Brief Outline of Topics Covered in Lecture 2
Chapter 3 What is Money? [continued]
Functions of Money
- Medium of Exchange
- Unit of Account
- Store of Value
Evolution of the Payments System
- Commodity Money
- Partially backed paper money
- Full backed paper money
- Fiat Money
Measuring Money
- The Federal Reserve’s Monetary Aggregates
How Reliable Are the Money Data?
Chapter 4 Understanding Interest Rates [pages 86-90]
The Distinction between Real and Nominal Interest Rates
- Nominal interest rates
- Ex-ante real rates
- Ex-post real rates
Chapter 11 The Economics of Financial Intermediation
- Function of Financial Intermediaries
- Examples of pooling risk, pooling small deposits, and pooling over time
Video:
Additional Reading:
- Labor Markets, the Great Recession and the (Not So Great) Recovery - Murat Tasci
- Estimating the Cost of the Eurozone Crisis - The Street Light
- The Productivity Slowdown Reaffirmed - Liberty Street
- Tea Partiers Want A New Dollar Coin - Stan Collender
- Larry Kotlikoff Proves My Point - Paul Krugman
- Sovereign default: panic versus fundamentals - Antonio Fatas
- Ben Bernanke Deserves a Break - Alan Blinder
- Nobel Winner Diamond: I ‘Really Wanted to Go’ to the Fed - WSJ
- Special economic zones: What have we learned? - Vox EU
- Causes of the Eurozone Crisis - The Street Light
- Europe’s High-Risk Gamble - Martin Feldstein
- European banks and US dollars - MacroMania
Application:
Fed’s Lockhart: Operation Twist Should Have ‘Modest’ Impact - WSJ: The Federal Reserve‘s decision last week to tweak the maturity of its massive balance sheet will likely have a “modest” impact on helping the economy achieve a better rate of growth.
“The transmission mechanism for monetary policy remains somewhat impaired, and for this reason I am not expecting large gains from the Fed’s most recent action,” Federal Reserve Bank of Atlanta President Dennis Lockhart said.
Lockhart was referring to the decision of the Fed last week to implement what many in financial markets are calling Operation Twist. The central bank announced it would sell some $400 billion of its shorter dated holdings and buy longer dated bonds, in a bid to lower borrowing costs and improve a moribund state of economic activity.
The effort is “a measured, incremental attempt to add more support to the recovery. It’s not a fix for everything that ails the economy, but it should help,” Lockhart said. ...
Lockhart, in his speech Tuesday, sought to condition how Operation Twist is seen, and he also signaled it’s possible the Fed could take additional action to help the economy. ...“I don’t see a recurrence of economic contraction. That said, we are in a period of greater risk and uncertainty,” the official warned. “I expect the pace of the recovery to build, albeit modestly, and this will bring a gradual reduction in unemployment,” Lockhart said. He expects the U.S. gross domestic product to rise 1% to 2% this year and 2% to 3% next year.
“The European debt crisis looms as the biggest threat at the moment, in my opinion,” he said. ...
