Associate Professor Rudiger Dornbusch covered the second course in the graduate money field during the Fall term 1976 at M.I.T. This was a course taught by his colleague Stanley Fischer (I took that course in 1975). The syllabus was more-or-less unchanged from the one used when Fischer taught the monetary theory course. According to the department staffing report for the term, 22 students were registered for credit and 2 students audited the course.
___________________________
MONETARY ECONOMICS II
14.463
Professor R. Dornbusch
Fall 1976
*denotes required reading
There is no textbook for this course. The following books and surveys should be useful.
Robert Barro and Herschel Grossman, Money, Employment and Inflation, Macmillan, 1976.
Robert W. Clower (ed.), Monetary Theory, Penguin Books, 1969.
Milton Friedman, The Optimum Quantity of Money and Other Essays, Aldine, 1969.
Robert Mundell, Monetary Theory, Goodyear, 1971.
Robert J. Barro and Stanley Fischer, “Recent Developments in Monetary Theory,” Journal of Monetary Economics, April 1976.
I. BACKGROUND
*Friedman, Milton, “The Quantity Theory of Money—A Restatement” in Studies in the Quantity Theory of Money, Friedman, ed., University of Chicago Press, 1956, 3-24.
___________, “A Theoretical Framework for Monetary Analysis,” JPE, March/April 1970, 193-238. (See also Symposium on this article in Sept./Oct. 1972 JPE.)
*Johnson, Harry G., “The Keynesian Revolution and the Monetarist Counter-Revolution,” AER, May 1971, 1-14.
Keynes, J.M., General Theory of Employment, Interest and Money, Harcourt Brace, 1964.
*Leijonhuvud, Axel, “Keynes and the Classics: Two Lectures on Keynes’ Contribution to Economic Theory,” London, Institute of Economic Affairs, 1969. Occasional Paper 30. (This is a reasonably coherent account of his book.)
*Patinkin, Don, Money, Interest and Prices, Harper and Row, 1965, Part II.
Tobin, James, “Money, Capital and Other Stores of Value,” AER Papers and Proceedings, May 1961, 16-37.
*___________, “A General Equilibrium Approach to Monetary Theory,” JMCB, Feb. 1969, 15-29.
___________, Chapter I of Manuscript, on reserve.
___________, “Money and Income: Post Hoc, Ergo Propter Hoc?” QJE, May 1970, (and discussion with Friedman, same, 318-329).
___________, The New Economics One Decade Older, Princeton University Press, 1974.
II. DISEQUILIBRIUM ANALYSIS
*Barro, Robert J. and Herschel Grossman, “A General Equilibrium Model of Income and Employment,” AER, March 1971, 82-93.
___________, Money, Employment and Inflation, MacMillan, 1976.
Benassy, J.P., “Neo-Keynesian Disequilibrium Theory in a Monetary Economy, Unpublished, 1974.
*Clower, Robert, “The Keynesian Counterrevolution: A Theoretical Appraisal,” in The Theory of Interest Rates, F.H. Hahn and F.P.R. Brechling (ed.), MacMillan, 1965.
Iwai, K., “On Disequilibrium Economic Dynamics,” Parts I & II. Cowles Discussion Papers #385 and #386, 1974, 1975.
Patinkin, Don, Money, Interest and Prices, Chapter 13.
III. DEMAND FOR MONEY
Barro, Robert J., “Inflation, the Payments Period, and the Demand for Money,” JPE, Nov./Dec. 1970, 1228-1263.
___________, “Integral Constraints and Aggregation in an Inventory Model of Money Demand,” Journal of Finance(forthcoming).
*Baumol, W.J., “The Transactions Demand for Cash: An Inventory Theoretic Approach,” QJE 66 (Nov. 1952), 545-556. (Reprinted in Thorn, R.S., ed. Monetary Theory and Policy, Ch. 6.)
*Cagan, P., “The Monetary Dynamics of Hyperinflation,” in Friedman, M., ed., Studies in the Quantity Theory of Money.
Goldfeld, S.M., “The Demand for Money Revisited,” in Okun, A.M. and Perry, G.L., Brookings Papers on Economic Activity, 1973:3.
*Hicks, J.R., “A Suggestion for Simplifying the Theory of Money,” in AEA Readings in Monetary Theory, pp. 13-32.
