class4 - Monetary Policy Xavier Ragot October 2010 Class 5...

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Unformatted text preview: Monetary Policy Xavier Ragot October 2010 Class 5 Monetary Policy In this class : 1 Organization of Money and the Banking system 2 Channels of Monetary Policy 3 Phillips-Curve Economics 4 Advanced Monetary Economics Class 5 Monetary Policy Textbooks 1 Undergrad : The Economics of Money, Banking and Financial Markets, Frederic Mishkin. 2 Grad Course : Monetary Theory and Policy, Carl Walsh. Class 5 Monetary Policy De&nition of Money Money is a very complicated thing. It is a least three things at the same time : A mean of transaction : We pay with money (with currencies for instance) (transaction motive) Class 5 Monetary Policy De&nition of Money Money is a very complicated thing. It is a least three things at the same time : A mean of transaction : We pay with money (with currencies for instance) (transaction motive) A reserve of value : many households keep their wealth in money in their current account Class 5 Monetary Policy De&nition of Money Money is a very complicated thing. It is a least three things at the same time : A mean of transaction : We pay with money (with currencies for instance) (transaction motive) A reserve of value : many households keep their wealth in money in their current account The unit of acount : many &nancial contracts or wage contracts are denominated in money. For instance : I will give you 10 e tomorrow (implicitly, whatever the in¡ation rate, and hence whatever the real value of one e ) Class 5 Monetary Policy Why do People Hold Money (Tentative Explanation) A mean of transaction : The quality of money is guaranteed by the State : A bank note can not loose its monetary value, except if the State collapses. ) Di/erent from private means of payment because of the possibility of bankruptcies Class 5 Monetary Policy Why do People Hold Money (Tentative Explanation) A mean of transaction : The quality of money is guaranteed by the State : A bank note can not loose its monetary value, except if the State collapses. ) Di/erent from private means of payment because of the possibility of bankruptcies A reserve of value : There is a &xed cost to transfer money into bonds. I keep money to avoid these transaction costs. Class 5 Monetary Policy Why do People Hold Money (Tentative Explanation) A mean of transaction : The quality of money is guaranteed by the State : A bank note can not loose its monetary value, except if the State collapses. ) Di/erent from private means of payment because of the possibility of bankruptcies A reserve of value : There is a &xed cost to transfer money into bonds. I keep money to avoid these transaction costs. The unit of account : It is simpler to write nominal contracts instead of contracts in terms of goods as "I will pay you ten apples tomorrow", but what can of apples, what size, quality, and so one. Contractual facility....
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This note was uploaded on 01/12/2011 for the course ECO 010023 taught by Professor Mrraggillpol during the Fall '09 term at Paris Tech.

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class4 - Monetary Policy Xavier Ragot October 2010 Class 5...

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