School of Economics
MONETARY ECONOMICS
ECOS3010 2014: SEMESTER 1
Tony Aspromourgos
WEEK II: MONEY DEMANDKEY POINTS
2.1 micro aspects: transactions and speculative demands
2.2 the macroeconomic money demand function
2.3 the collapse of the money demand fun
ECOS3010 Monetary Economics
Lecture Notes 2
Prof. Amy Sun
University of Sydney
11/03/2016
Assessment  Essay (40%)
Topic:
Negative Interest Rate Policy : Will It or Will It Not Work?
Refer to the course outline for all the other details of the essay requi
ECOS3010 Monetary Economics
Lecture Notes 4
Prof. Amy Sun
University of Sydney
08/04/2016
Announcement
For the essay, ANY reference style can be applied, although Harvard is
a common one to use.
Consultation time on April 8 (only) will be held @Merewether
ECOS3010 Monetary Economics
Lecture Notes 7
Prof. Amy Sun
University of Sydney
22/04/2016
Announcement
Where do I submit my essay? Turnitin on Blackboard.
Is the file name expected to be something or not?
Use the last names of your group members as the
ECOS3010 Monetary Economics
Solutions to PQ Set 2
U of Sydney; 2016 Semester 1
Solution 1 (a) The representative agents intertemporal maximization problem is:
max
(ct ;bt+1 ;st+1 ;mt+1 )
s:t:
t
t
t=0
ct +
ct
Let
1
X
t
c1t
1
1
+ at st+1 + qt bt+1 +
0; mt+1
ECOS3010 Monetary Economics
Lecture Notes 9
Prof. Amy Sun
University of Sydney
29/04/2016  06/05/2016
Monetary Policy under Uncertainty
Without aggregate uncertainty, discretionary policy generates positive ination and reduces welfare.
With aggregate unc
ECOS3010 Monetary Economics
Practice Question Set 2
U of Sydney; 2016 Semester 1
1. Consider the following currencyintheutilityfunction model. The economy has innite horizons with t = 0; 1; 2;
; 1. There is a large number of agents who live
forever. T
ECOS3010 Monetary Economics
Practice Question Set 5
Answers to All Exercises in Lecture Notes
U of Sydney; 2016 Semester 1
1. [From Notes 2] Find the relative price of period1 goods to period0 goods
that is consistent with the competitive equilibrium. S
ECOS3010 Monetary Economics
Lecture Notes 5
Prof. Amy Sun
University of Sydney
15/04/2016
Announcement
Final exam will take place during the regular exam period.
Term Structure of Interest
Consider the 3period model in Problem Set 1. Recall that:
(2)
q0
ECOS3010 Monetary Economics
Lecture Notes 8
Prof. Amy Sun
University of Sydney
29/04/2016
Disadvanrage of currencyintheutilityfunction model
The very reason why at money is valued in this kind of models is due to
, the parameter in the utility functio
ECOS3010 Monetary Economics
Solutions to PQ Set 1
U of Sydney; Semester 1, 2016
Solution 1 (1) Note that s0 = 1. Because the utility function is strictly increasing in
consumption. The agent will not waste any resources. Therefore, all budget constraints
ECOS3010 Monetary Economics
Lecture Notes 3
Prof. Amy Sun
University of Sydney
18/03/2016
Government Finance and Asset Pricing
Adding a government in the Lucas tree model:
introduce borrowing and lending
analyze government policy
Model Environment
Same en
ECOS3010 Monetary Economics
Lecture Notes 11
Prof. Amy Sun
University of Sydney
Lagos & Wright with money growth

DM
!
cfw_z
t
CM
Mt: aggregate money supply in CM in period t.