*Miller, M.H. and Orr, D., “A Model of the Demand for Money by Firms,” QJE 80 (August 1966), 413-435.
*Modigliani, F., R. Rasche, and J.P. Cooper, “Central Bank Policy, The Money Supply and the Short-Term Rate of Interest,” JMCB, 2 (May 1970), 166-217.
*Tobin, J., “The Interest-Elasticity of Transactions Demand for Cash,” REStat. 38 (August 1956), 241-247.
___________, “Liquidity Preference as Behavior Toward Risk,” REStud 25 (Feb. 1958), 65-86. (Reprinted in Thorn, Ch. 7)
Whalen, E.L., “A Rationalization for the Precautionary Demand for Cash,” QJE (May 1966), 314-324.
IV. MONEY, INFLATION DYNAMICS AND GROWTH
*Brock, William A., “A Simple [Perfect Foresight] Model of Money and Growth,” on reserve.
*Cagan, Phillip, op. cit.
Fischer, Stanley, “Keynes-Wicksell and Neoclassical Models of Money and Growth,“ AER, Dec. 1972.
Friedman, Milton, “The optimum Quantity of Money,” in The Optimum Quantity of Money and Other Essays, Aldine, 1969, 1-50.
*Foley, Duncan K. and Miguel Sidrauski, “Portfolio Choice, Investment and Growth,” AER, March 1970, 44-63.
Levhari, David and Don Patinkin, “The Role of Money in a Simple Growth Model,” AER, Sept. 1968, 713-753.
Mundell, Robert A., “Growth, Stability and Inflationary Finance,” JPE, 1965, 97-109.
*___________, Monetary Theory, Goodyear, 1971.
*Sidrauski, Miguel, “Inflation and Economic Growth,” JPE, Dec. 1967, 796-810.
*___________, “Rational Choice and Patterns of Growth in a Monetary Economy,” AER, Papers and Proceedings, May 1967, 534-544.
Dornbusch, Rudiger and Frenkel, Jacob, “Inflation and Growth Alternative Approaches,” Journal of Money, Credit and Banking, Feb. 1973, 141-156.
V. RATIONAL EXPECTATIONS
Barro, Robert J., “Rational Expectations and the Role of Monetary Policy,” Unpublished, 1975.
Black, Fischer, “Uniqueness of the Price Level in Monetary Growth Models With Rational Expectations,” JET, Jan. 1974, 53-65.
*Fama, E.F., “Efficient Capital Markets: A Review of Theory and Empirical Work,” JF, 25 (May 1970), 383-417.
*Fischer, S., “Long-Term Contracts, Rational Expectations, and the Optimal Money Supply Rule,” Unpublished, 1975.
*Lucas, Robert E., “Expectations and the Neutrality of Money,” JET, April 1972, 103-124.
__________, “Some International Evidence on Output-Inflation Tradeoffs,” AER June 1973, 326-334.
__________, “Econometric Policy Evaluation: A Critique,” Mimeo, on Reserve.
Muth, J.F., “Rational Expectations and the Theory of Price Movements,” Econometrica 29 (July 1961), 315-335.
Phelps, E.S. and J.B. Taylor, “Stabilizing Properties of Monetary Policy Under Rational Price Expectations,” Unpublished, 1975.
*Sargent, T.J. and N. Wallace, “’Rational’ Expectations, the Optimal Monetary Instrument, and the Optimal Money Supply Rule,” JPE (April 1975), 241-254.
__________, “Rational Expectations and the Theory of Economic Policy,” Federal Reserve Bank of Minneapolis, Part I and II.
VI. TEMPORARY EQUILIBRIUM, THE CONSUMPTION LOANS MODEL, AND THE BURDEN OF THE DEBT
*Barro, R.J., “Are Government Bonds Net Wealth?” JPE, Nov./Dec. 1974, 1095-1117.
Cass, D. and M. Yaari, “Individual Saving, Aggregate Capital Accumulation and Efficient Growth,” in K. Shell (ed.), Essays in the Theory of Optimal Growth, M.I.T. Press, 1967.
*Diamond, P.A., “National Debt in a neoclassical Growth Model,” AER, Dec. 1965, 1126-1135.
