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Monetary Theory and Policy NATIONAL OPEN UNIVERSITY OF NIGERIA FACULTY SOCIAL SCIENCES MONETARY THEORY AND POLICY ECO 343 Course Developer Dr. ADEGBOLA Mufutau Benjamin Economics Department Ogun State University Course Editor Dr. Adesina-Uthman Ganiyat. A, Acma, Fmnes, Fce Economics Department National Open University of Nigeria. 1 COURSE GUIDE CONTENT Introduction- - - - --- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 2 Course Content- - - - -- - - -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 3 Course Aims- - - - - - - - - - - - - - - - - - - -- - - - - - - - - - - - - - - - - - - - - - 3 Course Objectives- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- 3 Working through This Course- - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- 5 Course Materials- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - --- 5 Study Units- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- 5 Textbooks and References - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 7 Assignment File - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 8 Presentation Schedule - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 9 Assessment - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 9 Tutor-Marked Assignment (TMAs) - - - - - - - - - - - - - - - - - - - - - - - - -- 9 Final Examination and Gradingv - - - - - - - - - - - - - - - - - - - - - - - - - - - 10 Course Marking Scheme - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- 10 Course Overview- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- - - - - - 11 How to Get the Most from This Course- - - - - - - - - - - - - - -- - - - - - - 12 Tutors and Tutorials- - - - - - - - - - - - - - -- - - - - -- - - - - - - - - - - - - - 15 Summary- - - - - - - - - - - - - - -- - - - - - - - - - - - - - -- - - - - - - - - - - 15 2 Introduction Welcome to ECO: 343 MONETARY THEORY AND POLICY. ECO 343: Monetary Theory and Policy is a three-credit and one-semester undergraduate course for Economics student. The course is made up of nineteen units spread across fifteen lectures weeks. This course guide gives you an insight to monetary theory and policy in an elementary way and how to study the economy in larger dimension. It tells you about the course materials and how you can work your way through these materials. It suggests some general guidelines for the amount of time required of you on each unit in order to achieve the course aims and objectives successfully. Answers to your tutor marked assignments (TMAs) are therein already. Course Content This course is basically on monetary theory and policy and the topics covered include the analysis of monetary policy, monetary policy: instruments and types, changes in the value of money: the quantity theory of money and its variants, supply and demand for money and other Keynesian approaches of demand for money. Course Aims The aims of this course is to give you in-depth understanding of monetary policy analysis as regards Fundamental concept of monetary policy To familiarize students with monetary policy instruments and types To stimulate student‘s knowledge on changes in the value of money To make the students to understand supply and demand for money. To expose the students to rudimentary analysis of other Keynesian approaches of demand for money. Course Objectives To achieve the aims of this course, there are overall objectives which the course is out to achieve though, there are set out objectives for each unit. The unit objectives are included at the beginning of a unit; you should read them before you start working through the unit. You may want to refer to them during your study of the unit to check on your progress. You should always look at the unit objectives after completing a unit. This is to assist the students in accomplishing the tasks entailed in this course. In this way, you can be sure you have done what was required of you by the unit. The objectives serves as 3 study guides, such that student could know if he is able to grab the knowledge of each unit through the sets of objectives in each one. At the end of the course period, the students are expected to be able to: Define and understand the meaning of monetary policy Know the objectives or goals of monetary policy Define and understand the Full Employment and Economic Growth Understand the relationship between Full Employment, Price Stability and Balance of Payment. Understand Price Stability and Balance of Payment Define and understand the term Targets of Monetary Policy Understand the meaning of Market yield on Equity Know the basic indicators of Monetary Policy Define and understand monetary strategies in Nigeria Understand Effectiveness