Economics 435: The Financial System
This site provides resources for students in Economics 435
at the University of Wisconsin,
Madison for Fall 2017 Semester
Term spread (blue, left scale), and real value of US dollar (red, right log scale). Source: Federal Reserve Board, author's calculations.
Syllabus | Academic Misconduct |
Important Dates |
Downloadable Course Materials and Information Sources |
Department of Economics
Robert M. LaFollette School of Public Affairs |
LECTURE: MW 4-5:15, Social Sciences 6203
Professor Menzie Chinn
Office Hours: M 12-1:30, W 11:45-12:15
Office: 7418 Social Sciences Bldg.
Phone: (608) 262-7397
mchinn [at] lafollette.wisc.edu
Econ 435 Syllabus in PDF file.
This course will review the basics of monetary policy, including how the money supply is controlled and the role of the banking system. The course will then cover the principles of asset pricing, the role of collateral constraints and other informational problems in banking, and how those factors induce feedback loops in the macroeconomy. A portion of the course will address the analysis and implications of financial regulation or non-regulation, especially in regard to the financial crisis of 2008. Prerequisites: Econ 301/311 and 302/312, Econ 310. If you have completed Econ 410 with a prior statistics course other than 310, you can enroll with my assistance/authorization.
Academic Integrity is critical to maintaining fair and knowledge based learning at UW Madison. Academic dishonesty is a serious violation: it undermines the bonds of trust and honesty between members of our academic community, degrades the value of your degree and defrauds those who may eventually depend upon your knowledge and integrity.
Examples of academic misconduct include, but are not limited to: cheating on an examination (copying from another student's paper, referring to materials on the exam other than those explicitly permitted, continuing to work on an exam after the time has expired, turning in an exam for regrading after making changes to the exam), copying the homework of someone else, submitting for credit work done by someone else, stealing examinations or course materials, tampering with the grade records or with another student's work, or knowingly and intentionally assisting another student in any of the above.
The Dept. of Economics will deal with these offenses harshly following UWS14 procedures: http://www.ssc.wisc.edu/~munia/Undergraduate/MisconductSyl.doc):
1. The penalty for misconduct in most cases will be removal from the course and a failing grade,
2. The department will inform the Dean of Students as required and additional sanctions may be applied.
3. The department will keep an internal record of misconduct incidents. This information will be made available to teaching faculty writing recommendation letters and to admission offices of the School of Business and Engineering.
If you think you see incidents of misconduct, you should tell your instructor about them, in which case they will take appropriate action and protect your identity. You could also choose to contact our administrator and your identity will be kept confidential.
- Lecture cancelled Monday 9/25
- Midterm 1: 10/16
- Midterm 2: 11/20
- Term paper due date:
12/13 12/15 11:59PM
- Lecture cancelled Wednesday 11/22
Downloadable Course Materials
Required On-line Readings
- Preface and Chapters 1-2 of Lost Decades
- [ISLM] IS-LM
- [PCO] Portfolio Crowding Out
- [ADAS1] and [ADAS2] Aggregate Demand - Aggregate Supply (ADAS1) and AD-AS with Expectations and Supply Shocks (ADAS2)
- [EHTS] Expectations Hypothesis of the Term Structure, the Liquidity Premium, and Economic Activity
- [Asset pricing] Asset prices, efficient markets hypothesis...
- [BBS] Notes on Bank Balance Sheets
- [CCLM] Notes on CC-LM
- [Ru] Glenn D. Rudebusch, "The Fed's Monetary Policy Response to the Current Crisis," FRBSF Economic Letters 2009-17; May 22, 2009
- [BB] Ben Bernanke, Alan Blinder, “Credit, Money and Aggregate Demand,”American Economic Review 78(2) (May, 1988), pp. 435-439.
- [BGG] Bernanke, Gertler and Gilchrist, "The Financial Accelerator and the Flight to Quality," The Review of Economics and Statistics 78(1). (Feb., 1996): 1-15.
- [CJS] J.D. Coval, J. Jurek, E. Stafford, "The Economics of Structured Finance," Journal of Economic Perspectives 23(1) (Winter 2009).
- [GHKS] David Greenlaw, Jan Hatzius, Anil K Kashyap, Hyun Song Shin, “Leveraged Losses: Lessons from the Mortgage Market Meltdown,” paper presented at US Monetary Policy Forum Conference, February 29, 2008.
- [Br] M. Brunnermeier, Deciphering the Liquidity and Credit Crunch, 2007-2008,” Journal of Economic Perspectives 23(1) (Winter 2009).
- [DFP] Mathias Dewatripont, Xavier Freixas, and Richard Portes, editors, Macroeconomic Stability and Financial Regulation: Key Issues for the G20 (CEPR, 2 March 2009), pp. 91- .)
- [ACRW] Viral Acharya, Thomas Cooley, Matthew Richardson and Ingo Walter, "Dodd-Frank: One Year On..." Dodd-Frank One Year On (CEPR/Vox, 2011). backup version on UW server: Dodd-Frank: One Year On
Additional Optional Readings
- Claessens and Kose, "Asset Prices and Macroeconomic Outcomes: A Survey," World Bank Policy Research Working Paper 8259.
