Faculty of Business: Finance and Economics
Credit points: 6 cp

Subject level: Undergraduate

Result Type: Grade and marks

Requisite(s): 25555 Macroeconomics: Theory and Applications AND 25622 Quantitative Business Analysis
These requisites may not apply to students in certain courses.
There are also course requisites for this subject. See access conditions.

Handbook description

This subject encompasses the theoretical aspects of monetary economics as well as its application both to the practice of monetary policy and the prediction of likely future trends in funds flows, credit aggregates and other macroeconomic statistics. Other topics include: special issues dealing with monetary policy in Australia; systemic crises; international comparisons of monetary policy as practised by other central banks; and the prediction of interest rate movements.

Subject objectives/outcomes

On successful completion of this subject students should be able to:

1. Understand and interpret monetary phenomena in the economy
2. Understand the principles and practice of monetary policy
3. Think critically and in particular to compare and evaluate propositions about the workings of the financial system and financial policy.

Contribution to graduate profile

This course extends material covered in Macroeconomics: Theory and Applications. It considers how monetary and financial conditions affect macroeconomic conditions, how interest rates are determined and how monetary policy is conducted.

Teaching and learning strategies

This subject is taught through lectures and tutorials. It refers to Quarterly Statement on Monetary Policy published by the Reserve Bank of Australia in examining the application of the principles of monetary economics in an Australian context. It enables students to track developments in monetary policy stance and the economy in Australia.

Content

• Monetary issues in the Australian economy
• Neoclassical and Keynesian models of a monetary economy
• Theories of money demand
• Money supply formation processes and credit rationing
• Theories of interest rate determination
• Theories of inflation and money neutrality
• The Phillips Curve and Expectations Augmented Phillips Curve
• The transmission of monetary impulses
• Australian policy experience and inflation targeting.

Assessment

Essay (Individual)	30%
This assessment is designed to develop and test students' ability to think critically about the structure of monetary theory and how that theory may be applied to understand current monetary phenomenon including policy. It thus indirectly tests objectives 1-3.
Class Tests (Individual)	10%
Class tests examine the theoretical topics covered in the subject in an ongoing way and assist in evaluating the development of students' understanding of monetary phenonena under objective 1. They also provide on-going feedback on student performance throughout the semester.
Final Examination (Individual)	60%
The final examination assures objectives 1, 2 and 3. It requires students to shown an appreciation of the theoretical content of the subject and a wholistic understanding of monetary theory and its policy applications. It thus provides an opportunity to test the skills students have developed.

Tests and examination will be conducted under University examination conditions, and hence thoroughly address concerns regarding secure assessment. The assignment will be secured through a combination of updating of assessment tasks across semesters and/or plagiarism detection software.

Recommended text(s)

Mishkin F.S. (2004) The Economics of Money, Banking and Financial Markets, 7th ed. Thomson/South-Western, Ohio.

Indicative references

Juttner J.D. and Hawtrey, K.M. (1997) Financial Markets, Money and Risk, 4th ed. Longman, Australia.