Course title

Econ 40362

Monetary Policy: Formulation, Conduct and Crisis Management

University of Notre Dame

Syllabus and Course Requirements

Fall 2009

Professor Nelson Mark

Phone: (574) 631-0518

Office: Flanner 721. M-W: 900-1200, R: 1130-1200.

Email: nmark@nd.edu

Course prerequisites:

Intermediate Macroeconomics.

Course components:

Cases: One part of the class will be centered around real-life central bank cases. A case is a detailed account of a real-life situation that describes the dilemma of a real person with a real job who is confronted with a real problem. Usually there is no one right or wrong resolution to the problem—such as in real life. Class sessions devoted to cases are rooted in student discussion. You need to prepare the case in advance and to participate in the analysis and assessment of the problem in order to get anything out of the case exercise. Groups of two students each will be assigned to lead the other cases. Also, there will be a case write-up that is due at the beginning of class. The case writeups will count for 30 percent of your grade.

Case write-ups are graded on a 3 point scale. In preparing your write-up, make sure you address all parts of the study questions. Second, for questions that require calculations, clearly document all of your steps and maintained assumptions. Third, be concise in your answers. My grader has been instructed to penalize long rambling answers. Since the case write-ups are intended to get you prepared for class, you should not expect the answers to all questions to come easily. Assignments turned in late will be given a zero. An average write-up will answer all the questions but doesn’t get the difficult parts correct and earns a score of 2. A superficial write-up will earn a score of 1. A write-up that answers all the questions and gives a convincing answer to the difficult parts earn a score of 3.

The other 70 percent of your grade is based on one long oral exam plus a short paper. There are several components here. The first is attendance. The second is the quality of your contributions to case discussions. If you’ve been too quiet in class, expect a cold call. The third is your presentation of your assigned case. The fourth is your contribution to the Fed Challenge (see below), by participation in the practice/try-outs, then in the actual Fed Challenge preparation. Although the actual Fed Challenge team is limited to seven people (five regulars, two alternates), the other people in the class can contribute in supporting roles by helping team members prepare. The paper is a final write-up of your economic assessment, forecast, and policy recommendation and assessment.

Lectures: There is some material that I need to teach you that is difficult to learn on your own. For about the first three weeks, I will lecture on some material, both theoretical and applied, that you will need in order to analyze the cases and to participate in the Fed Challenge. After that, I expect that class will run primarily by your participation.

The Fed Challenge has been an academic competition sponsored by the Federal Reserve Bank of Chicago. This has been a single competition amongst colleges and universities in the seventh Federal Reserve district. Teams of three to five students have 20 minutes to present a current analysis of the U.S. economy, a short-term forecast, and to make a monetary policy recommendation. The team then defends its view before a panel of professional economists in a 15-minute question and answer session. (See the Chicago Fed's College Fed Challenge web page.) There is one small wrinkle this year. The Federal Reserve system is not formally sponsoring the college competition this year. However, Professor Helen Roberts at UIC has volunteered to bear the organizational costs for the Challenge, got the Fed to let us host the competition at the Bank on Monday November 9, and arranged for some of the Fed Staff to judge the competition. So nominally, this isn't an official Fed Challenge, but in real terms, we shouldn't notice any difference.

Team selection, preparation and the competition is a student run activity. You’re going to analyze the data, to read reports from the Fed’s Beige Book, the latest IMF World Economic Report, obtain the latest Livingston Survey etc. etc. digest that information and to formulate policy options for the Fed. It is you who will compete, not me. My role in this is to coach you, to guide you towards resources, to correct mistakes and to critique your performances.

Proposed time-table and topics:

Weeks 1-4: Topics:

1. Data and other resources.

2. Understanding business cycles

3. How to analyze macroeconomic data: detrending methods, co-movements, forecasting.

Notes01

Notes02

NBER_Business Cycle Expansions and Contractions

GDP Revisions

4. Mechanics of central banking and monetary policy

4.1 Cecchetti: Central Banks in the World Today: Discussion questions.

4.2 Cecchetti: Structure of the Fed and ECB: Discussion questions.