The Economics of Money, Banking, and Financial Markets, Global Edition

Cover
Title Page
Copyright Page
About the Author
Brief Contents
Contents in Detail
Preface
Acknowledgments
Global Acknowledgments
Summary
Part 1: Introduction
	Chapter 1: Why Study Money, Banking, and Financial Markets?
		Why Study Financial Markets?
			Debt Markets and Interest Rates
			The Stock Market
		Why Study Financial Institutions and Banking?
			Structure of the Financial System
			Banks and Other Financial Institutions
			Financial Innovation
			Financial Crises
		Why Study Money and Monetary Policy?
			Money and Business Cycles
			Money and Inflation
			Money and Interest Rates
			Conduct of Monetary Policy
			Fiscal Policy and Monetary Policy
		Why Study International Finance?
			The Foreign Exchange Market
			The International Financial System
		Money, Banking, and Financial Markets and Your Career
		How We Will Study Money, Banking, and Financial Markets
			Exploring the Web
		Concluding Remarks
		Summary
		Key Terms
		Questions
		Applied Problems
		Data Analysis Problems
		Web Exercises
		Web References
		Appendix to Chapter 1: Defining Aggregate Output, Income, the Price Level, and the Inflation Rate
			Aggregate Output and Income
			Real Versus Nominal Magnitudes
			Aggregate Price Level
			Growth Rates and the Inflation Rate
	Chapter 2: An Overview of the Financial System
		Function of Financial Markets
		Structure of Financial Markets
			Debt and Equity Markets
			Primary and Secondary Markets
			Exchanges and Over-the-Counter Markets
			Money and Capital Markets
		Financial Market Instruments
			Money Market Instruments
		Following the Financial News Money Market Rates
			Capital Market Instruments
		Following the Financial News Capital Market Interest Rates
		Internationalization of Financial Markets
		Global Are U.S. Capital Markets Losing Their Edge?
			International Bond Market, Eurobonds, and Eurocurrencies
			World Stock Markets
		Function of Financial Intermediaries: Indirect Finance
		Following the Financial News Foreign Stock Market Indexes
			Transaction Costs
		Global The Importance of Financial Intermediaries Relative to Securities Markets: An International Comparison
			Risk Sharing
			Asymmetric Information: Adverse Selection and Moral Hazard
			Economies of Scope and Conflicts of Interest
		Types of Financial Intermediaries
			Depository Institutions
			Contractual Savings Institutions
			Investment Intermediaries
		Regulation of the Financial System
			Increasing Information Available to Investors
			Ensuring the Soundness of Financial Intermediaries
			Financial Regulation Abroad
		Summary
		Key Terms
		Questions
		Applied Problems
		Data Analysis Problems
		Web Exercises
		Web References
	Chapter 3: What Is Money?
		Meaning of Money
		Functions of Money
			Medium of Exchange
			Unit of Account
			Store of Value
		Evolution of the Payments System
			Commodity Money
			Fiat Money
			Checks
			Electronic Payment
			E-Money
		FYI: Are We Headed for a Cashless Society?
		Application: Will Bitcoin Become the Money of the Future?
		Measuring Money
			The Federal Reserve’s Monetary Aggregates
		Following the Financial News The Monetary Aggregates
		FYI: Where Are All the U.S. Dollars?
		Summary
		Key Terms
		Questions
		Applied Problems
		Data Analysis Problems
		Web Exercises
		Web References
Part 2: Financial Markets
	Chapter 4: The Meaning of Interest Rates
		Measuring Interest Rates
			Present Value
		Application: Simple Present Value
		Application: How Much Is That Jackpot Worth?
