financialmacroeconomics.com

Vivek Moorthy is presently with St Joseph's Institute of Management, Bangalore, India, as Distinguished Professor. Prior to that, he was Professor at the Indian Institute of Management Bangalore. There he taught the core course (First Year) in Macroeconomics and two elective Courses Financial Macroeconomics & Global Macroeconomics & Financial Markets, mostly to second year MBAs in the flagship program, and variants of these courses in the doctoral program and other programs too.

Prior to IIM Bangalore, he was at the Federal Reserve Bank of New York. Initially he was working on GDP and inflation projections in the Domestic Research Division and later was Senior Economist in the Foreign Exchange (Analysis) Function. Prior to that he taught at Pennsylvania State University. His PhD is from UCLA and M.A. in Economics from Jawaharlal Nehru University, New Delhi.
A full list of his publications is on the website economicsperiscope.com

To purchase, click here.

Non Amazon detailed reviews

Front and Back of First Edition(2017).

Clarificatory Note for Book Buyers and Errata.

This website hosts the content of my books in the SCHEMATIC and related course outlines. Earlier, some of this content was displayed on my original website economicsperiscope.com, started about ten years ago, which is basically a strictly chronological list of my publications.Content from my book(s) and course material was being added as it evolved. However, the periscope website was becoming too dense in two ways. First, the book material at the top was becoming cumbersome. Second, I felt those readers interested only in the publications may find the book content to be an interference. Vice versa too: those interested in the course material would find the publications to be an interference. Although my publications and my book(s) are very closely connected and have evolved simultaneously, some time back I decided to move my course material here. Future relevant course material will be posted here.

To comprehend the contents here, and as to why and how the planned composite book on the left hand side, well over a decade ago expanded into three mini books on the right, I request you to read this Cunningham Constraint 2019 note. Full title: Coping with the Colossal, Curricular Cunningham Constraint!

The SCHEMATIC of My Books (please print and peruse carefully)

Financial Macroeconomics Course Outline

Global Macroeconomics & Financial Markets Course Outline

Exam questions and answers, PPTs etc. available to potential users upon specific requests.

Why IS/LM is Irrelevant and Wrong: An Explanation (To class, Feb 2015)

Summary of my Critique of Blinder-Solow Debt Stability Proofs in their 1974 Debate with Milton Friedman

The Chronology and Evolution of These Mini Books (as of February 2021)

An earlier version of EGI was published in 2014 titled Understanding Stagflation: Past and Present as an e-book, with five chapters, by McGraw Hill Education (India). Due to inability to get some vital copyright permissions in time, the hard copy of that book had to be postponed. After obtaining those permissions much later, the expanded version comprising eight chapters, with the last Chapter on India's 2016 Demonetization, was brought out in 2017 as Applied Macroeconomics: Employment, Growth and Inflation (acronym EGI to be kept in mind).

The TOC for the second mini book Financial Macroeconomics: A Policy Rate Approach (acronym PRA) is shown below. As of January 2021, my tentative plan is to merge these two into one book, but leaving out the last mini book on global macroeconomics.

