Monetary economics
Associate Professor Lachlan McGregor
6 points * Two 1-hour lectures and one 1-hour tutorial per week * First semester * Clayton * Prerequisite: ECO2020, ECO2030
Objectives On completion of this subject students should understand the principal issues in contemporary monetary theory and policy; the nature and functions of the monetary system in a developed economy; the factors governing the relationship between monetary forces and economic activity; the principles, techniques and problems of implementation of monetary policies; interactions between fiscal and monetary policy; current controversies in monetary policy; developments in the international financial system.
Synopsis The evolution of monetary theory; the determinants and significance of the demand for money; problems of identifying strategic monetary aggregates; the relationship between the money supply and economic activity; theoretical and empirical aspects of monetarism and its policy implications; determinants of the money supply; financial markets and the behaviour of interest rates; the role of wealth in economic decision-making; problems in the control of inflation; monetary implications of fiscal policy; controversies concerning the implementation of monetary policy and the role of the central bank; the international monetary mechanism and the question of an appropriate exchange rate regime.
Assessment Examination (2 hours): 100%
Prescribed texts
Frederick S Mishkin The Economics of money, banking and financial markets 3rd edn, Harper Collins, 1992