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Jason Abrevaya, Chair 2225 Speedway, Stop C3100, Austin, TX 78712 • Admin: 512-471-3211 & Advising: 512-471-2973

Douglas C Dacy

Professor Ph.D., Harvard University

Contact

  • Phone: 475-8511
  • Office: BRB 2.134D
  • Office Hours: MW 10a - 11:30a
  • Campus Mail Code: C3100

Biography

After graduate school Dacy took a job at the Institute for Defense Analyses (IDA) where he served as a defense analyst and, for a short time, as Director of the Program Analysis Division. During the Vietnam War he served as an economic assistant to the Deputy Ambassador working primarily on problems of economic development. From 1967 to 1981 he alternated between IDA and the Economics Department at the University of Texas. Starting in 1981 he has devoted full time to the Economics Department. His principle concern within the area of macroeconomics-monetary economics has been on the measurement of the real interest rate. The real interest rate is not just a single rate such as the rate of treasury bills, he thinks, but it is an after-tax composite rate of return on a balanced portfolio of assets including stocks and residential housing. Currently he is engaged in a study to define this real return as well as to measure it.

ECO 320L • Macroeconomic Theory

34741 • Spring 2014
Meets TTH 1230pm-200pm BRB 1.120
show description

THEORY OF THE DETERMINATION OF NATIONAL INCOME, EMPLOYMENT, AND THE PRICE LEVEL, WITH POLICY IMPLICATIONS. REQUIRED OF STUDENTS MAJORING IN ECONOMICS.

PREREQUISITE: ECONOMICS 420K WITH A GRADE OF AT LEAST C-.

The purpose of this course is to further students' understanding of the central ideas of macroeconomics.  We will study long-run economic growth and short-run economic fluctuations.  Once we have a basic understanding of these phenomena, we will discuss the main macroeconomic tools of the government, fiscal policy and monetary policy.  By the end of the semester, students should be able to critically read articles on current economic issues that appear in publications such as The New York Times, The Wall Street Journal, and The Economist.

ECO 369F • Financial Economics

34620 • Fall 2013
Meets TTH 200pm-330pm BRB 1.120
show description

ECONOMIC ANALYSIS OF THE OPERATION OF FINANCIAL MARKETS, INCLUDING ARBITRAGE THEORY, ASSET PRICING, AND CORPORATE FINANCE.

PREREQUISITE: ECONOMICS 420K, 320L, AND 329 WITH A GRADE OF AT LEAST C- IN EACH; ECONOMICS 322 IS RECOMMENDED.

The course covers the general principles of financial economics and lays out the foundation for more specialized courses to be taken in the future. It is built around the foundations of financial economics? the time value of money, asset valuation and risk management. The course specifically deals with optimization over time, discounted cash flow analysis, asset valuation, futures markets, portfolio theory, options pricing, options strategies and capital structure. An emphasis is put on the application of these financial concepts to decisions faced by households and firms.

ECO 320L • Macroeconomic Theory

34315 • Spring 2013
Meets TTH 1230pm-200pm BRB 2.136
show description

THEORY OF THE DETERMINATION OF NATIONAL INCOME, EMPLOYMENT, AND THE PRICE LEVEL, WITH POLICY IMPLICATIONS. REQUIRED OF STUDENTS MAJORING IN ECONOMICS.

PREREQUISITE: ECONOMICS 420K WITH A GRADE OF AT LEAST C-.

The purpose of this course is to further students' understanding of the central ideas of macroeconomics.  We will study long-run economic growth and short-run economic fluctuations.  Once we have a basic understanding of these phenomena, we will discuss the main macroeconomic tools of the government, fiscal policy and monetary policy.  By the end of the semester, students should be able to critically read articles on current economic issues that appear in publications such as The New York Times, The Wall Street Journal, and The Economist.

ECO 369F • Financial Economics

34315 • Fall 2012
Meets TTH 200pm-330pm BRB 1.120
show description

ECONOMIC ANALYSIS OF THE OPERATION OF FINANCIAL MARKETS, INCLUDING ARBITRAGE THEORY, ASSET PRICING, AND CORPORATE FINANCE.