			Four Types of Credit Market Instruments
			Yield to Maturity
		Application: Yield to Maturity on a Simple Loan
		Application: Yield to Maturity and the Yearly Payment on a Fixed-Payment Loan
		Application: Yield to Maturity and Bond Price for a Coupon Bond
		Application: Yield to Maturity on a Perpetuity
		Application: Yield to Maturity on a Discount Bond
		The Distinction Between Interest Rates and Returns
		Global Negative Interest Rates? Japan First, Then the United States, Then Europe
			Maturity and the Volatility of Bond Returns: Interest-Rate Risk
			Summary
		The Distinction Between Real and Nominal Interest Rates
		Application: Calculating Real Interest Rates
		Summary
		Key Terms
		Questions
		Applied Problems
		Data Analysis Problems
		Web Exercises
		Web References
	Chapter 5: The Behavior of Interest Rates
		Determinants of Asset Demand
			Wealth
			Expected Returns
			Risk
			Liquidity
			Theory of Portfolio Choice
		Supply and Demand in the Bond Market
			Demand Curve
			Supply Curve
			Market Equilibrium
			Supply and Demand Analysis
		Changes in Equilibrium Interest Rates
			Shifts in the Demand for Bonds
			Shifts in the Supply of Bonds
		Application: Changes in the Interest Rate Due to a Change in Expected Inflation: The Fisher Effect
		Application: Changes in the Interest Rate Due to a Business Cycle Expansion
		Application: Explaining Current Low Interest Rates in Europe, Japan, and the United States: Low Inflation and Secular Stagnation
		Supply and Demand in the Market for Money: The Liquidity Preference Framework
		Changes in Equilibrium Interest Rates in the Liquidity Preference Framework
			Shifts in the Demand for Money
			Shifts in the Supply of Money
		Application: Changes in the Equilibrium Interest Rate Due to Changes in Income, the Price Level, or the Money Supply
			Changes in Income
			Changes in the Price Level
			Changes in the Money Supply
		Money and Interest Rates
		Application: Does a Higher Rate of Growth of the Money Supply Lower Interest Rates?
		Summary
		Key Terms
		Questions
		Applied Problems
		Data Analysis Problems
		Web Exercises
		Web References
	Chapter 6: The Risk and Term Structure of Interest Rates
		Risk Structure of Interest Rates
			Default Risk
		FYI: Conflicts of Interest at Credit-Rating Agencies and the Global Financial Crisis
		Application: The Global Financial Crisis and the Baa-Treasury Spread
			Liquidity
			Income Tax Considerations
			Summary
		Application: Effects of the Obama Tax Increase on Bond Interest Rates
		Term Structure of Interest Rates
		Following the Financial News Yield Curves
			Expectations Theory
			Segmented Markets Theory
			Liquidity Premium and Preferred Habitat Theories
			Evidence on the Term Structure
		FYI: The Yield Curve as a Forecasting Tool for Inflation and the Business Cycle
			Summary
		Application: Interpreting Yield Curves, 1980–2017
		Summary
		Key Terms
		Questions
		Applied Problems
		Data Analysis Problems
		Web Exercises
		Web References
	Chapter 7: The Stock Market, the Theory of Rational Expectations, and the Efficient Market Hypothesis
		Computing the Price of Common Stock
			The One-Period Valuation Model
			The Generalized Dividend Valuation Model
			The Gordon Growth Model
		How the Market Sets Stock Prices
		Application: Monetary Policy and Stock Prices
		Application: The Global Financial Crisis and the Stock Market
		The Theory of Rational Expectations
			Formal Statement of the Theory
			Rationale Behind the Theory
			Implications of the Theory
		The Efficient Market Hypothesis: Rational Expectations in Financial Markets
			Rationale Behind the Hypothesis
			Random-Walk Behavior of Stock Prices
		Global Should Foreign Exchange Rates Follow a Random Walk?
		Application: Practical Guide to Investing in the Stock Market
			How Valuable Are Reports Published by Investment Advisers?
			Should You Be Skeptical of Hot Tips?
		FYI: Should You Hire an Ape as Your Investment Adviser?
			Do Stock Prices Always Rise When There Is Good News?
			Efficient Market Prescription for the Investor
		Why the Efficient Market Hypothesis Does Not Imply That Financial Markets Are Efficient
		Application: What Do Stock Market Crashes Tell Us About the Efficient Market Hypothesis and the Efficiency of Financial Markets?
