Total word count at least 650
Reading Assignment Guidelines:
Answers should be in complete sentences with proper grammar and punctuation.
Answers should be in your own words, not quotes. If you quote something, you need to identify it as a quote and then explain the quote.
The answers should be complete explanations; none of these should be answered with less than a complete paragraph.
My expectation is that carefully reading these materials and answering these questions should take roughly 3-4 hours of work.
Readings and Questions:
Whelan, Karl. Introducing the IS-MP-PC Model, pages 17-18.
Ben S. Bernanke and Mark Gertler, Inside the Black Box: The Credit Channel of Monetary Policy Transmission, The Journal of Economic Perspectives, Vol. 9, No. 4 (Autumn, 1995), pp. 27-48 (22 pages)
- The authors list four “facts” of how the economy responds to shocks. What are those facts and what evidence do the authors present to support this thesis? To adequately answer this question, you will need to have a basic understanding of VAR models which may require you to do some research beyond this reading.
- What is the conventional story of how monetary policy operates? Do the “facts” as described by the authors support this story?
- In a number of places, the authors describe the “external finance premium.” What is this premium and from where does it arise? Provide examples.
- Describe the operation of the balance sheet channel. How does monetary policy impact the balance sheet channel? Does the balance sheet channel magnify or reduce the impact of interest changes? Explain.
- What evidence do the authors cite to test the balance sheet channel of monetary policy? Explain.
- Describe the operation of the bank lending channel. How is “Regulation Q” related to the channel? What do the authors conclude about the bank lending channel?
- How do credit channels of policy transmission affect household borrowing conditions? Explain.
This criterion is linked to a Learning OutcomeAnswers all questions
This criterion is linked to a Learning OutcomeAnswers use proper grammar and punctuation.The expectation is the you review your answers for grammar, punctuation, and typographical errors.
This criterion is linked to a Learning OutcomeAll answers are complete explanations that reveal an effort to understand and obtain mastery of the material.
This criterion is linked to a Learning OutcomeAnswers are in you own words.No quotes unless the quotes are used to expand on your answer (you explain how the quote relates you your answer in your own words).
Total Points: 4.0