PREREQUISITE: ECONOMICS 420K, 320L, AND 329 WITH A GRADE OF AT LEAST C- IN EACH; ECONOMICS 322 IS RECOMMENDED.

The course covers the general principles of financial economics and lays out the foundation for more specialized courses to be taken in the future. It is built around the foundations of financial economics? the time value of money, asset valuation and risk management. The course specifically deals with optimization over time, discounted cash flow analysis, asset valuation, futures markets, portfolio theory, options pricing, options strategies and capital structure. An emphasis is put on the application of these financial concepts to decisions faced by households and firms.

ECO 320L • Macroeconomic Theory

34240 • Spring 2012
Meets TTH 1230pm-200pm BRB 2.136
show description

THEORY OF THE DETERMINATION OF NATIONAL INCOME, EMPLOYMENT, AND THE PRICE LEVEL, WITH POLICY IMPLICATIONS. REQUIRED OF STUDENTS MAJORING IN ECONOMICS.

PREREQUISITE: ECONOMICS 420K WITH A GRADE OF AT LEAST C-.

The purpose of this course is to further students' understanding of the central ideas of macroeconomics.  We will study long-run economic growth and short-run economic fluctuations.  Once we have a basic understanding of these phenomena, we will discuss the main macroeconomic tools of the government, fiscal policy and monetary policy.  By the end of the semester, students should be able to critically read articles on current economic issues that appear in publications such as The New York Times, The Wall Street Journal, and The Economist.

ECO 369F • Financial Economics

34230 • Fall 2011
Meets TTH 1230pm-200pm BRB 1.120
show description

ECONOMIC ANALYSIS OF THE OPERATION OF FINANCIAL MARKETS, INCLUDING ARBITRAGE THEORY, ASSET PRICING, AND CORPORATE FINANCE.

PREREQUISITE: ECONOMICS 420K, 320L, AND 329 WITH A GRADE OF AT LEAST C- IN EACH; ECONOMICS 322 IS RECOMMENDED.

The course covers the general principles of financial economics and lays out the foundation for more specialized courses to be taken in the future. It is built around the foundations of financial economics? the time value of money, asset valuation and risk management. The course specifically deals with optimization over time, discounted cash flow analysis, asset valuation, futures markets, portfolio theory, options pricing, options strategies and capital structure. An emphasis is put on the application of these financial concepts to decisions faced by households and firms.

ECO 320L • Macroeconomic Theory

34419 • Spring 2011
Meets TTH 1230pm-200pm BRB 2.136
show description

THEORY OF THE DETERMINATION OF NATIONAL INCOME, EMPLOYMENT, AND THE PRICE LEVEL, WITH POLICY IMPLICATIONS. REQUIRED OF STUDENTS MAJORING IN ECONOMICS.

PREREQUISITE: ECONOMICS 420K WITH A GRADE OF AT LEAST C-.

The purpose of this course is to further students' understanding of the central ideas of macroeconomics.  We will study long-run economic growth and short-run economic fluctuations.  Once we have a basic understanding of these phenomena, we will discuss the main macroeconomic tools of the government, fiscal policy and monetary policy.  By the end of the semester, students should be able to critically read articles on current economic issues that appear in publications such as The New York Times, The Wall Street Journal, and The Economist.

ECO 369F • Financial Economics

34515 • Spring 2011
Meets TTH 1100am-1230pm BRB 2.136
show description

ECONOMIC ANALYSIS OF THE OPERATION OF FINANCIAL MARKETS, INCLUDING ARBITRAGE THEORY, ASSET PRICING, AND CORPORATE FINANCE.

PREREQUISITE: ECONOMICS 420K, 320L, AND 329 WITH A GRADE OF AT LEAST C- IN EACH; ECONOMICS 322 IS RECOMMENDED.

The course covers the general principles of financial economics and lays out the foundation for more specialized courses to be taken in the future. It is built around the foundations of financial economics? the time value of money, asset valuation and risk management. The course specifically deals with optimization over time, discounted cash flow analysis, asset valuation, futures markets, portfolio theory, options pricing, options strategies and capital structure. An emphasis is put on the application of these financial concepts to decisions faced by households and firms.

