For students who missed the EC6012 midterm this week, we'll do a resit on Monday at 11 in KB-1-11. Please bring all relevant medical certs, etc, to the exam.
With apologies for the lateness, below are the problem set marks. Please note the (re)marks for PS1, if you're effected by Stylised-Fact-Gate. If you have questions, please drop me a mail. Scripts can be picked up from the department office, KB3-22a, tomorrow.
I'll hold a revision lecture in KB 1-11 at 10am on Monday, 27 April, hope you all can make it.
Here is the marking scheme and suggested answers, and below are the marks by student number. I'll hand back the problem sets in class. The average mark was 85%, which was excellent. Each question was scored out of 10, so the best possible score for the main section is 40. I write this so you don't have heart attacks when you click below and see '34'. The extra credit question's marks are in the second column. If you don't see your student number here, email me or chat to me after class.
The IMF released it's World Economic Outlook report, which has some interesting things to say about the international economic situation. Pay particular attention to page 105, where they contrast today's economic outlook with the Great Depression. This report resonates well with the recent work of O'Rourke and Eichengreen, too.
Visiting a friend's house last night, their seven year old asked what I did. I told her I was a guy who studied the economy.
She asked me:
What does the economy do?
In your opinion, what does the economy do? Answers either by email or in the comments.
Here's the second problem set for International Monetary Economics. There are 4 questions. Questions 1-3 are compulsory, question 4 is extra credit. This is worth 15% of your grade, and due in Monday, 20th of April at the start of class.
Typo: For question 2, equation (2) has all + signs, the i on the deposit side of the eqn should be negative. Cheers for spotting the typo!
Readings & Helpful Papers
Here's a fully worked out past exam with questions and answers, to give students a sense of the type of answers I'm looking for in the sample exam and in the exam itself.
[Update: Ze Links, Zey Live!]
Here's part 1 of a two part lecture on a new paper describing how we should think about modeling a world with different interest rates in a simple Keynesian schema.
A 3 slide handout is here, and the slides are below
Prof. James Hamilton digests the pure rage AIG's decision to pay its executives 165 million dollars in bonuses, some of them to people who no longer worked for AIG. Hamilton writes:
"One of the reasons this is so outrageous is that the promise of such bonuses was in fact one of the very factors that caused our current problems, creating incentives for managers of AIG to get out of solid insurance underwriting and into hedge fund gambling. If anyone had supposed that AIG had "learned its lesson", this report seemed to dash that hope against the wall like a plate of china."
On a slightly lighter note, here's MIT's Ricardo Caballero on more constructive solutions to the crisis.
This week we'll be looking at models of interest rate determination in closed and open economies. Before we get there, though, it makes sense in the light of the forthcoming budget to think about aggregate demand, the money creation process, and especially tax financing of government deficits. And it just so happens I've got a model of that exact thing. Funny, eh? Then we'll move onto a model of an open economy with endogenous sterlisation or fixed exchange rates. This model, by Wynne Godley and Marc Lavoie, has a lot to say about our current predicament, and we'll mess about with it tonight.
Having had some feedback on the problem set, I've decided to change it slightly.
- First, the deadline is now next Friday, 13th of March, at the same time as before.
- Second, question 2, on the Goodwin model, will be an extra credit question, where marks gained in the question go towards any marks one might lose in the final exam. Thus if a student has worked hard on the problem, I will still reward that work.
Some students are finding this module hard. That is a good thing. The module will remain as hard, if not harder, in the coming weeks. International Monetary Economics is a technical subject. Mastery of this subject to a postgraduate requires a technical facility, which I expect each student to demonstrate over the course of the module if they wish to see a good grade at the end of it.
I'm very much looking forward to the rest of the course, and I'll see everybody on Monday, where I'll answer more questions if students have them.
This piece by Sal Rossi accurately summarises the current debate on how to fix banks in the short to medium term.
There are two schools of thought on how to get credit flowing again. One suggests buying the toxic assets, the other says to recapitalise banks. This column says that both approaches are necessary, though the right balance will vary across nations. The real difficulty is aligning incentives – in both pricing assets and recapitalising banks, bank managers’ interests may thwart governments’ objectives.
Apologies for the delay in posting this problem set, I've changed the due date to compensate.
This problem set is worth 10% of your final mark. All questions carry equal marks, and the date for submission is Friday, March 6th, to the departmental office, KB 3-22a, by 4pm. Work in groups, but submit alone.
Email me if you've questions on the problem set. It is a mix of theoretical, data work, and applied policy analysis, exactly the stuff we want you to learn in this course.
Update: Some sensible emails suggest I help you prepare for these questions a bit more, in order that I not break the class , so here are some hints.
For question 2, read the notes, and work through to the final equation with the term included, then just see what happens to things when goes up.
For question 3, plug values of 1, 2, 3, 4, etc, into and , and graph it. You'll find interesting equilibrium values. Helpful notes on the maths are here, here, and here. I'm not looking for an algebraic solution though, just the graph will do.
For question 4, use your data skills from the trading floor and the notes from lecture 2.
For question 5, read the paper, tell me what you think.
I'll be on hand by email at any time to answer questions about the problem sets. Promise.