- Cecchetti-Schoenholtz textbook website
- Financial Stability Oversight Council
- Basel III webpage
- Ihrig, Meade, Weinbach, 2015, "Rewriting Monetary Policy 101: What’s the Fed’s Preferred Post-Crisis Approach to Raising Interest Rates?," Journal of Economic Perspectives, 29(4): 177-98.
- Favara, Gilchrist, Lewis, Zakrajsek, "Recession Risk and the Excess Bond Premium," FEDS Notes (April 2016).
- Favara, Gilchrist, Lewis, Zakrajsek, "Updating the Recession Risk and the Excess Bond Premium," FEDS Notes (October 2016).
- "Bank Regulation: Buffering," Economist (Nov. 15, 2014) [link]
- Baily and Elliott "How Is the System Safer?
What More Is Needed?" [link] In Baily, Taylor, Across the Great Divide: New Perspectives on the Financial Crisis (Hoover, 2014) [link]
- Martin Weale and Tomasz Wieladek, "What are the macroeconomic effects of asset purchases?", Bank of England Discussion Paper, April 2014.
- "The slumps that shaped modern finance," The Economist (April 11, 2014).
- Basel Committee, Progress report on implementation of the Basel regulatory framework (April 2014)
- Basel III Regulatory Update (June 2012)
- NY Fed Crisis Timeline
- Gorton, "The Panic of 2007," paper presented at Kansas City Fed Jackson Hole conference (August 2008).
- Richard G. Anderson, Charles S. Gascon, and Yang Liu, "Doubling Your Monetary Base and Surviving: Some International Experience," Federal Reserve Bank of St. Louis Review, November/December 2010, 92(6), pp. 481-505.
- Aswath Damodaran (NYU) notes on VaR
- Kevin Kliesen, et al., "Disentangling Diverse Measures: A Survey of Financial Stress Indexes" Federal Reserve Bank of St. Louis Review (Sept/Oct 2012). [pdf]
- Lawrence Summers, "Does the Stock Market Rationally Reflect Fundamental Values?" Journal of Finance 41(3) (July 1986). [pdf]
- Robert Schiller, "Do Stock Prices too Much to Be Justified by Subsequent Dividends," AER 71(3) (June 1981). [pdf]
- Matthieu Bussière and Annukka Ristiniemi, "Credit Ratings and Debt Crises," Bank of France Working Papers No. 396 (September 2012). [pdf]
- Menzie Chinn and Kavan Kucko, "The Predictive Power of the Yield Curve across Countries and Time," NBER Working Paper No. 16398 (Sept. 2010). [pdf].
- Menzie Chinn and John Kitchen, "Financing U.S. Debt: Is There Enough Money in the World – and At What Cost?" International Finance (2012). [pdf].
- Gary Gorton, "The Panic of 2007," paper presented at 2008 Jackson Hole conference [link]
- "Credit default swaps: Heading towards a more stable system," Deutsche Bank (Dec 2009). [link]
- A. Alesina, "Fiscal Adjustments: Lessons from Recent History," paper presented at ECOFIN meeting (April 15, 2010).
- Interactive Yield Curve
- NBER, Business Cycle Dating Committee, National Bureau of Economic Research (Sep. 20, 2010).
- Financial Crisis Inquiry Commission A bipartisan commission.
- Menzie Chinn and Jeffry Frieden, "Reflections on the Causes and Consequences of the Debt Crisis of 2008," La Follette Policy Report 19(1) (Fall 2009): 1-5. [pdf].
- P. Cohen, Ivory Tower Unswayed by Crashing Economy, NYT (5 March 09).
- P. Swagel, 2009, "The Financial Crisis: An Inside View," paper presented at the Brookings Panel on Economic Activity, March 2009
- Brunnermeier, et al., "The Fundamental Principles of Financial Regulation," Geneva Reports on the World Economy No 11.
News Reports/Additional Readings
Tracking the Crisis and Recession
Weblogs and Perspectives
Economics and Economic Policy Links
U.S. Government Agencies
Current and Historical Data
- St. Louis Fed economic database Thousands
of time series on economic activity, in an easily downloadable form.
- IMF International Financial Statistics via UW Data and Information Services Center
- U.S. Treasury yield curve
- Yahoo finance - bond yields
- WSJ bond yields
- http://www.econ.yale.edu/~shiller/data/ie_data.xlsRobert Shiller historical stock data
- YCharts Macro and equity market data series.
- md4stata ("Macroeconomic Data for Stata")
- Yahoo finance website Current financial data.
- Google finance website Current financial data.
- ino.com Futures data.
- Federal Reserve Board data Monetary, financial and output data
collected by the Nation's central bank.
- Bureau of Economic Analysis, Dept. of Commerce Data on GDP and components (the national income and product accounts) as well as other macroeconomic data.
- Bureau of the Census, Dept. of Commerce Data on the characteristics
of the US population as well as of US firms.
- Bureau of Labor Statistics, Dept. of Labor Data on
wages, prices, productivity, and employment and unemployment rates.
- Energy Information Agency, Dept. of Energy Data on
on energy (electricity, gas, petroleum) production, consumption and prices.
- Economic Report of the President, various years. The back portion of
this annual publication contains about 70 tables of government economic data.
- Economic Time Series page A large collection of economic time series.
- NBER Data Specialized economic databases created by
economists associated with the National Bureau of Economic Research.
Economics 435 The Financial System / UW Madison / firstname.lastname@example.org / 12 December 2017