		Behavioral Finance
		Summary
		Key Terms
		Questions
		Applied Problems
		Data Analysis Problems
		Web Exercises
		Web References
Part 3: Financial Institutions
	Chapter 8: An Economic Analysis of Financial Structure
		Basic Facts About Financial Structure Throughout the World
		Transaction Costs
			How Transaction Costs Influence Financial Structure
			How Financial Intermediaries Reduce Transaction Costs
		Asymmetric Information: Adverse Selection and Moral Hazard
		The Lemons Problem: How Adverse Selection Influences Financial Structure
			Lemons in the Stock and Bond Markets
			Tools to Help Solve Adverse Selection Problems
		FYI: The Enron Implosion
		How Moral Hazard Affects the Choice Between Debt and Equity Contracts
			Moral Hazard in Equity Contracts: The Principal–Agent Problem
			Tools to Help Solve the Principal–Agent Problem
		How Moral Hazard Influences Financial Structure in Debt Markets
			Tools to Help Solve Moral Hazard in Debt Contracts
			Summary
		Application: Financial Development and Economic Growth
		FYI: The Tyranny of Collateral
		Application: Is China a Counterexample to the Importance of Financial Development?
		Summary
		Key Terms
		Questions
		Applied Problems
		Data Analysis Problems
		Web Exercises
		Web References
	Chapter 9: Banking and the Management of Financial Institutions
		The Bank Balance Sheet
			Liabilities
			Assets
		Basic Banking
		General Principles of Bank Management
			Liquidity Management and the Role of Reserves
			Asset Management
			Liability Management
			Capital Adequacy Management
		Application: Strategies for Managing Bank Capital
		Application: How a Capital Crunch Caused a Credit Crunch During the Global Financial Crisis
		Managing Credit Risk
			Screening and Monitoring
			Long-Term Customer Relationships
			Loan Commitments
			Collateral and Compensating Balances
			Credit Rationing
		Managing Interest-Rate Risk
			Gap and Duration Analysis
		Application: Strategies for Managing Interest-Rate Risk
		Off-Balance-Sheet Activities
			Loan Sales
			Generation of Fee Income
			Trading Activities and Risk Management Techniques
		Global Barings, Daiwa, Sumitomo, Société Générale, and JP Morgan Chase: Rogue Traders and the Principal–Agent Problem
		Summary
		Key Terms
		Questions
		Applied Problems
		Data Analysis Problems
		Web Exercises
		Web References
	Chapter 10: Economic Analysis of Financial Regulation
		Asymmetric Information as a Rationale for Financial Regulation
			Government Safety Net
		Global The Spread of Government Deposit Insurance Throughout the World: Is This a Good Thing?
			Drawbacks of the Government Safety Net
		Types of Financial Regulation
			Restrictions on Asset Holdings
			Capital Requirements
		Global Where Is the Basel Accord Heading After the Global Financial Crisis?
			Prompt Corrective Action
			Financial Supervision: Chartering and Examination
			Assessment of Risk Management
			Disclosure Requirements
			Consumer Protection
			Restrictions on Competition
			Summary
		Global International Financial Regulation
		Summary
		Key Terms
		Questions
		Applied Problems
		Data Analysis Problems
		Web Exercises
		Web References
	Chapter 11: Banking Industry: Structure and Competition
		Historical Development of the Banking System
			Multiple Regulatory Agencies
		Financial Innovation and the Growth of the “Shadow Banking System”
			Responses to Changes in Demand Conditions: Interest-Rate Volatility
			Responses to Changes in Supply Conditions: Information Technology
			Securitization and the Shadow Banking System
			Avoidance of Existing Regulations
		FYI: Bruce Bent and the Money Market Mutual Fund Panic of 2008
			Financial Innovation and the Decline of Traditional Banking
		Structure of the U.S. Commercial Banking Industry
			Restrictions on Branching
			Response to Branching Restrictions
		Bank Consolidation and Nationwide Banking
			The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
			What Will the Structure of the U.S. Banking Industry Look Like in the Future?
		Global Comparison of Banking Structure in the United States and Abroad
			Are Bank Consolidation and Nationwide Banking Good Things?