Feldstein, M., “Perceived Wealth in Bonds and Social Security: A Comment,” Unpublished, 1975.
Foley, D.K. and M. Sidrauski, “Monetary and Fiscal Policy in a Growing Economy, MacMillan, 1971, Ch. 11.
Grandmont, J. and G. Laroque, “Money in the Pure Consumption Loans Model,” JET, August 1973, 382-395.
__________, and Y. Younes, “On the Efficiency of a Monetary Equilibrium,” REStud., April 1973, 149-166.
Modigliani, F., “Long-Run Implications of Alternative Fiscal Policies and the Burden of the National Debt,” Economic Journal, Dec. 1961, 730-755.
Samuelson, P.A., “An Exact Consumption-Loan Model of Interest With or Without the Social Contrivance of Money,” JPE, 1958 (reprinted in Collected Scientific Papers, 219-234.)
VII. INDEXATION AND THE LABOR CONTRACT
*Azariadis, C., “Implicit Contracts and Underemployment Equilibria,” JPE, August 1975.
__________, “Asymmetric Wage Behavior,” Unpublished, 1975.
*Baily, M.N., “Wages and Employment Under Uncertain Demand,” REStud., Jan. 1974, 37-50.
Fischer, S., “The Demand for Index Bonds,” JPE, June 1975.
__________, “Wage-Indexation and Macro-Economic Stability,” Unpublished, 1975.
__________, “Non-Indexation in the Capital Markets,” Unpublished, 1975.
Gray, J.A., “Economic Aspects of Indexing and Contract Length,” Unpublished, 1975.
Grossman, H., “The Nature of Optimal Labor Contracts,” Unpublished, 1975.
Shavell, S., “Sharing Risks of Deferred Payment,” Unpublished, 1975.
Tobin, J., “An Essay on the Principles of Debt Management,” in Tobin’s Essays in Economics.
VIII. MICRO FOUNDATIONS OF MONEY
(This material will not be discussed in class; it is on the reading list for those who are interested)
*means most worthwhile
Brunner, Karl, and Allan Meltzer, “The Uses of Money: Money in the Theory of Exchange,” AER, Dec. 1971, 784-805.
*Clower, Robert W., Monetary Theory, Clower (ed.), Penguin, 1970, pp. 7-16.
Fischer, S., “Money and the Production Function,” on reserve.
Hahn, Frank, “On Transaction Costs, Inessential Sequence Economics and Money,” REStud., Oct. 1973, 449-462.
*__________, “On the Foundations of Monetary Theory,” in Parkin and Mobay (eds.), Essays in Modern Economics, Langman, 1973.
Heller, Walter P., “The Holding of Money Balances in General Equilibrium,” JET, Jan. 1974, 93-108.
*Johnson, Harry G., “Is There an Optimal Money Supply?” in Frontiers of Quantitative Economics, M.O. Intriligator, ed., North-Holland, 1971.
Niehans, Jurg, “Money in a Static Theory of Optimal Payment Arrangements,” JMCB, Nov. 1969, 706-726.
Ostroy, Joesph, “The Informational Efficiency of Monetary Exchange,” AER, Sept. 1973, 597-610.
Patinkin, Don, Money, Interest and Prices, Harper and Row, 1965, Part I.
*Samuelson, Paul A., “What Classical and Neo-Classical Monetary Theory Really Was,” Canadian Journal of Economics, Feb. 1968, 1-15; also in Clower, Readings, 170-190.
*__________, Foundations of Economic Analysis, Harvard University Press, 1947, 117-122.
Starr, Ross, M., “The Structure of Exchange in Barter and Monetary Economics,” QJE, May 1972, 290-302.
Starrett, David, “Inefficiency and the Demand for ‘Money’ in a Sequence Economy,” REStud., Oct. 1973, 437-448.
Source: Copy of mimeographed course reading list from the files of Irwin L. Collier. Provided by Robert Dohner (our friendship goes back to our internships at the Nixon Council of Economic Advisers in the year of Watergate).
Image Source: Rudiger Dornbusch from FAZ, April 12, 2014
One reply on “M.I.T. Reading List for Monetary Economics II. Dornbusch, 1976”
Ah, yes. This was the one that I took. Good course. Many models.