of monetary policy in Nigeria Understand the overview and framework for monetary policy in Nigeria Define and understand the meaning of macroeconomics as a field of study Know the basic macroeconomics concepts History of Monetary Policy Understand the role of monetary policy in a developing economy Know the limitations of monetary policy in less developing countries. Understand Keynes reformulated quantity theory of money Know the superiority of the Keynesian theory over the traditional quantity theory of money Know the criticisms of keynes theory of money and prices Define and understand the concepts and measures of money supply Know the important facts about measures of money supply Know the Keynesian approach to demand for money Understand the motives of holding money Define and understand the Post Keynesian approach of demand for money Know the tobin‘s portfolio and baumol‘s inventory approach to demand for money 4 Working through The Course To successfully complete this course, you are required to read the study units, referenced books and other materials on the course. Each unit contains self-assessment exercises called Student Assessment Exercises (SAE). At some points in the course, you will be required to submit assignments for assessment purposes. At the end of the course there is a final examination. This course should take about 15weeks to complete and some components of the course are outlined under the course material subsection. Course Material The major component of the course, What you have to do and how you should allocate your time to each unit in order to complete the course successfully on time are listed follows: 1. Course guide 2. Study unit 3. Textbook 4. Assignment file 5. Presentation schedule Study Unit There are 19 units in this course which should be studied carefully and diligently. MODULE ONE: ANALYSIS OF MONETARY POLICY Unit One: Meaning of Monetary Policy Unit Two: Trade-off in Monetary Goals Unit Three: Targets of Monetary Policy Unit Four: Strategies and Effectiveness of Monetary Policy Implementation in Nigeria MODULE TWO: MONETARY POLICY: INSTRUMENTS AND TYPES Unit One: Instruments of Monetary Policy Unit Two: Expansionary Monetary Policy Vs Restrictive Monetary Policy Unit Three: Lag in Monetary Policy Unit Four: Role of Monetary Policy in a Developing Economy 5 MODULE THREE: CHANGES IN THE VALUE OF MONEY: THE QUANTITY THEORY OF MONEY AND ITS VARIANTS Unit One: Value Of Money Unit Two: The Cambridge Equations: The Cash Balance Approach Unit Three: The Keynesian Theory of Money and Price Unit Four: Friedman‘s Restatement of Quantity Theory of Money and Supply of Money MODULE FOUR: SUPPLY AND DEMAND FOR MONEY UNIT ONE Money Supply UNIT TWO Determinants of Money Supply UNIT THREE Supply of Money and High-Powered Money UN IT FOUR High Powered Money and Money Multiplier UNIT FIVE Demand for Money MODULE FIVE OTHER KEYNESIAN APPROACHES OF DEMAND FOR MONEY UNIT ONE The Post Keynesian Approach UNIT TWO Friedman‘s Theory of Demand for Money Each study unit will take at least two hours, and it includes the introduction, objective, main content, self-assessment exercise, conclusion, summary and reference. Other areas border on the Tutor-Marked Assessment (TMA) questions. Some of the self-assessment exercises will necessitate discussion, brainstorming and argument with some of your colleagues. You are advised to do so in order to understand and get acquainted with historical economic events as well as notable periods. There are also textbooks under the references and other (on-line and off-line) resources for further reading. They are meant to give you additional information if only you can lay your hands on any of them. You are required to study the materials; practice the self- assessment exercise and tutor-marked assignment (TMA) questions for greater and in- depth understanding of the course. By doing so, the stated learning objectives of the course would have been achieved. 6 Textbook and References For further reading and more detailed information about the course, the following materials are recommended: Adesoji, J.J., (2014). Introduction to Monetary Policy, 4th edition, Dale Publication limited. Adewuyi, A.A., (2012). Monetary Policy and the Economy, a textbook, 1st edition, Meridian Publication limited. Adewunmi, L. K., (2014). Analysis of Demand for Money in an inflationary economy, Journal vol 3, Jillion Publication limited. Ajayi, S. S., (2016). Introduction to money and Banking, 2nd edition, University Press, Ibadan, Oyo state, Nigeria. Bala, A.Z., (2014). Monetary Theory and Policy, 2nd edition, University Publication limited. Becker, B. R., (2012). Money and Banking, 3rd
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