Brief Outline of Topics Covered in Lecture 8
Chapter 18 Tools of Monetary Policy
The Market for Reserves and the Federal Funds Rate
- Supply and Demand in the Market for Reserves
- Tools of monetary policy: Open Market Operations, Discount Policy, and Reserve Requirements
The Market for Reserves and the Federal Funds Rate
- Supply and Demand in the Market for Reserves
- Tools of monetary policy: Open Market Operations, Discount Policy, and Reserve Requirements
Chapter 20 Money Demand
Quantity Theory of Money
- Velocity of Money and Equation of Exchange
- Quantity Theory
- Quantity Theory of Money Demand
The Cambridge Approach
Is velocity a constant?
Keynes’s Liquidity Preference TheoryFurther Developments in the Keynesian Approach
- Transactions Motive
- Precautionary Motive
- Speculative Motive
- Putting the Three Motives Together
Video:
Additional Reading:
- Five myths about Dodd-Frank - Christopher Dodd
- Small Businesses Aren’t Key to the Economic Recovery - Jared Bernstein
- Can Small Businesses Make America Prosperous? - James Surowiecki
- Publication lags and young economists’ research output - Vox EU
- More Grim Euro Thoughts - Paul Krugman
- The Tax Reform Evidence From 1986 - Martin Feldstein
- Why the housing burden stalls America’s recovery - Larry Summers
- Great Recession may cost US economy $5,900 billions - Gavyn Davies
- Are We Really in Danger of Turning into Zimbabwe? - Brad DeLong
- Number of the Week: GDP 6.7% Below Potential - WSJ
- Who Needs Financial Stability? - NYTimes.com
- Nobel’s work did not stop at ‘rational expectations’ - Wouter Den Haan
Application:
A faction within the Fed is trying to set the stage for more Fed action:
Dudley Leaves Door Open to More Fed Action, by Michael S. Derby, WSJ: Recent moves by the Federal Reserve should help the economy, a top central banker said Monday in remarks that left open the door for further action to spur better growth.
“The actions we have taken recently will be helpful in supporting growth and jobs,” Federal Reserve Bank of New York President William Dudley said. “The Fed is doing — and will continue to do — everything in its power to promote jobs and price stability.”
But Dudley said, “I do not think that monetary policy is all powerful,” explaining that “to get the strongest possible recovery, we need reinforcing action in areas such as housing and fiscal policy.” The decision last month to sell $400 billion in its short-dated holdings and buy a like amount of longer-dated bonds “should provide some additional support for growth,” Dudley said. ...
While the Fed has only just embarked on the program markets call Operation Twist, speculation is growing that more stimulus in the form of expanded Fed purchases of mortgage assets could be around the corner. Dudley is widely viewed as being in sympathy with Fed Chairman Ben Bernanke and the other Fed officials who believe the central bank still can provide stimulus to the economy.
Dudley left open the possibility he’d support the Fed buying mortgage securities beyond what it is doing now. ...
The Fed has a considerable dissident faction that contend at a time when families and companies are cutting debt, making credit more affordable won’t do much to boost growth and bring down the unemployment rate. ...
