Download ECON 612-001 Monetary Theory

Econ 612 - Adv. Monetary Theory I
Professor Mott
Office Hours: WF 12:00-1:30
Office: Econ . 102
FALL 1987
SYLLABUS
This is a course in advanced monetary theory. It is designed to serve as
part of a sequence with Econ. 611 and 643, though it can be taken
independently. The purpose of the sequence as I see it is to acquaint
participants with various issues and contributions within the domain of monetary
theory, i . e . , the theory of what money has to do with an economic system. To
that end I have arranged a series of topics for this course which have been
chosen with the goal of allowing us to examine the logical and historical
development of certain ideas which have come to represent the major widely-held
notions of what the relation of money to an economy is. We will not be able to
cover thoroughly all the topics which are listed on this syllabus. Thus you
should take the reading list as a list of material with which you may want to
familiarize yourself at some point in your life (like before the comprehensive
exam) and as a list containing some material with which you will want to
familiarize yourself intimately during this semester.
The assignments to be completed in order to receive a grade in the course
are three. Each counts for 1/3 of your grade. The first two assignments are two
short (less than 10 pages) papers. The first paper is to answer the question:
how is Keynes' monetary theory different from and similar to neoclassical
monetary theory? This will be due one week after we finish Topic III. The
second paper is to answer the question: how successfully does one (your choice)
of the newer theories (Topics IV through VI) correct deficiencies and overcome
criticisms of its ancestors? This will be due on the last day of classes.
Lateness in the papers will be tolerated but penalized (1/3 of a letter grade
off if handed in within one week late; 2/3 of a letter off if over one week
late).
The third requirement is eithe r an open book final exam at the scheduled
time or a 10-20 page paper on a topic of your own choosing, which, however, must
be approved by me, due at the final exam time. The maximum late penalty here is
1/3 of a letter, though you need to be concerned about completing the course.
-2The list of topics and suggested readings for the course follows:
Three books were ordered to be available for purchase in the bookstore:
Laurence Harris, Monetary Theory
John Maynard Keynes, The General Theory of Employment, Interest and
Money (GT)
Robert Lucas, Studies in Business-Cycle Theory.
Copies of all the other selections will be available grouped by topic at Kinko's Copy
Center across the street.
I. The Essence and Existence of Money
Harris, Chaps. 1-2
Robert Clower (ed.), Monetary Theory: Selected Readings, Intro and Selection 3
Ross Starr, "The Structure of Exchange in Barter and Monetary Economics QJE
88 (1972)
Paul Samuelson, "An Exact Consumption-Loan Model of Interest with or without
the Social Contrivance of Money," JPE 66 (1958)
Hyman Minsky, "Frank Hahn's Money and Inflation: A Review Article," JPKE 6 (1984)
II. Neoclassical Monetary Theory
Harris, Chaps. 3-6
Clower (ed.), Selections 9-12
Clower, "What Traditional Monetary Theory Really Wasn't," Can. JE (1969)
Samuelson, "Nonoptimality of Money Holding under Laissez Faire," Can. JE (1969)
Harry G. Johnson, Further Essays in Monetary Economics, Chaps 4, 5
John Klein, Money and the Economy , pp. 94-95
Eugene Fama, "Banking in the Theory of Finance," JME 6 (1980).
Robert Greenfield and Leland Yeager, "A Laissez-Faire Approach to Monetary
Stability," JMCB 15 (1983).
Lawrence White, "Competitive Payments Systems and the Unit of Account," AER 74
(1984).
Irving Fisher, The Purchasing Power of Money, Chaps. 2, 4, 5, 8,
Gardner Ackley, Macroeconomics: Theory and Policy, pp. 135-138
Knut Wicksell, Lectures on Political Economy, Vol. II, pp. 141-208
Friedrich Lutz, "On Neutral Money," in Striessler (ed.), Roads to Freedom
III. Keynes
Keynes, A Tract on Monetary Reform, pp . 61-70
A Treatise on Money, Vol. I, Book III
_ _ _ , GT, Preface, Chaps. 1-3, 13-22, 24
IV. Neoclassical Keynesianism
Harris, Chaps. 9-17
John Hicks, "Mr. Keynes and the 'Classics'; A Suggested Interpretation,"
Econometrica 5 (1937)
James Tobin, "A General Equilibrium Approach to Monetary Theory," JMCB 1 (1969)
--, "Commercial Banks as Creators of 'Money'," in Essays in
Economics (and elsewhere)
John Gurley and Edward Shaw, "Financial Intermediaries and the SavingInvestment Process," J. of Finance 11 (1956)
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-3Bruce Greenwald, Joseph Stiglitz, and Andrew Weiss, "Informational Imperfections
in the Capital Market and Macroeconomic Fluctuations," AER Pap . & Proc. (1984)
Janet Yellen, "Efficiency Wage Models of Unemployment," AER Pap. & Proc. (1984)
Don Patinkin, Money, Interest, and Prices, Chap. 13
Clower (ed.), Selections 14, 19
Axel Leijonhufvud, Information and Coordination, Selection 1
V. "Post" Keynesianism
Keynes, GT, Chap. 12
Robinson, Economic Heresies, Chaps. 5, 6
_ _ _ _ , "The Rate of Interest," in The Rate of Interest and Other Essays
Nicholas Kaldor, "Speculation and Economic Stability," RES 7 (1939)
Michal Kalecki, "The Principle of Increasing Risk," Economica 4 (1937).
_ _ _ _ , "Political Aspects of Full Employment," in. Selected Essays on the
Dynamics of the Capitalist Economy
Mott, "Kalecki's Princ iple of Increasing Risk and the Relation Among
Mark-up Pricing, Investment Fluctuations, and Liquidity Preference," Econ.
Forum (1985) "Towards a Post-Keynesian Formulation of Liquidity Preference,"
JPKE 8 (1985).
Tobin, "Real Balance Effects Reconsidered," in Asset Accumulation and
Economic Activity.
Clower (ed . ), Selection 13.
Paul Davidson, "Money and the Real World," EJ (1972)
Minsky, "Financial Innovations and FinanciaY-Instability: Observations and
Theory"
Basil Moore, "Monetary Factors," in Alfred Eichner (ed.), A Guide to
Post-Keynesian Economics.
VI . The "New Classical Macroeconomics"
Harris, Chap. 7, 21
Friedman, "The Role of Monetary Policy," in The Optimum Quantity of Money.
Edmund Phelps, "Money Wage Dynamics and Labor Market Equilibrium,"
JPE 76 (1968)
Lucas, pp. 66-89, 179-296.
Thomas Sargent and Neil Wallace, "Rational Expectations and the Theory of
Economic Policy," JME 2 (1976)
Sargent, "The Ends of Four Big Inflati ons " in Rati onal Expectations and
Inflation
Rodney Maddock and Michael Carter, "A Child 's Guide t o Rational Expectations," JEL 20 (1982)
Stanley Fis cher, "Long-Term Contracts, Ra tional Expectations, and the
Optimal Money Sup ply Rule," JPE 85 (1977)
Randall Bausor, "The Ra tional-Expectations Hypo thesis and the Epistemics
of Time," Cam. JE 7 (1983)
Arthur Okun, Pri ces and Quantities, Chaps. 2, 3
VII. Money, Growth, and Economic Development
Ronald McKinnon, Money and Capital in Economic Development, Chps. 5, 6, 7.
Kalecki, Essays on Developing Economies, Chp. 5.
Harris, Chap. 18.