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Monetary Theory

Why do we need this object called "money"? Is it simply because it is necessary to carry out trades? If so, then in our simplistic view of the world, money would be a constraint. What about alternative trading arrangements like barter or credit? This course starts with a micro-founded approach to money using an overlapping generations model and discusses why money is not a constraint but an instrument that arises endogenously leading to welfare gains for the economy. This course further discusses why money is welfare improving vis-a-vis barter or credit, why fiat money and not commodity money, and then we go on to study the relationship between money and other institutions that issue/ use money - financial intermediation & banks, a model of bank risk and bank panic (Diamond-Dybvig model), governments & national debt, fiscal theories of price level & inflation, pension systems, etc.

Prerequisites: ECO 2101 (Microeconomic Theory 1), ECO 2201 (Macroeconomic Theory 1), ECO 2202 (Macroeconomic Theory 2)

Study at Ashoka

Study at Ashoka