		Separation of Banking and Other Financial Service Industries
			Erosion of Glass-Steagall
			The Gramm-Leach-Bliley Financial Services Modernization Act of 1999: Repeal of Glass-Steagall
			Implications for Financial Consolidation
			Separation of Banking and Other Financial Services Industries Throughout the World
		FYI: The Global Financial Crisis and the Demise of Large, Free-Standing Investment Banks
		Thrift Industry: Regulation and Structure
			Savings and Loan Associations
			Mutual Savings Banks
			Credit Unions
		International Banking
			Eurodollar Market
		Global Ironic Birth of the Eurodollar Market
			Structure of U.S. Banking Overseas
			Foreign Banks in the United States
		Summary
		Key Terms
		Questions
		Data Analysis Problems
		Web Exercises
		Web References
	Chapter 12: Financial Crises in Advanced Economies
		Global The European Sovereign Debt Crisis
		What Is a Financial Crisis?
		Dynamics of Financial Crises
			Stage One: Initial Phase
			Stage Two: Banking Crisis
			Stage Three: Debt Deflation
		Application: The Mother of All Financial Crises: The Great Depression
			The U.S. Stock Market Crash
			Worldwide Decline in Asset Prices
			Bank Failures
			Economic Contraction and Debt Deflation
		The Global Financial Crisis of 2007–2009
			Causes of the 2007–2009 Financial Crisis
		FYI: Collateralized Debt Obligations (CDOs) and Credit Default Swaps
			Effects of the 2007–2009 Financial Crisis
		Inside the Fed Was the Fed to Blame for the Housing Price Bubble?
			Height of the 2007–2009 Financial Crisis
		Government Intervention and the Recovery
			Short-Term Responses and Recovery
		Global Latvia’s Different and Controversial Response: Expansionary Contraction
		Stabilizing the Global Financial System: Long-Term Responses
			Global Financial Regulatory Framework
			Policy Areas at the National Level
		FYI: The Libor Scandal
		Future Regulations and Policy Areas at the International Level
			Bilateral and Multilateral Supervisory Cooperation
			Collective Supervisory Cooperation
			Collectively Coordinated Macroeconomic Stability Plans
			Self-Discipline
		Summary
		Key Terms
		Questions
		Data Analysis Problems
		Web Exercises
	Chapter 13: Financial Crises in Emerging Economies
		Dynamics of Financial Crises in Emerging Market Economies
			Stage One: Initial Phase
			Stage Two: Currency Crisis
			Stage Three: Full-Fledged Financial Crisis
		Application: Crisis in South Korea, 1997–1998
			Financial Liberalization and Globalization Mismanaged
			Perversion of the Financial Liberalization and Globalization Process: Chaebols and the South Korean Crisis
			Stock Market Decline and Failure of Firms Increase Uncertainty
			Adverse Selection and Moral Hazard Problems Worsen, and the Economy Contracts
			Currency Crisis Ensues
			Final Stage: Currency Crisis Triggers Full-Fledged Financial Crisis
			Recovery Commences
		Global China and the “Noncrisis” in 1997–1998
		Application: The Argentine Financial Crisis, 2001–2002
			Severe Fiscal Imbalances
			Adverse Selection and Moral Hazard Problems Worsen
			Bank Panic Begins
			Currency Crisis Ensues
			Currency Crisis Triggers Full-Fledged Financial Crisis
			Recovery Begins
		Global When an Advanced Economy Is Like an Emerging Market Economy: The Icelandic Financial Crisis of 2008
		Preventing Emerging Market Financial Crises
			Beef Up Prudential Regulation and Supervision of Banks
			Encourage Disclosure and Market-Based Discipline
			Limit Currency Mismatch
			Sequence Financial Liberalization
		Summary
		Key Terms
		Questions
		Data Analysis Problems
		Web References
Part 4: Central Banking and the Conduct of Monetary Policy
	Chapter 14: Central Banks
		Origins Of The Central Banking System
		Variations in The Functions and Structures of Central Banks
			The European Central Bank, the Euro System, and the European System of Central Banks
		Global Who Should Own Central Banks?