ECO 369F • Financial Economics

33519 • Fall 2010
Meets TTH 930am-1100am BRB 1.118
show description

ECONOMIC ANALYSIS OF THE OPERATION OF FINANCIAL MARKETS, INCLUDING ARBITRAGE THEORY, ASSET PRICING, AND CORPORATE FINANCE.

PREREQUISITE: ECONOMICS 420K, 320L, AND 329 WITH A GRADE OF AT LEAST C- IN EACH; ECONOMICS 322 IS RECOMMENDED.

The course covers the general principles of financial economics and lays out the foundation for more specialized courses to be taken in the future. It is built around the foundations of financial economics? the time value of money, asset valuation and risk management. The course specifically deals with optimization over time, discounted cash flow analysis, asset valuation, futures markets, portfolio theory, options pricing, options strategies and capital structure. An emphasis is put on the application of these financial concepts to decisions faced by households and firms.

ECO 369F • Financial Economics

33520 • Fall 2010
Meets TTH 1230pm-200pm BRB 1.120
show description

ECONOMIC ANALYSIS OF THE OPERATION OF FINANCIAL MARKETS, INCLUDING ARBITRAGE THEORY, ASSET PRICING, AND CORPORATE FINANCE.

PREREQUISITE: ECONOMICS 420K, 320L, AND 329 WITH A GRADE OF AT LEAST C- IN EACH; ECONOMICS 322 IS RECOMMENDED.

The course covers the general principles of financial economics and lays out the foundation for more specialized courses to be taken in the future. It is built around the foundations of financial economics? the time value of money, asset valuation and risk management. The course specifically deals with optimization over time, discounted cash flow analysis, asset valuation, futures markets, portfolio theory, options pricing, options strategies and capital structure. An emphasis is put on the application of these financial concepts to decisions faced by households and firms.

ECO 320L • Macroeconomic Theory

33600 • Spring 2010
Meets TTH 200pm-330pm UTC 3.122
show description

THEORY OF THE DETERMINATION OF NATIONAL INCOME, EMPLOYMENT, AND THE PRICE LEVEL, WITH POLICY IMPLICATIONS. REQUIRED OF STUDENTS MAJORING IN ECONOMICS.

PREREQUISITE: ECONOMICS 420K WITH A GRADE OF AT LEAST C-.

The purpose of this course is to further students' understanding of the central ideas of macroeconomics.  We will study long-run economic growth and short-run economic fluctuations.  Once we have a basic understanding of these phenomena, we will discuss the main macroeconomic tools of the government, fiscal policy and monetary policy.  By the end of the semester, students should be able to critically read articles on current economic issues that appear in publications such as The New York Times, The Wall Street Journal, and The Economist.

ECO 367R • Monetary Economics

33725 • Spring 2010
Meets TTH 930-1100 UTC 3.122
show description

Major issues in the monetary field.

Prerequisite: Economics 420K and 320L with a grade of at least C- in each; Economics 322 is recommended.

Most of this course is about monetary theory, not monetary practice. Students will learn that much of what they know about money derives from how a rational agent attempts to maximize utility under budget constraints. This leads, for example, to a deeper understanding of the meaning of money as a store of value and as a medium of exchange. Specifically, the course is a study how an economy that uses fiat money achieves a higher level of economic welfare than one that does not. Some questions to be addressed are the following: How efficient is the raising of government revenues from printing money (called seigniorage) in comparison to taxation? What is the optimum quantity of money in a growing economy? How is the demand for money affected by real capital? What is the impact of liquidity on financial inter-mediation? What are some important implications of bank risk? To answer these questions and others we employ the overlapping generations (OLG) model of the monetary economy. This model permits us to examine monetary dynamics in a very simple way. Learning and applying the OLG model will consume about one-half of the course.

ECO 304K • Introduction To Microeconomics

33655 • Fall 2009
Meets TTH 930-1100 BRB 1.118
show description

 

Economics 304 (33655)

Principles of Microeconomics

Fall Semester 2009

BRB 1.118

T, Th 9:30-11

 

Professor: Douglas Dacy

BRB 2.134D

Office Hours: T, W, Th 3:30-4:30

 

 

 

Textbook

Mankiw, N. Gregory, Principles of Microeconomics, Thomson South Western, 5th Ed.,* 2009.