Money growth: Mt+1 = (1 + ) Mt, achieved through lumpsum transfers to agents
ECOS3010 Monetary Economics
Solutions to Sample Final Exam 1
U of Sydney; 2016 Semester 1
Solution 1 (a) This is because at does not bring any direct utility benets. Neither does
it bring benets such as dividends. It is an intrinsically useless object. Mo
ECOS3010 Monetary Economics
Sample Final Exam 1
U of Sydney; 2016 Semester 1
[This sample exam is intended to be more intense than the amount of work
involved in the actual exam. It is natural if it takes one more than 2 hours
to nish the sample exam. The
ECOS3010 Monetary Economics
Sample Final Exam 2
U of Sydney; 2016 Semester 1
[This sample exam is intended to be more intense than the amount of work
involved in the actual exam. It is natural if it takes one more than 2 hours
to nish the sample exam. The
ECOS3010 Monetary Economics
Lecture Notes 6
Prof. Amy Sun
University of Sydney
15/04/2016  22/04/2016
Announcement
Final exam will take place during the regular exam period.
Currency in the Utility Function
Currency: "dollar", issued by the government
u
ECOS3010 Monetary Economics
Practice Question Set 4
U of Sydney; 2016 Semester 1
Consider a variation of Lagos and Wright (2005, JPE). Time is discrete. There is
a measure one of innitelylived agents. There are two goods markets: centralized and
decentra
ECOS3010 Monetary Economics
Practice Question Set 1
U of Sydney; Semester 1, 2016
Consider the following Lucas tree model. Imagine an economy with a large number of
agents, the size of which is normalized to one. All agents are identical. Agents live for
ECOS3010 Monetary Economics
Solutions to Sample Final Exam 2
U of Sydney; 2016 Semester 1
Solution 1 (a) See Notes 5 and Notes 6revised.
(b) Anticipated changes in money supply are believed to be neutral but unanticipated
changes in money supply may not
ECOS3010 Monetary Economics
Solutions to PQ Set 4
U of Sydney; 2016 Semester 1
Solution 1 (1.a) Value function of an individual entering the centralized market:
W (m) =
C(H) + V (m0 )g
max 0
fX
s:t:
X + m0 = H + m:
(X;H;m )
(1)
Note that there is no disco
ECOS3010 Monetary Economics
Lecture Notes 10
Prof. Amy Sun
University of Sydney
Background
The literature needs a model with a proper microfoundation for at money.
The Search Theory of money (started by Kiyotaki and Wright [1989, 1991])
carefully models f
ECOS3010 Monetary Economics
Solutions to PQ Set 3
U of Sydney; 2016 Semester 1
Solution 1 This is the same model as in the one in Notes9 with = 3. So the derivation
of results follows the exact same procedure. See Notes9 for details. Final answers are giv
ECOS3010 Monetary Economics
Practice Question Set 3
U of Sydney; 2016 Semester 1
Consider the following model of monetary policy. The economy obeys the following
Lucas supply curve:
e
x=
";
where x is the rate of employment, is the actual ination rate, e
ECOS3010: Tutorial 2 (Answer Key)
Question 15. Answer True, False or Uncertain. Briefly explain your answer.
1. According to RBAs definition of monetary aggregates, M1 includes more assets than
M3 does.
False. According to RBAs definition of monetary agg
ECOS3010: Tutorial 2
Question 15. Answer True, False or Uncertain. Briefly explain your answer.
1. According to RBAs definition of monetary aggregates, M1 includes more assets than
M3 does.
2. Suppose that the government increases money supply and gives
ECOS3010: Tutorial 3
Question 14. Answer True, False or Uncertain. Briefly explain your answer.
1. Suppoe that the government creates new money to finance its own purchases. Comparing monetary equilibrium and the golden rule allocation, we find that both
School of Economics
MONETARY ECONOMICS
ECOS3010: 2014, Semester 1
Tony Aspromourgos
WEEK XIII: INTERNATIONAL MONETARY ECONOMICS & MONETARY POLICYKEY POINTS
13.1 from a closed monetary system (single currency area), to a closed global system, with
interact
ECOS3010: Tutorial 3 (Answer Key)
Question 14. Answer True, False or Uncertain. Briefly explain your answer.
1. Suppose that the government creates new money to finance its own purchases. Comparing monetary equilibrium and the golden rule allocation, we
ECOS3010: Tutorial 1
Question 15. Answer True, False or Uncertain. Briefly explain your answer.
1. The main dierence between fiat money and commodity money is that fiat money is
intrinsically useless.
2. The golden rule allocation maximizes the utilities