			Decision-making Bodies of the ECB
		Global The Importance of the Bundesbank Within the ECB
			How Monetary Policy Is Conducted Within the ECB
		Global Are Non-Euro Central Banks Constrained by Membership In the EU?
			The Federal Reserve System
			Comparing the ECB and the Fed
			The Bank of England
		Global Brexit and the BoE
		Structure of Central Banks in Larger Economies
		Structure and Independence of Central Banks in Emerging Market Economies
		Should Central Banks Be Independent
			The Case for Independence
			The Case Against Independence
			The Trend Toward Greater Independence
		Summary
		Key Terms
		Questions
		Web Exercises
	Chapter 15: The Money Supply Process
		Three Players in the Money Supply Process
		The Fed’s Balance Sheet
			Liabilities
			Assets
		Control of the Monetary Base
			Federal Reserve Open Market Operations
			Shifts from Deposits into Currency
			Loans to Financial Institutions
			Other Factors That Affect the Monetary Base
			Overview of the Fed’s Ability to Control the Monetary Base
		Multiple Deposit Creation: A Simple Model
			Deposit Creation: The Single Bank
			Deposit Creation: The Banking System
			Deriving the Formula for Multiple Deposit Creation
			Critique of the Simple Model
		Factors That Determine the Money Supply
			Changes in the Nonborrowed Monetary Base, MBn
			Changes in Borrowed Reserves, BR, from the Fed
			Changes in the Required Reserve Ratio, rr
			Changes in Excess Reserves
			Changes in Currency Holdings
		Overview of the Money Supply Process
		The Money Multiplier
			Deriving the Money Multiplier
			Intuition Behind the Money Multiplier
			Money Supply Response to Changes in the Factors
		Application: Quantitative Easing and the Money Supply, 2007–2017
		Summary
		Key Terms
		Questions
		Applied Problems
		Data Analysis Problems
		Web Exercises
		Web References
	Chapter 16: Tools of Monetary Policy
		The Market for Reserves and the Federal Funds Rate
			Demand and Supply in the Market for Reserves
			How Changes in the Tools of Monetary Policy Affect the Federal Funds Rate
		Application: How the Federal Reserve’s Operating Procedures Limit Fluctuations in the Federal Funds Rate
		Conventional Monetary Policy Tools
			Open Market Operations
		Inside the Fed A Day at the Trading Desk
			Discount Policy and the Lender of Last Resort
		Inside the Fed Using Discount Policy to Prevent a Financial Panic
			Reserve Requirements
			Interest on Reserves
			Relative Advantages of the Different Tools
		Nonconventional Monetary Policy Tools and Quantitative Easing
			Liquidity Provision
			Large-Scale Asset Purchases
		Inside the Fed Fed Lending Facilities During the Global Financial Crisis
			Quantitative Easing Versus Credit Easing
			Forward Guidance
			Negative Interest Rates on Banks’ Deposits
		Monetary Policy Tools of the European Central Bank
			Open Market Operations
			Lending to Banks
			Interest on Reserves
			Reserve Requirements
		Summary
		Key Terms
		Questions
		Applied Problems
		Data Analysis Problems
		Web Exercises
		Web References
	Chapter 17: The Conduct of Monetary Policy: Strategy and Tactics
		The Price Stability Goal and the Nominal Anchor
			The Role of a Nominal Anchor
			The Time-Inconsistency Problem
		Other Goals of Monetary Policy
			High Employment and Output Stability
			Economic Growth
			Stability of Financial Markets
			Interest-Rate Stability
			Stability in Foreign Exchange Markets
		Should Price Stability Be the Primary Goal of Monetary Policy?
			Hierarchical Versus Dual Mandates
			Price Stability as the Primary, Long-Run Goal of Monetary Policy
		Inflation Targeting
			Inflation Targeting in New Zealand, Canada, and the United Kingdom
			Advantages of Inflation Targeting
			Disadvantages of Inflation Targeting
		The Evolution of the Federal Reserve’s Monetary Policy Strategy
			The Fed’s “Just Do It” Monetary Policy Strategy
			The Long Road to Inflation Targeting
		Inside the Fed Ben Bernanke’s Advocacy of Inflation Targeting
		Global The European Central Bank’s Monetary Policy Strategy
		Lessons for Monetary Policy Strategy from the Global Financial Crisis
			Implications for Inflation Targeting
		Should Central Banks Try to Stop Asset-Price Bubbles?