 

Economics in general

            Professor Mankiw begins his textbook by quoting Alfred Marshall, commonly acknowledged as the father of modern economics: "Economics is the study of mankind in the ordinary business of life." Marshall did not envision that economics would eventually divide along the lines of micro and macro studies, the small and the large. An alternative definition of economics is: "Economics is the study of why all of us are as well off as we are, but why some of us are better off than others," the macro and the micro of economic science. Macroeconomics is about aggregate behavior of the nation, and microeconomics is about how individuals and firms respond to incentives. As a nation we might be rich (high gross domestic product) but not all individuals are equally rich. Why? Microeconomics (earlier called "price theory") attempts to supply the answer to this question by focusing mainly on how individuals and firm respond to changing prices and wages.  

 

A living example

            First, there is a story of the demand for goods and services.

            Recently we have seen a perfect example of how changing prices affect behavior at the levels of the individual, firms and industries. When gasoline prices were below $2.50 per gallon, we all drove around in SUVs and pick-up trucks. Virtually all of the profits at Ford and General motors came from selling these vehicles. As the price rose to $3.00, we complained. When the price rose to $3.50, we did more than complain. We started buying hybrids and selling our SUVs and Pick-up trucks. When the price of gasoline increased to $4.00 we starting dumping our SUVs and pick ups and started buying KIAs. Toyota was a big winner. GM and Chrysler eventually had to undergo

 

*The price of this textbook new at bookstores is $156.65. You can buy this book cheaper on the internet, and even the 4th edition (still cheaper) is satisfactory.

 

Government-aided bankruptcy. It was too late for shareholders who lost billions. In this unexpected circumstance, automobile producers had to change their behavior, too. All of this is easily understandable using the tools of microeconomics, the tools that you will learn in this class. After this course, the instructor hopes it will all seem like commonsense.

            Let's continue the story with a supply response.

            The supply response to the gasoline problem in the U.S. (and the rest of the world) also is predictable using the tools of microeconomics. Tens of thousands of auto workers were laid off. Mr. Ambani, an Indian billionaire, began constructing a refinery that eventually will employ 150,000 workers. He plans to ship the refined gasoline all over the world including the U.S. despite the 9,000 miles separating the two countries.  Why India? It is close to the huge Chinese market, construction costs are relatively low, wages are low and there is less red tape in obtaining permits because the regulatory environment is less restrictive than in the U.S., where no new refinery has been built in thirty years.

            And, then, there are politics. It has little or no role in this course. Why? Because politics is a different game, most usually unrelated to demand and supply. However, a student should feel free to ask serious microeconomic economic questions arising from political debates. The professor will attempt to respond as an economist, hopefully, not revealing his own political bias.

           

Grading and other information

            You will be examined in this course in two 75-minute intra-semester exams and a three-hour final examination.  Each intra-semester exam will make up 22.5% of your final grade. The final exam will be all-inclusive and it will count 45% of your final grade.  In addition to the three scheduled exams, eight or nine short quizzes (5 - 10 minutes), based on the previous lecture, will be given randomly throughout the semester. These exams will count 10% of your final grade. Although they do not count much, they are good indicators of whether the materials taught are being learned. The intra-semester exams will be given on September 29 and November 3. Please note that there will be no make-up exams.   Experience shows that good class attendance is a prerequisite for doing well in this course. Q-drops are not automatically approved. They will be approved only for students who maintain a C average on the exams up to the time the Q drop is requested.

            The course will be conducted according to the schedule attached.  In most cases it will be obvious which readings are relevant for the specific lectures; however, to avoid any misunderstanding the relevant readings for each lecture are shown in parentheses in the classroom schedule given below.  The instructor is compulsive and likes to stay on schedule.  If he has not completed his discussion for any given day, it is most likely that he will move on to the next topic in order to stay on schedule.  In that case the student will have to learn the material omitted on his or her own by referring to the assigned readings.  Sometimes a lecture might be extended if some interesting, relevant current economic event is useful for the discussion.

            Please note the office hours announced above.  If, for some reason, you need to see the TA or instructor but cannot make their scheduled office hours, special arrangements will be made for you.  In other words, if you have a problem, there is no reason why you will not be able to see the TA or instructor outside of scheduled office hours in an effort to remedy the problem.  It is hoped that you learn a lot in this course and, also, that you have fun learning it.

