Econ 411 Fall 2015
1
Syllabus: Economics 411 Money & Banking
Fall 2015
Tuesday and Thursday 1PM to 2:15PM
White Hall 205
Sheila Tschinkel
Rich Building 311B
Office Hours: Tuesdays and Thursdays 2:30PM-4:00 PM. And by appointment
stschin@emory.edu and text to 678-427-1336
This is a great time to be taking Economics 411!
The financial environment is very different than it was a few years ago. We now need to
understand “shadow banks” as well as banks. The past several years have demonstrated
how central banks in developed economies can influence but not control the money
supply.
Think about how you and your family pay for things. People use debit cards to access
money market funds to make payments, even though money market funds are not
banks. Not all “funds” in money market funds are considered “money”. Some spenders
use Bit coins, which are computer algorithm generated and not subject to government
control. In fact, it is hard to measure what money is in practice, even if we know what it
is in theory.
The financial crisis of 2007-2009 also changed things. The Federal Reserve (the Fed), the
US central bank, has kept its policy interest rate at zero for six years and has used
unconventional methods to carry out its policy. The European Central Bank (the ECB)
also began using similar unconventional methods.
The Fed has indicated it hopes to raise its policy interest rate this semester. This interest
rate has been at essentially zero for over six years. When the Fed does finally move, it
will implement its interest rate policy in new ways. Recent turbulence in global financial
markets has everybody rethinking the timing of a Fed move.
Financial regulation has also changed and the US Congress is considering legislation that
would undo some of the changes made in the wake of the financial crisis.
Textbook: M and B, by Dean Croushore
Cengage Learning ISBN-13-978-1-285-16796-1
Articles: Money in the Modern Economy: An introduction
Money Creation in the Modern Economy by Michael McLeay, Amar Radia and Ryland
Thomas
Econ 411 Fall 2015
2
Bank of England Quarterly Bulletin 2014 Q1 (Download from Blackboard or the Bank
of England)
The first article is an easy read and does not even require the prerequisites for Econ 411.
The second article is more complicated and you can wait until we start discussions of
financial intermediation (banks) in October.
Other Readings: Articles from newspapers, magazines, central banks, the IMF and other
sources will be assigned and posted on Blackboard. You should follow financial market
news regularly. Some commentators have no idea what they are talking about and you
will learn how to decide this for yourself during the semester.
Attendance Policy
Attendance is mandatory. Individual review sessions are not an alternative.
I do not repeat the textbook and I do introduce other material and ideas. It is much
harder to do well in the course if you miss classes.
You will sign an attendance sheet each time and the percentage of your attendance
counts for 5% of your grade. You can be excused in advance if you have an excellent
reason or, afterwards, a note from the infirmary.
Please decide no later than class on September 3 where you will sit during the
semester. Keep in mind that I may shift people if you cluster in the back rows. Taking the
same seat will help me get to know you more quickly.
Please do not make me remind you to turn off phone rings and messaging.
Grading Policy
Two midterms will count for 25 percent each and the comprehensive final will count for
45 percent.
Attendance will count for 5 percent.
Exams will not require the use of calculators, phones, tablets or laptops.
The exams I give are usually difficult, even if they are mainly multiple-choice questions. I
grade on a “curve” but have no preset numbers for each grade. My experience has been
that there are obvious “groupings” and it is easy to form them without a lot of
calculations. I distribute a histogram with the results showing the groups and grade
distribution.
Make-Up Exams will only be given under extraordinary circumstances and only if I
receive written request from your dean.
Please see policy information from the Office for Undergraduate Education.
3
Econ 411 Fall 2015
Outline of Classes:
This outline may be adjusted based on class interest and developments during the
semester. Readings will be added to the textbook chapters and class sessions will not
cover all of the material in each text chapter. The “Applications” at the end of most
chapters will not be required unless noted specifically. The “Policy Perspectives” will
usually be assigned or newer readings, posted on Blackboard, will cover the same area.
I have also omitted the text chapter on foreign exchange rates. If there is time and
interest, we will work on how different economies are linked through exchange rates
and interest rates.
