Posts from — January 2008

Introduction

Neoclassical macroeconomic theory posits the stock of money in a financial system as an exogenously determined variable. This simplification is the source of much confusion and rivers of ink have been spilt on the meaning for policy of an exogenously determined money stock.

This lecture is about introduced the SFC concept of endogenously created money. We’ll start with a simple banking system, and work our way organically up to a plausible description of a monetary economy in the 21st century.

Click below the fold to see handouts, slides, and links to further reading.

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• NPRS Annual Reports
  Neonatal data nationally
  (tags: health+economics)

Here’s a quick post for posterity: when these guys win the Nobel prize, I want to be the one who said it first.

We’ll organise a workshop based on their ideas later on in the year at UL, and I’ll blog the arse off it, of course.

(Actually, being sneaky about it, I should put some money down on this, and send vitamins and safety helmets to the two profs to hedge my bet!).

“Probability and Finance: It’s Only a Game!” (Glenn Shafer, Vladimir Vovk)

EC6012 Lecture 2 Review of Intermediate Macroeconomic Concepts

Introduction

Macroeconomics is the study of fluctuations in the economy as a whole. The key to understanding fluctuations is the accounting matrix. This lecture is about connecting the macroeconomic concepts you would have seen in an intermediate economics class using a textbook like Leddin and Walsh or “Macroeconomics (4th Edition)” (Olivier Blanchard), and the approach of Godley and Lavoie.

We’ll use the example of the multiplier to make the connections crystal clear. Before that, we’ll take a brief tour through James Tobin’s Nobel lecture, highlighting passages which guides and gives a methodological definition to the structuralist approach.

Aim

To bridge the orthodox macroeconomic treatment of the multiplier, with the structuralist treatment employed by Godley and Lavoie.

Length: 1.4 hours

Click the link below to access slides, handouts, and get links to further reading.

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Introduction

The financial system is a web of institutional relationships set up to move funds between economic actors for profit. The roles these individual actors take up determines the shape of the market, and the gains investors can make for themselves in that market. In this lecture, we’ll begin by looking at the overall structure of the system, then drill down into the decisions households and firms have to make and what they use to make these decisions, and then we’ll talk about the functions of the financial system.

Aim

To explore the setup and functions of an idealised financial market

Length 50 minutes

Handouts, slides, and links for further reading are below the fold. Just click the link below.

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“There are very few things which we know; which are not capable of being reduc’d to a Mathematical Reasoning; and when they cannot, it’s a sign our Knowledge of them is very small and confus’d.”

- John Arbuthnot 1692

Introduction

Financial Economics is the study of data, which generates models, which try to understand how and why the financial system works.

The financial system is composed of buyers, sellers and the financial institutions that regulate the rules which govern flows of funds in exchange. We will study concrete examples and simple idealisations of their behaviour.

To provide a context for what will follow, it is useful to consider (if only briefly) the domain of the financial economist.

One of the fundamental aspects of economic activity is a trade in which one party provides another party something, in return for which the second party provides the first something else. In many such trades, or transactions, one or both parties are human beings. If Mr. A gives Ms. B an orange and Ms. B gives Mr. A two apples, it is a trade between two people. In other cases, only one is a human being. If a fisherman throws a fish back in the water to get more fish a year hence, it is a trade between a person and nature. Often the first type of trade is called an exchange, while the second is called production (Sharpe, 1998).

Economists generally (but not always) concern themselves with exchanges in which one of the items traded is money.

To facilitate trade, most societies establish a convention in which a particular item serves as numeraire. Thus if dollars serve as money, one typically trades oranges for apples by (1) trading oranges for dollars (”selling oranges”), then (2) trading dollars for apples (”buying apples”). The terms of the first trade (e.g. €1 for 1 orange) determine the price of an orange (e.g. €1); the terms of the second trade (e.g. €0.50 for one apple) determine the price of an apple (e.g. €0.50). Together, these prices determine the terms of trade for an exchange of oranges for apples (e.g. 1 orange for 2 apples).

The use of money greatly simplifies trading, thus lowering transactions costs. If a society produces 100 different goods, there are 49,950 different possible “good-for-good” trades ([1000x1000-1000]/2). With money, only 1000 prices are needed to establish all possible trading ratios.

Aim

Let’s spend some time describing an ideal financial market and the processes inside it, and round out the lecture with a description of the international financial system. Then we can discuss what it says it does, what it really does, and develop some measures to tell when an asset like a stock or a security or something else is doing well, or doing badly.

Length: 1 hour

Lecture notes, slides, and links are below the fold. Just click the link.

