Monetary theory
Associate Professor Dietrich Fausten
Two 1.5 hour sessions per week * First semester * Clayton * Prerequisites: ECO4650 and ECO4660
Objectives To promote the understanding of the differential real resource requirements of barter and monetised exchange; microfoundations of the emergence of money and of the voluntary demand for it; the role of money and credit as vehicles for the transmission of monetary policies; use of targets and indicators in the formulation of monetary policy; stability of the monetary/financial sector in the context of financial innovation and deregulation; monetary/financial dimension of exchange rates and balance of payments adjustment.
Synopsis Microfoundations of contemporary monetary theory; approaches to the demand for money; monetary neutrality; stock-flow relations; interaction between the real and financial sectors and channels of transmission; wealth effects and substitution effects; portfolio behaviour; disequilibrium and adjustment in the general equilibrium, open economy framework; financial institutions and the conduct of monetary policy.
Assessment One seminar paper to be presented in class for discussion and comment and subsequently to be submitted in written form: 50% * Examination (3 hours): 50%o * Participants are also expected to present in class synopses of journal articles