 

 

Classroom Schedule for Principles of Microeconomics

Fall Semester 2009

(Relevant readings in parentheses)

 

Aug.     27       Orientation/About the course/examples of microeconomics (Ch. 1)                                                                                                                          

Sept.      1       Thinking like an economist (Ch. 2)

   3       The gains from trade (Ch. 3)

     8       Opportunity cost, comparative advantage (Ch. 3)

   10       Demand (Ch. 4)

   15       Supply (Ch. 4)

   17       Elasticity of demand and supply (Ch. 5)

   22      Effects of government controls (Ch. 6)

   24       Consumer surplus, producer surplus and market efficiency (Ch. 7)

             29       EXAM

 Oct.       1       Open  

               6       The microeconomics of taxation (Ch. 8)        

               8       The microeconomics of international trade (Ch. 9)

   13       The microeconomics of international trade continued             

   15       Externalities in microeconomics (Ch. 10)

             20       The economic analysis of public goods (Ch. 11)

             22       The costs of production (Ch. 13)

 27       Open

             29       EXAM

Nov.       3       Perfect competition (Ch. 14)

               5       Monopoly (Ch. 15)

             10       Monopolistic competition (Ch. 16)

             12       Oligopoly (Ch. 17)

             17       Equilibrium in the labor market (Ch. 18)        

   19       Income inequality and poverty (Ch. 20)

   24       Open

   26       Thanksgiving holiday          

Dec.        1       The theory of consumer choice continued (Ch 21)

               3       The theory of consumer choice continued                                                     

 

                Final exam date will be announced as soon as it becomes available

ECO 367R • Monetary Economics

33900 • Fall 2009
Meets TTH 200pm-330pm BRB 1.120
show description

 

Economics 367R (33900)

                                                       Monetary Economics                          

Fall Semester 2009

BRB 1.120

T-Th 2-3:30, UTC 3.122

 

Professor: Douglas Dacy

BRB 2.134D

Office Hours: T,W, Th 3:30-4:30

 

 

             

 

            Just as classes began last year Lehman Brothers declared bankruptcy and Bank of America was forced to buy the nearly bankrupt Merrill Lynch. The financial system appeared o be in a state of shock, if not collapse. Most of us wondered whether it could get any worse. From early September 2008 to early March 2009 when the Federal Reserve and US Treasury took over 70% on insurance giant AIG with a $150 billion bailout, bank lending, both long and short term, virtually ceased. If the stock market is any indicator of financial failure, consider these numbers. Based on the stock performance of four of the largest financial firms, American Express, Bank of America, Citigroup and JP Morgan-Chase, stock market prices fell 82% and the Dow-Jones Industrial Average fell 42%. Economist Paul Krugman wrote in the New York Times that he was "scared." The Treasury and Federal Reserve have undertaken unprecedented actions to shore up the financial system and the economy at large. Has it worked? Once again, we take a look at the stock market for a hint. The Dow Jones Industrial average has risen 44% and the same financial stocks 340% since March 5, 2009. Neither is back to where it was a year ago, but they are on  the way. The fall in housing prices is leveling out and sales of single family homes rose 7% in July over the previous July and and continued the uptick for the fourth straight month. Even so, housing foreclosures continue to rise faster than sales. Despite this bit of bad news, Chairman of the Federal Reserve, Mr. Ben Bernanke, stated at a conference last Friday that he thinks the recovery will begin sooner than had previously been expected, though the recovery will be slow and unemployment will continue to rise some.

            What role did conventional monetary policy play in all of this? The Federal Reserve has attempted to pump money into the economy as never before. The Federal Funds rate is below .25%, but the money stock has not increased much. Students in a class of monetary economics should understand why. The monetary base has about doubled. Most of the increase in the base has been due to bank borrowing from the Fed via the discount window. The banks have borrowed to improve their balance sheet condition to avoid insolvency, not for the purpose of lending; and lending to create deposits is the mechanism for money supply increases.

            Many economists are asking whether the Fed will be able to contain inflation once the economy has recovered and banks start using their excess reserves to make loans and create money at a rapid rate. Recently Mr. Bernanke wrote an article explaining why it might not be a major problem to slow down banks' use their excess reserves to create money. He thinks that the Fed's new authority to pay interest on reserves will induce  banks to hold higher excess reserves than they would do without interest. All things considered, this is an opportune time to be studying monetary economics.