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speeding tunnel

Aims

To introduce the course, it’s content, and themes to the students

Length

Approx. .45 hours

Introduction

Financial Economics is the study of the applied side of economics. It is economic theory in action, in many ways, but not in all. Those qualifications are important, and they will be discussed later on in the course. For now, let’s get to know each other, and make a start into the course.

Slides for the lecture, a handout, and further reading are all below the fold.

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• UCFEconomics Working Papers
  Experimental economics working paper archive.
  (tags: exp)

Introduction

This lecture will introduce the course itself, and outline the paradigm in which we’ll work: the stock flow consistent framework developed by Stone, Godley, and Taylor.

All details of the lecture (slides, handouts, further reading) are below the fold.

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Why?

Fascinating research result, probably known for thousands of years anecdotally:

When retired people move to a warmer state, their life expectancy rises dramatically.

Hmm…

So We Thought. But Then Again . . . - New York Times:

Throw out the IS-LM model and Slutsky decomposition and start your syllabus from a blank page. Make the course relevant to student experience, employer needs and current research.

“Teaching Relevant Economics” by Monojit Chatterji

This paper looks interesting, and should be a part of the PBL series.

“Economics as a discipline has considerable strengths. But the number of economics students has fallen substantially over a number of years. How can the tide be turned and the product made more attractive? Economics textbooks have become too dogmatic, as if many problems have been solved and students simply need to absorb a settled body of knowledge. Theoretical models taught in courses need empirical grounding if they are to be persuasive. Students need to know about the key episodes in 20th century economic history, and about the importance of institutions. Computer technology can be used to good effect with agent-based models.”

Turning the Tide: Bringing Economics Teaching into the Twenty First Century

Below the fold is a case study on the PBL setup I used for EC6012 last year. I wrote a paper about it, and presented it at a conference. Now it’s a case study.

Some version of the stuff below the fold should be available on the economics network in a few days.

Update: The finished article is here. That was quick!

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Spain’s inflation-less drop in unemployment is due in large part to its immigration boom. If immigrants’ labour-supply behaviour comes closer to that of natives and inflation remains above target, a deeper slowdown or increasing immigration flows will be needed to bring it down.

Immigration and the Philips curve | vox - Research-based policy analysis and commentary from leading economists

This is perfect as a cases study for EC4004, Economics for Business. When we discuss inflation and unemployment, would the same effects hold in Ireland over the past 3/4 years? That’s a great FYP thesis right there.

• Bolzano-Weierstrass Theorem — from Wolfram MathWorld
  Notes on the BWT for mathematical economic
  (tags: Teaching exp_econ_book)
• Chronology of Game Theory
  Nice but derivative history of GT.
  (tags: Teaching,)

I’ve just read a lovely book on being a junior academic, the notes from which I’m posting below. I think I’ll put a page up of the notes I’ve made from ’self improvement’ books like “Economical Writing”, “The Craft of Research, Advice for New Faculty Members,“The Elements of Style” , “Made to Stick: Why Some Ideas Take Hold and Others Come Unstuck” , and so forth.

It’ll be useful for me more than others, but that’s mainly what this site is for anyway. Notes below the fold.

Here’s a link to the book:

“Advice for New Faculty Members: Nihil Nimus” (Robert Boice)

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• http://economistsview.typepad.com/
• http://www.portfolio.com/views/blogs/market-movers/
• http://calculatedrisk.blogspot.com/
• http://www.nakedcapitalism.com/
• http://www.prospect.org/csnc/blogs/beat_the_press
• http://www.aleablog.com/
• http://scurvon.blogspot.com/
• http://abnormalreturns.com/
• http://www.financialarmageddon.com/
• http://www.rgemonitor.com/blog/roubini
• http://globaleconomicanalysis.blogspot.com/
• http://ml-implode.com/
• http://unqualified-reservations.blogspot.com/
• http://bigpicture.typepad.com/
• http://accruedint.blogspot.com/
• http://crookery.blogspot.com/
• http://www.creditslips.org/creditslips/
• http://nihoncassandra.blogspot.com/
• http://jeffmatthewsisnotmakingthisup.blogspot.com/
• http://themessthatgreenspanmade.blogspot.com/
• http://www.rgemonitor.com/blog/setser
• http://macro-man.blogspot.com/
• http://piaohaoreport.sampasite.com/

• Robin Boadway
  Prominent Public Economist, pages has links to his papers.
  (tags: interestingpeople)

Is the dollar doomed to a hard landing? Are the increasingly arcane instruments of global finance a source of new wealth or a cause of greater instability? Why can the housing market suddenly turn “hot”? What makes long-term bond prices shoot up and down in a single year? Can financial globalization be regulated?

Project Syndicate

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