MABE 2010: First Post

Apologies for the delay.

**** Updated July 14th ****

Here are the lecture materials for download:

• Lecture 1: Introduction
• Lecture 2: Fixed income market
• Lecture 3: Term structure of interest rates
• Lecture 4: Market expectations
• Lecture 7: Stock market
  

NB: Lectures 5 and 6 in previous years addressed Foreign exchange market, which this year will be covered by my colleague instead.

All the groups should now have their topics confirmed. Do let me know as soon as possible if you are not yet part of any group, or if your group is still in search of a topic.

Let me repeat what is expected of this assignment.

1. Key output includes (1) a 15-20 minute presentation by one or more representatives from the group, (2) two hard copies of the presentation materials for me and my colleague, and (3) a report containing the details of the research. After your presentation, please send soft copies of both the presentation and report to me as well.

2. The presentation should aim to be both informative and fun. The key aim is to engage your audience and educate them. I plan to hold presentations on the last 2 lectures of our class, but now realize that there's only one lecture on the last week, i.e. 28th. I will try to schedule 2 classes for that last week, so that all groups will have more time to prepare. The ordering of presentation will be randomized, and announced soon.

3. There is no strict requirement about the length of the report, as I place most emphasis on the quality and depth of research rather than length. For example, there's little point of including pages and pages of tables and diagrams if there's no discussion of what they mean. But if you really need a ballpark, previous years' reports range from 10ish to 30ish pages.

4. The research topics are pretty loosely defined, so you are free as a group to decide what angles to conduct your research.


Let me know if you have any questions.

MABE 2009: Revision Questions

In this post, I will answer questions that some of you sent me while revising for exams.

1. As, Price stability suggests that inflation should be "low and stable", should we set inflation close to zero as possible? Is the result of setting inflation close zero mean that we will be at risk of deflation? And what is the appropriate rate of inflation (inflation Targeting) or it depend on each in country forecast as New Keynesian suggested?

This is a good question, and one that I didn't get to address properly in lectures. If price stability is so important, why don't we aim for zero inflation? After all, our ultimate aim is price stability rather than inflation stability. There are at least 2 reasons why, in practice, targeting a low but positive inflation may be a good idea.

First, as you stated, there is a danger of deflation, which can make monetary policy ineffective and thus can be very costly (Japan's lost decade is the prime example here). So, even if zero inflation may be desirable in principles, the upside and downside costs of missing your target is highly asymmetric: you are much happier to end up with 1% inflation, rather than -1%. Just to be on the safe side, targeting a small but positive inflation reduces the deflation risk.

Secondly, it is well-known that our measurement of inflation is imperfect, especially because we cannot account for the quality improvement of goods. For example, the cars' prices may rise every year, but does that mean we have a higher inflation, or simply that cars this year are better than last year model? Due to this unseen quality adjustment, economists are aware that our measured inflation is probably subject to upward bias: it tends to overstates the true inflation. Hence, while we may aim for close to zero inflation, in practice we target a slightly positive number.

What inflation number precisely? I think most central banks would agree that somewhere around 1-2% represents price stability. Countries with higher targets may be those whose inflation targets are still 'converging' towards their long-run ultimate objective.

MABE 2009: Lectures 7,8,9,10 and Exams Prep

Long-overdue presentations for the rest of the course have been uploaded.

• Lecture 7: Stock Market
• Lecture 8: Review of Macro Theory
• Lecture 9: Monetary Policy Frameworks
• Lecture 10: Assessing Inflation Targeting
• Exams Prep
  

If you have any questions/problems during your revision, please let me know!

MABE 2009: Lectures 5 and 6 Materials

Presentation files and readings are available for downloads

• Lecture 5: Foreign Exchange
  
• Lecture 6: Modern Views on Exchange Rates
  

MABE 2009: Lectures 3 and 4 Materials

Lecture materials for download...