 

Readings for the course

Champ, Bruce and Scott Freeman, Modeling Monetary Economics, Cambridge                    

            University Press (Second Edition), 2001

Dacy, Douglas (Compiler), Selected Readings in Monetary Economics, Jenn's Copy,  

            2008

 

Who should enroll in this course?

            Students who are concerned about welfare implications of monetary policy will find this course useful as well as interesting, even though it is not about monetary policy, per se. However, once a student gets comfortable with theory that suggests policy approaches, he or she will be well on the way to becoming a reasoned critic or supporter of Federal Reserve policy. You will come to appreciate the theory you learn once you see that it has an intuitive interpretation.  Basically, the course is about concepts of monetary economics that you will carry through life. In addition, if you are interested in working in the financial sector of the economy, getting a graduate degree in economics or an MBA, your expertise in monetary economics will be of great value.  The major prerequisite for the course is Eco. 420K because much of the course is based on fundamental concepts in microeconomics.   

 

About the course

            As implied above, much of the course is related to theory. You will learn that a lot of what we know about money derives from how a rational agent attempts to maximize utility over time and under budget constraints. This leads, for example, to a deeper understanding of the meaning of money as a store of value and as a medium of exchange. Specifically, you will study how an economy that uses fiat money achieves a higher level of economic welfare than one that does not. Some questions to be addressed are the following. How efficient is the raising of government revenues from printing money (called seigniorage) in comparison to taxation? What is the optimum quantity of money in a growing economy? In what way do other financial assets and real capital affect the demand for money? What is the impact of liquidity on financial intermediation? How does a surprise price change affect production? We will approach answering these questions and others by employing the overlapping generations (OLG) model of the monetary economy. This model permits us to examine monetary dynamics in a very simple way. Because this approach will be new to most of you, learning it will require some serious thinking. For a student willing to invest the time and effort required the reward is ample. It is hoped that you will become sufficiently adept at handling the model so that you will be able to answer your own questions. Learning and applying the OLG model will consume about fifty percent of the time allocated to the course.

            Next on the agenda is a more detailed study of some of the topics encountered in developing the OLG model. In this part of the course you will be required to study some articles from economics journals written by famous economists. Unlike a textbook, these articles were written for the economics profession. Some of them are highly technical and require more concentration than the textbook material studied in the first part of the course. Of course, it is the job of the instructor to help you understand these articles. They deal with money as a store of value, money as a medium of exchange, seigniorage, risk and the demand for money. The course ends on the hotly argued topic of inflation targeting. Is it better to set targets for inflation to be followed strictly, or should the Fed pursue a discretionary monetary policy.

 

Grading and other information

                        You will be examined in this course in two 75-minute mid-term exams and a three-hour final examination.  The final exam will be all-inclusive.  Your final grade will be determined mainly by the sum of the three grades with the final counting about half of the grade.  The mid-term exams will be given on September 29 and October 29. Please note that there will be no make-up exams.   Experience shows that good class attendance is a prerequisite for doing well in this course. Q-drops are not automatically approved. They will be approved only for students who maintain a C average on the exams up to the time the Q drop is requested.  Students taking this course on a credit/no credit basis must make a grade of C in order to receive credit for the course.

            The course will be conducted according to the schedule attached.  In most cases it will be obvious which readings are relevant for the specific lectures; however, to avoid any misunderstanding the relevant readings for each lecture are shown in parentheses in the classroom schedule given below.  The instructor is compulsive and likes to stay on schedule.  If he has not completed his discussion for any given day, it is most likely that he will move on to the next topic in order to stay on schedule.  In that case the student will have to learn the material omitted on his or her own by referring to the assigned readings.  Sometimes a lecture might be extended if some interesting, relevant current economic event is useful for the discussion.

            Please note the office hours announced above.  If, for some reason, you need to see the TA or instructor but cannot make their scheduled office hours, special arrangements will be made for you.  In other words, if you have a problem, there is no reason why you will not be able to see the TA or instructor outside of scheduled office hours in an effort to remedy the problem.  The lecture form for this class, admittedly, does not encourage a lot of classroom discussion, but it does not preclude clarifying questions or even thoughtful contentious questions.  It is hoped that you learn a lot in this course and, also, that you have fun learning it.

