ECONOMICS 200: (Bard College Course) MONEY AND BANKING FALL 1998


EMAIL: WRAY@LEVY.ORG (note: this is the best way to contact me)

OFFICE HOURS: M/W 3-4 PM, M/W 5:45-6 PM, and by appointment

COURSE DESCRIPTION: An investigation of the role of money and financial intermediaries in determining aggregate economic activity. We also examine in detail the functions of commercial banks and other financial institutions, as well as the role the central bank (Fed) plays in the economy. Institutional material will provide the backdrop for a discussion of the connection between prescriptions for monetary policy and monetary theories.

CLASS MEETS: M/W 4:20-5:40 pm, Olin 203

EVALUATION: MAKEUPS ARE GIVEN ONLY IN EXTRAORDINARY CIRCUMSTANCES. The evaluation will be based on participation, homework, a midterm, and a final exam. There will be approximately 10 homework assignments, most of which will require a two to three page essay. Late homework is devalued by 25% after the first instance (you may be late once with no penalty). The midterm will consist of essays and pictures. The final will be comprehensive, and will also consist of essays and pictures.

Summary: Homework 30%

Participation 10%

Midterm 30%

Final 30%

TEXTS: There are two texts: Principles of Money, Banking and Financial Markets, by Ritter, Silber and Udell; and Post Keynesian Monetary Economics, by Stephen Rousseas. In addition, a number of articles will be provided in class or placed on reserve in the library.

The Ritter, et. al., book presents the conventional approach to monetary theory and policy; this is also the approach taken by Chairman Greenspan. The Rousseas book presents an alternative, the Post Keynesian approach.

The Midterm Exam will be "open notes": you will be permitted to bring up to 3 pages of your own notes (one-sided; no xeroxes--I will check) to the exam; the notes will be collected with the exam. While I encourage you to work in groups while studying for the exam, you are to either write-out or type-up your notes for use during the exam. These should be in your own words, pictures, tables, and so on. The Final Exam WILL NOT BE open notes.

You should, of course, type your homework on a computer; this will allow you to make revisions easily and will greatly improve the quality of your work. It is also easier for me to read typed work, and you can use a "spell-check" to avoid errors. I do not deduct for handwritten work, however.



In the outline, the following abbreviations are used:

Ritter, Silber, Udell = (RSU)

Stephen Rousseas = (R)

Handouts or on Reserve = (P)

Note 1: Readings are to be completed by the date indicated. You will probably find it best to read items in the order listed.

Note 2: I will be away on Wednesday November 3, Monday November 30, and Wednesday December 9, because I have to attend conferences. There will be no class on these days. We will schedule make-up meetings.






1/Sep 2



2/Sep 7

RSU Ch 1-2; Smithin Ch 1 (P)

What is Money?

3/Sep 9

Smithin Ch 2 (P)

Monetary Controversies

4/Sep 14

RSU Ch 3, 4

Financial Instruments, Interest Rates

5/Sep 16

RSU Ch 5, 6

Term Structure; Securities

6/Sep 21

RSU Ch 7, 8, 9

Markets; Derivatives

7/Sep 23

RSU Ch 10

Foreign Exchange

8/Sep 28

RSU Ch 11-12

Intermediation; Depositories

9/Sep 30

RSU Ch 13


10/Oct 5

RSU Ch 14-15, skim Ch 16, 17

Financial System, Regulation, Innovation

11/Oct 7

RSU Ch 18

Structure of FRS

12/Oct 19

RSU Ch 19

Reserves; Review

13/Oct 21



14/Oct 26

RSU Ch 20-22

Monetary Policy

15/Oct 28

RSU Ch 23

Classical Approach

16/Nov 2

(P) Brunner, Friedman

Control of Money Supply

Quantity Theory of Money



RSU Ch 24

(P) Tobin

"Keynesian" Monetary Theory

18/ Nov 9

RSU Ch 25, 26


19/Nov 11

RSU Ch 27, 28


20/Nov 16

(R) Ch 1, 2

Keynes vs. "Keynesians"

21/Nov 18

(R) Ch 3

Money Demand/Finance Motive

22/Nov 22

(R) Ch 4, 5

(P) Wray

Exogenous vs. Endogenous Money


(R) Ch 6

(P) Papadimitriou and Wray

Monetary Policy

24/Dec 7

(P) Greenspan;

RSU Ch 29

Current Fed Policy; Policy Effectiveness


(P) Galbraith

(P) Wray

(P) Papadimitriou and Wray

Financial Instability, Recession, Stock Market

26/Dec 14


(P) Davidson B

International Monetary Policy

Review for Final

27/Dec 16