			Two Types of Asset-Price Bubbles
			The Debate Over Whether Central Banks Should Try to Pop Bubbles
		Tactics: Choosing the Policy Instrument
			Criteria for Choosing the Policy Instrument
		Tactics: The Taylor Rule
		Inside the Fed The Fed’s Use of the Taylor Rule
		Inside the Fed Fed Watchers
		Summary
		Key Terms
		Questions
		Applied Problems
		Data Analysis Problems
		Web Exercises
		Web References
Part 5: International Finance and Monetary Policy
	Chapter 18: The Foreign Exchange Market
		Foreign Exchange Market
		Following the Financial News Foreign Exchange Rates
			What Are Foreign Exchange Rates?
			Why Are Exchange Rates Important?
			How Is Foreign Exchange Traded?
		Exchange Rates in the Long Run
			Theory of Purchasing Power Parity
		Application: Burgernomics: Big Macs and PPP
			Factors That Affect Exchange Rates in the Long Run
		Exchange Rates in the Short Run: A Supply and Demand Analysis
			Supply Curve for Domestic Assets
			Demand Curve for Domestic Assets
			Equilibrium in the Foreign Exchange Market
		Explaining Changes in Exchange Rates
			Shifts in the Demand for Domestic Assets
			Recap: Factors That Change the Exchange Rate
		Application: Effects of Changes in Interest Rates on the Equilibrium Exchange Rate
		Application: The Global Financial Crisis and the Dollar
		Application: Brexit and the British Pound
		Summary
		Key Terms
		Questions
		Applied Problems
		Data Analysis Problems
		Web Exercises
		Web References
		Appendix to Chapter 18: The Interest Parity Condition
			Comparing Expected Returns on Domestic and Foreign Assets
			Interest Parity Condition
	Chapter 19: The International Financial System
		Intervention in the Foreign Exchange Market
			Foreign Exchange Intervention and the Money Supply
		Inside the Fed A Day at the Federal Reserve Bank of New York’s Foreign Exchange Desk
			Unsterilized Intervention
			Sterilized Intervention
		Balance of Payments
			Current Account
			Financial Account
		Global Should We Worry About the Large U.S. Current Account Deficit?
		Exchange Rate Regimes in the International Financial System
			Gold Standard
			The Bretton Woods System
			How a Fixed Exchange Rate Regime Works
			Speculative Attacks
		Application: The Foreign Exchange Crisis of September 1992
			The Policy Trilemma
		Application: How Did China Accumulate $4 Trillion of International Reserves?
			Monetary Unions
			Managed Float
		Global Will the Euro Survive?
		Capital Controls
			Controls on Capital Outflows
			Controls on Capital Inflows
		The Role of the IMF
			Should the IMF Act as an International Lender of Last Resort?
		International Considerations and Monetary Policy
			Direct Effects of the Foreign Exchange Market on Monetary Policy
			Exchange Rate Considerations
		To Peg or Not to Peg: Exchange-Rate Targeting as an Alternative Monetary Policy Strategy
			Advantages of Exchange-Rate Targeting
			Disadvantages of Exchange-Rate Targeting
			When Is Exchange-Rate Targeting Desirable for Industrialized Countries?
			When Is Exchange-Rate Targeting Desirable for Emerging Market Countries?