• Lecture 3: Term Structure of Interest Rates
• Lecture 4: Market Expectations
  

You may also find the following extra readings useful

• "Gauging the market's expectations about monetary policy" by Simon Kwan @ Fed San Fran
• "What policymakers can learn from asset prices" by Ben Bernanke
  

MABE 2009: Lectures 1 and 2 Materials

Lecture materials can be downloaded here...

• Lecture 1
• Lecture 2

I've told the class what the password was, but if you forget what it is, please send me an email.

I've included the excel files and other reference materials in the lecture pack as well, in case you find them useful.

MABE: Past Exam Questions

Here's the exam questions in 2007, which may (or may not) be useful for your revisions.

Please note that

• Some part of the course has been revised, especially the part covered by Dr. Surach, which is incorporated only this year. So question 3 in the old exam is no longer applicable this year, for example.
  
• The old exam questions are meant to give you some idea of the style of questions that could be asked in exams. The actual contents of the questions need not be similar, so do not base your revisions solely on these questions. The safest approach is to stick with what is covered in the lectures.
• For reasons outlined above, I will not provide solutions to these exam questions. If you wish to cross-check your answers, the best way would be to consult among your friends.

Exams-related questions are welcomed. Leave your message!

MABE: Monetary Theory and Policy (Dr. Surach)

Here's a collection of course materials for lectures delivered by Dr. Surach.

MABE: Simulation Game Data, and Other Comments

First of all, I hope you are already aware that tomorrow class (Sat 5th) is postponed to Sunday 13th! Check out the updated schedule here.

Next, regarding the simulation game, links to various data sources can be found at the following:

• Economic Data @ Economics Network
  

For those writing Fed reports, you may want to go straight to the following

• US Economic Data @ FRED

Those writing ECB reports, please see

• EU Statistics @ ECB

Do let me know if there is any other data series which you want, but cannot obtain from the web. I'll try to get them for you if possible.

MABE: Extra Readings for Lecture 4

Here are some extra readings for lecture 4 which you may find helpful.

For a comprehensive coverage of instruments in the money market (eurodollars, fed fund futures, swaps etc) please check out

• Instruments of the Money Market: by Richmond Fed

On how to infer market expectations from the prices of these markets, please see the following introductory article

• Gauging the Market's Expectations about Monetary Policy: by San Fran Fed

Do check out the references therein, which include a more detailed paper and a speech by Ben Bernanke on the topic.

I have gathered some of these papers plus additional ones that may be of interests, and you can download them HERE. Most of these go well beyond the scope of this course, so you only need to read these selectively!

MABE: Lecture 6 Note

Here's the final note for my final lecture

• Lecture 6: The Stock Market

Dr. Surach will take over from Saturday July 6th onwards. Drop me any questions in the meantime, either via email or on the chat box to the right. And check this website periodically, as I may post some materials.

MABE: Lecture 5 Note & Some Fixed Income Readings

Here's note for

• Lecture 5: Foreign Exchange Market

Some readings on forward rates computation, and duration/convexity etc as requested

• Fixed Income Readings

MABE: Lecture 3 and 4 Notes

Here're notes for

• Lecture 3: Explaining Movements in Interest Rates and Term Structure


• Lecture 4: Market Expectations of Interest Rates
  

A couple of excel files shown in class are included in the pack.

MABE Simulation Game: Primer on Economic Data

In your assignments, the reports (both economic and financial) will need to discuss the implications of real-life incoming economic data. To understand what these are, and what they mean, a good place to start would be the following 'primers'

• US Economic Indicators (@ Forex)
• Euro-Zone Economic Indicators (@ FXwords)

For basic explanation on economic indicators, e.g. what does 'annualised' mean etc, please see

• Economic Indicator User Guide (@ FX words)

More materials to be posted here. Do check back.

MABE: Lecture 2 Fixed Income Securities

Here's lecture ppt file.

MABE: Money and Financial Management in Economic Development

That's mouthful for a course title.

Here's Lecture-1 note and course descriptions .

Details about the assignments tba, but probably will be similar to last year as I mentioned.