August 27
Chapters 1 and 2
Introduction and Overview
September 1
September 3
and 8
September 10
and 15
Chapter 2
Chapter 1
September 17
Chapter 5 and 6
September 22
and 24
Chapter 6 continued
and Chapter 7
What is Money?
Financial Intermediation, the Functions of
Financial Markets, Central Banks
Interest rates and asset prices. Differences in
interest rates. How the prices of debt
instruments are affected by interest rate
changes.
The term structure of interest rates. The real
interest rate and how inflation affects
nominal interest rates and the term
structure.
Market efficiency and what it implies. We
will not cover individual investment
decisions and asset allocation (portfolio
theory).
Asset Price Bubbles
Asset financing if time.
Chapter 4 and 5
September 29
Supplementary reading
on financial assets,
markets and financing.
October 1 and Chapter 8: Parts a. and
6
b.
October 8
October 15
and 20
First Midterm
Chapter 8
October 22
Chapter 9
Information Asymmetry and how it relates to
banks and other intermediaries.
Review
Banks and a little history of the US system.
This class will pay more attention to large
systemically important institutions. Balance
sheet management by banks and shadow
banks (financial intermediaries in general)
Banking industry regulation and supervision.
4
Econ 411 Fall 2015
and 27
October 29
November 3
Chapter 10
Chapter 11-Parts
November 5
Chapter 12
November 10
Chapter 13
November 12
November 17
Second Midterm
Chapter 15
November 19
Chapter 15, Parts of 16
and newer readings for
Chapters 15-18
November 24
December 1
Chapter 17
Chapter 18
December 3
December 8
December 16
Review
Review
Final Exam 3-5:30PM
Bank holding company structure and
subsidiaries. Shadow banks.
Economic growth and business cycles
Money and the demand for money.
Consideration of how “money” is created.
Macroeconomic models: AS-AD and large
econometric models
The Lucas critique and a little on DSGE
models
Review
Exam is comprehensive
The Federal Reserve; Structure and
operations
Federal Reserve Operations; How the money
supply is influenced by the Federal Reserve
and also by private economic behavior. A
critique of the “money multiplier”.
Monetary Policy Objectives
Rules versus Discretion for monetary policy.
What do we mean by a policy rule?
White Hall 205 Exam covers entire semester
Power-Point presentations are used in class. Most are new for this semester. I make
every effort to make them available on a timely basis. Often I edit them and make
changes and tell you newer versions are available. Please comment on these
presentations so that I can improve them.
The order and coverage of topics may change when we turn to monetary theory and
policy. The content of sessions will be shaped to include emerging developments.
In addition, I will try to set up an optional visit to the Federal Reserve Bank of Atlanta.
This will give you an opportunity to meet with the CEO and staff involved in monetary
policy, as well as to see money counting and the money museum. It is not on the
schedule because I do not know when or even if this will happen.
5
Econ 411 Fall 2015
HONOR CODE
The honor code is in effect throughout the semester. By taking this course, you affirm
that it is a violation of the code to cheat on exams, to plagiarize, to deviate from the
teacher’s instructions about collaboration on work that is submitted for grades, to give
false information to a faculty member, and to undertake any other form of academic
misconduct. You agree that the teacher is entitled to move you to another seat during
examinations, without explanation. You also affirm that if you witness others violating
the code you have a duty to report them to the honor council.
Office for Undergraduate Education
The Office for Undergraduate Education (OUE) central office is located in White Hall
300
Please visit or call 404.727.6069 with questions about academic affairs, concerns or
policies.
All Emory College of Arts and Sciences policies may be found in the College Catalog:
http://college.emory.edu/home/academic/catalog/index.html
For a full list of Religious Holidays can be found here:
http://www.religiouslife.emory.edu/pdf/Religious%20Holidays%202013-14.pdf
Students with Special Needs
Please provide me with the needed documentation if you are registered with ADSR. It
will make it easier to make sure the exams work out. Also, if a note taker is required, I
can arrange for this as well.