			Currency Boards
		Global Argentina’s Currency Board
			Dollarization
		Summary
		Key Terms
		Questions
		Applied Problems
		Data Analysis Problems
		Web Exercises
		Web References
Part 6: Monetary Theory
	Chapter 20: Quantity Theory, Inflation, and the Demand for Money
		Quantity Theory of Money
			Velocity of Money and Equation of Exchange
			From the Equation of Exchange to the Quantity Theory of Money
			Quantity Theory and the Price Level
			Quantity Theory and Inflation
		Application: Testing the Quantity Theory of Money
		Budget Deficits and Inflation
			Government Budget Constraint
			Hyperinflation
		Application: The Zimbabwean Hyperinflation
		Keynesian Theories of Money Demand
			Transactions Motive
			Precautionary Motive
			Speculative Motive
			Putting the Three Motives Together
		Portfolio Theories of Money Demand
			Theory of Portfolio Choice and Keynesian Liquidity Preference
			Other Factors That Affect the Demand for Money
			Summary
		Empirical Evidence for the Demand for Money
			Interest Rates and Money Demand
			Stability of Money Demand
		Summary
		Key Terms
		Questions
		Applied Problems
		Data Analysis Problems
		Web Exercises
		Web References
	Chapter 21: The IS Curve
		Planned Expenditure and Aggregate Demand
		The Components of Aggregate Demand
			Consumption Expenditure
		FYI: Meaning of the Word Investment
			Planned Investment Spending
			Government Purchases and Taxes
			Net Exports
		Goods Market Equilibrium
			Solving for Goods Market Equilibrium
			Deriving the IS Curve
		Understanding the IS Curve
			What the IS Curve Tells Us: Intuition
			What the IS Curve Tells Us: Numerical Example
			Why the Economy Heads Toward Equilibrium
		Factors that Shift the IS Curve
			Changes in Government Purchases
		Application: The Vietnam War Buildup, 1964–1969
			Changes in Taxes
		Application: The Fiscal Stimulus Package of 2009
			Changes in Autonomous Spending
			Changes in Financial Frictions
			Summary of Factors That Shift the IS Curve
		Summary
		Key Terms
		Questions
		Applied Problems
		Data Analysis Problems
		Web Exercises
		Web References
	Chapter 22: The Monetary Policy and Aggregate Demand Curves
		The Federal Reserve and Monetary Policy
		The Monetary Policy Curve
			The Taylor Principle: Why the Monetary Policy Curve Has an Upward Slope
			Shifts in the MP Curve
			Movements Along Versus Shifts in the MP Curve…
		Application: Movement Along the MP Curve: The Rise in the Federal Funds Rate Target, 2004–2006
		Application: Shift in the MP Curve: Autonomous Monetary Easing at the Onset of the Global Financial Crisis
		The Aggregate Demand Curve
			Deriving the Aggregate Demand Curve Graphically
			Factors That Shift the Aggregate Demand Curve
		FYI: Deriving the Aggregate Demand Curve Algebraically
		Summary
		Key Terms
		Questions
		Applied Problems
		Data Analysis Problems
		Web Exercises
		Web References
	Chapter 23: Aggregate Demand and Supply Analysis
		Aggregate Demand
		Following the Financial News Aggregate Output, Unemployment, and Inflation
			Deriving the Aggregate Demand Curve
			Factors That Shift the Aggregate Demand Curve
		FYI: What Does Autonomous Mean?