 

 

 

Classroom Schedule for Monetary Economics

Fall Semester 2009

(Relevant readings in parentheses)

 

 

Aug.    27        Introduction to monetary economics

Sept.      1        The overlapping generations model (Champ and Freeman, Ch. 1)

              3        The basic model with fiat money, population growth and technical change

              8        Barter and commodity money (Champ and Freeman, Ch.2)

            10        Money and inflation in the Quantity Theory of Money, (CN)

            15        Money and inflation in the OLG model (Champ and Freeman, Ch. 3)

            17        Seigniorage vs. taxation as means to finance government

            22        Price surprises: Are the data inconsistent? Champ and Freeman, (Ch. 5)

            24        More on price surprises and the Lucas critique

            29        Exam

Oct.       1        Capital in  the OLG model (Champ and Freeman, (Ch. 6)

              6        Liquidity and financial intermediation (Champ and Freeman, (Ch. 7)

              8        Central banking and money supply (Champ and Freeman, Ch. 8)                            13        Does money matter? (Champ and Freeman, Ch. 9)

            15        Economics of wealth (Champ and Freeman, (Ch. 14)

            20        Samuelson's pure consumption loan model (Readings, Samuelson/CN)

            22        A social planner's solution to a difficult problem8    

            27        Search in a theory of media of exchange (Readings, Jones)  

            29        Exam

Nov.      3        Search model using numerical examples (CN)

              5        Hicks' "central issue in monetary economics" (Readings, Hicks, Wallace)

             10       More on demand for money  

             12       Liquidity preference as behavior towards risk (Readings, Tobin)

             17       Money in a theory of finance (CN)

             19       Channels of monetary transmission (Readings, Taylor, Bernanke/Gertler)

             24       Channels of monetary transmission (Readings, Meltzer)

             26       Thanksgiving holiday 

Dec.        1       Inflation targeting (Readings, Taylor)           

               3       Inflation targeting (Readings, Bernanke and Mishkin)

            Final exam date to be announced as soon as it is known

 

CN for class notes,

ECO 320L • Macroeconomic Theory

33095 • Spring 2009
Meets TTH 200pm-330pm UTC 3.122
show description

THEORY OF THE DETERMINATION OF NATIONAL INCOME, EMPLOYMENT, AND THE PRICE LEVEL, WITH POLICY IMPLICATIONS. REQUIRED OF STUDENTS MAJORING IN ECONOMICS.

PREREQUISITE: ECONOMICS 420K WITH A GRADE OF AT LEAST C-.

The purpose of this course is to further students' understanding of the central ideas of macroeconomics.  We will study long-run economic growth and short-run economic fluctuations.  Once we have a basic understanding of these phenomena, we will discuss the main macroeconomic tools of the government, fiscal policy and monetary policy.  By the end of the semester, students should be able to critically read articles on current economic issues that appear in publications such as The New York Times, The Wall Street Journal, and The Economist.

ECO 367R • Monetary Economics

33225 • Spring 2009
Meets TTH 930-1100 UTC 3.122
show description

Major issues in the monetary field.

Prerequisite: Economics 420K and 320L with a grade of at least C- in each; Economics 322 is recommended.

Most of this course is about monetary theory, not monetary practice. Students will learn that much of what they know about money derives from how a rational agent attempts to maximize utility under budget constraints. This leads, for example, to a deeper understanding of the meaning of money as a store of value and as a medium of exchange. Specifically, the course is a study how an economy that uses fiat money achieves a higher level of economic welfare than one that does not. Some questions to be addressed are the following: How efficient is the raising of government revenues from printing money (called seigniorage) in comparison to taxation? What is the optimum quantity of money in a growing economy? How is the demand for money affected by real capital? What is the impact of liquidity on financial inter-mediation? What are some important implications of bank risk? To answer these questions and others we employ the overlapping generations (OLG) model of the monetary economy. This model permits us to examine monetary dynamics in a very simple way. Learning and applying the OLG model will consume about one-half of the course.

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