multiplier Part 2 Counting Money

    • The Money Multiplier Part 3 The Full Multiplier

    • The USA's Central Bank: the Fed

    • 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

    • Bank Panics Part 1 The Fragile System​

    • Bank Panics Part 2 Solutions and Problems

    • Bank Panics Part 3 The Prob of Leverage

  • Balance Sheets: Private Banks and the Central Bank

  • Basel IIII: Capital ratios (risk weighted) and Leverage Ratios (non-risk 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

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EXAM 1 - TBD

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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/bank-balance-sheet-constraint 

  • 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

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EXAM 2 - TBD

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Other Notes and General Topics​

• Geometric Series

• Time Paths

• Review of Law of One Price

• Review of Supply and Demand

• Review of the Mathematics of Supply and Demand

• Three Ways to Calculate Percentage Changes

• Dangerous Expectations (shows breakdown in game between Central Bank and economic agents in the economy)

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

  • NOTES: My lecture notes for the basics of Chap 5.​

  • NOTES: My lecture notes on solving Bond and Money Markets simultaneously.

• 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)

  • NOTES: Handwritten Notes on Chapter 8

  • NOTES: Handwritten Notes on Chapter 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 "Ample-Reserves" 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)​