		Aggregate Supply
			Long-Run Aggregate Supply Curve
			Short-Run Aggregate Supply Curve
			Price Stickiness and the Short-Run Aggregate Supply Curve
		Shifts in the Aggregate Supply Curves
			Shifts in the Long-Run Aggregate Supply Curve
			Shifts in the Short-Run Aggregate Supply Curve
		Equilibrium in Aggregate Demand and Supply Analysis
			Short-Run Equilibrium
			How the Short-Run Equilibrium Moves to the Long-Run Equilibrium over Time
			Self-Correcting Mechanism
		Changes in Equilibrium: Aggregate Demand Shocks
		Application: The Volcker Disinflation, 1980–1986
		Application: Negative Demand Shocks, 2001–2004
		Changes in Equilibrium: Aggregate Supply (Inflation) Shocks
			Temporary Supply Shocks
		Application: Negative Supply Shocks, 1973–1975 and 1978–1980
			Permanent Supply Shocks and Real Business Cycle Theory
		Application: Positive Supply Shocks, 1995–1999
			Conclusions
		Application: Negative Supply and Demand Shocks and the 2007–2009 Financial Crisis
		AD/AS Analysis of Foreign Business Cycle Episodes
		Application: The United Kingdom and the 2007–2009 Financial Crisis
		Application: China and the 2007–2009 Financial Crisis
		Summary
		Key Terms
		Questions
		Applied Problems
		Data Analysis Problems
		Web Exercises
		Web References
		Appendix to Chapter 23: The Phillips Curve and the Short-Run Aggregate Supply Curve
			The Phillips Curve
				Phillips Curve Analysis in the 1960s
			FYI: The Phillips Curve Trade-Off and Macroeconomic Policy in the 1960s
				The Friedman-Phelps Phillips Curve Analysis
				The Phillips Curve After the 1960s
				The Modern Phillips Curve
				The Modern Phillips Curve with Adaptive (Backward-Looking) Expectations
			The Short-Run Aggregate Supply Curve
	Chapter 24: Monetary Policy Theory
		Response of Monetary Policy to Shocks
			Response to an Aggregate Demand Shock
			Response to a Permanent Supply Shock
			Response to a Temporary Supply Shock
			The Bottom Line: The Relationship Between Stabilizing Inflation and Stabilizing Economic Activity
		How Actively Should Policymakers Try to Stabilize Economic Activity?
			Lags and Policy Implementation
		Inflation: Always and Everywhere a Monetary Phenomenon
		FYI: The Activist/Nonactivist Debate Over the Obama Fiscal Stimulus Package
		Causes of Inflationary Monetary Policy
			High Employment Targets and Inflation
		Application: The Great Inflation
		Monetary Policy at the Zero Lower Bound
			Deriving the Aggregate Demand Curve with the Zero Lower Bound
			The Disappearance of the Self-Correcting Mechanism at the Zero Lower Bound
		Application: Nonconventional Monetary Policy and Quantitative Easing
			Liquidity Provision
			Asset Purchases and Quantitative Easing
			Management of Expectations
		Application: Abenomics and the Shift in Japanese Monetary Policy in 2013
		Summary
		Key Terms
		Questions
		Applied Problems
		Data Analysis Problems
		Web Exercises
		Web References
	Chapter 25: The Role of Expectations in Monetary Policy
		Lucas Critique of Policy Evaluation
			Econometric Policy Evaluation
		Application: The Term Structure of Interest Rates
		Policy Conduct: Rules or Discretion?
			Discretion and the Time-Inconsistency Problem
			Types of Rules
			The Case for Rules
		FYI: The Political Business Cycle and Richard Nixon
			The Case for Discretion
			Constrained Discretion
		Global The Demise of Monetary Targeting in Switzerland
		The Role of Credibility and a Nominal Anchor
			Benefits of a Credible Nominal Anchor
			Credibility and Aggregate Demand Shocks
			Credibility and Aggregate Supply Shocks
		Application: A Tale of Three Oil Price Shocks
			Credibility and Anti-Inflation Policy
		Global Ending the Bolivian Hyperinflation: A Successful Anti-Inflation Program
		Application: Credibility and the Reagan Budget Deficits
		Approaches to Establishing Central Bank Credibility
			Nominal GDP Targeting
		Inside the Fed The Appointment of Paul Volcker, Anti-Inflation Hawk
			Appoint “Conservative” Central Bankers
		Summary
		Key Terms
		Questions
		Applied Problems
		Data Analysis Problems
		Web Exercises
	Chapter 26: Transmission Mechanisms of Monetary Policy
		Transmission Mechanisms of Monetary Policy
			Traditional Interest-Rate Channels
			Other Asset Price Channels
			Credit View
		FYI: Consumers’ Balance Sheets and the Great Depression
			Why Are Credit Channels Likely to Be Important?
		Application: The Great Recession
		Lessons for Monetary Policy
		Application: Applying the Monetary Policy Lessons to Japan’s Two Lost Decades
		Summary
		Key Terms
		Questions
		Applied Problems
		Data Analysis Problems
		Web Exercises
		Web References
Glossary
Index
Back Cover