Ch.'ZERO'	Preface and Table of Contents of Applied Macroeconomics (EGI)	(page i to xx)
CH. 1	Building the Framework for a Growing Economy	Page #
1.1	Demand and Supply in Macroeconomics	1
1.2	Factors Affecting Aggregate Demand	3
1.3	Factors Affecting Aggregate Supply	5
	1.3.1 Conventional Approach to Growth for Developing Economies	5
	1.3.2 Solow Growth Framework	6
1.4	Alternative Approach to Aggregate Supply	8
1.5	The Ease of Doing Business Survey	11
	1.5.1 Links between Output and Ease of Doing Business	13
	1.5.2 Other Important Determinants of Growth	19
1.6	Labour Supply Chain and Potential GDP Growth	21
1.7	Choosing the Right Output Measure for Macroeconomic Analysis	23
	1.7.1 Fluctuations around Potential GDP: A Hypothetical Case	25
	1.7.2 Classifying Business Cycle Phases Theoretically	26
1.8	Links between Unemployment Rate and Output	29
	1.8.1 Okun's Analysis and Okun's Law	29
	1.8.2 The Algebra and Economics of Okun's Law	31
	1.8.3 Okun's Law Regressions (Advanced Section)	34
1.9	Estimates of Potential GDP and their Limitations	35
1.10	Classification of Actual Recessions	37
Extra Q.	#10 Estimating India's potential GDP as of data November 2021	45
CH. 2	From Short-Run to Long-Run Phillips Curve
2.1	Impact of Changing Aggregate Demand on Unemployment	48
2.2	The Original Phillips Curve	49
2.3	The Phillips Curve Moves to America	52
	2.3.1 The Phillips Curve as a Policy Choice	53
2.4	The Friedman-Phelps Expectations Augmented Phillips Curve	54
	2.4.1 Level Versus Change Effects Upon Inflation	56
2.5	Evidence for the Prediction of Rising Inflation	58
	2.5.1 The Shifting Phillips Curve in European Countries	60
2.6	Global Evidence on the Natural Rate Hypothesis	61
	2.6.1 Inflation and Growth in Developing Economies	63
2.7	Output Based Version of the EAPC: The Basic Model	65
	2.7.1 Policy Decisions and EAPC Loops	67
2.8	India's Inflation Targeting Debate	67
CH. 3	The Costs and Consequences of Inflation
3.1	Categorizing the Costs	71
3.2	Menu Costs	72
	3.2.1 Inflation and the Frequency of Price Changes	72
	3.2.2 The Consequences of Staggered Price Changes	73
3.3	The Costs of Minting, Printing and Counterfeiting	74
3.4	How Inflation Distorts Price Signals	76
3.5	The Rationale for Cost Based Pricing	78
3.6	The Shrinkage Effect of Inflation	79
3.7	The Convenience of Nominal Accounting	80
3.8	Deflation Versus Disinflation	82
3.9	The Sacrifice Ratio and Disinflation Strategies	83
	3.9.1 The Volcker Disinflation	84
	3.9.2 Rational Versus Adaptive Expectations and Credibility	85
3.10	The EAPC/ADSGAP Model with Lags	86
CH. 4	Cost Push Versus Demand Pull Inflation and Quantity Theory
4.1	The Cost-Push View	91
4.2	The Classical Emphasis on Demand Constraints	92
4.3	Origins of the Natural Rate of Unemployment Concept	94
	4.3.1 The Friedman-Solow Debate on Wage-Price Guideposts	94
	4.3.2 Cost Push and Wage Restraint in the Simple Phillips Curve	95
	4.3.3 Solow's Defence and Friedman's Rejoinder	96
4.4	Combining the EAPC with Demand Based Inflation: A Model	98
4.5	Money Demand, Velocity and Quantity Theory	100
	4.5.1 Income and Velocity	100
	4.5.2 The Demand for Money	102
	4.5.3 Keynes' Discussion of the Quantity Theory	104
CH. 5	Understanding The Seventies Stagflation
5.1	The Huge Hike in Oil Prices	109
5.2	Evidence Against the OPEC Supply Shock View	111
5.3	Impact of Collapse of the US Dollar on Oil Prices	113
5.4	Commodity Prices Versus the Cartel	115
5.5	Response of US Fed Chairman Burns to Stagflation	116
5.6	Oil Prices and the World Economy: A Brief Update	119
CH. 6	Emerging Economies and BRICs: Rapid Rise to Slowdown
6.1	The Emergence of the Emerging Markets	121
6.2	The First BRICS Report: Speeding Along the GDP Autobahn	123
6.3	The Second BRICS Report: India in the Fast Lane	124
6.4	The Unexpected Slowdown	126
6.5	The Closing of the Goldman Sachs BRICS Fund	130
6.6	Explaining the Rise and Fall of the BRICS	132
	6.6.1 The Argentina Barings Crisis of 1890	132
	6.6.2 Capital Flow Reversals after 1990	133
6.7	Revisiting Japan's Prolonged Stagnation	136
	6.7.1 A Different Financial and Business System	136
	6.7.2 Role of the Yen/Dollar Exchange Rate Agreement of 1987	137
	6.7.3 Outlook for China: Implications of Japan	138
6.8	Geopolitical Importance of the BRICS	140
	6.8.1 Inclusion of the Yuan in SDR Basket	142
6.9	Outlook for Emerging Economies and their Equity Markets	143
	6.9.1 Returns to Different Investors in the BRICS	146
	6.9.2 Volatility in MSCI China Versus Shanghai Index	149
	6.9.3 Correlation between Emerging Markets and S&P Index	150
6.10	Data Appendix	152
CH. 7	Dissecting India's Stagflation Episode
7.1	India's High Growth Phase	156
	7.1.1 The Widespread Nine Percent Euphoria	157
7.2	The Weak Growth Phase: Policy Paralysis?	159
	7.2.1 Real Time Projections of Growth and Inflation	161
7.3	NREGA, Labour Shortages and Wage Increases	163
7.4	Exogenous' Administered Food Price Hikes?	166
7.5	A Protein Centric View of India's Inflation	168
	7.5.1 Food Prices and Inflation in Select Asian Countries	169
7.6	The Food Inflation Episode in China	170
	7.6.1 Food Inflation in a Two Sector Growing Economy	171
7.7	Profits, Wages and Sales During Stagflation	172
7.8	Policy Conclusions: A Postscript	173
7.9	GDP Measurement Issues and 2015 Revisions (Appendix)	174
	7.9.1 Evaluating the 2015 GDP Revisions	177
CH. 8	Analyzing India's Demonetization
8.1	Basic Facts about the Note Ban	182
	8.1.1 The Various Stated Goals of the Scheme	184
8.2	Government Spending, Taxes and Corruption	185
	8.2.1 Less Spending versus More Taxes?	186
	8.2.2 Government Spending, Cash Use and Election Funding	187
	8.2.3 India's flawed Fiscal Responsibility Act?	188
8.3	Basic Concepts for Evaluating the Note Ban	190
8.4	Failure to Catch Most 'Black Money'	191
	8.4.1 Complications due to Counterfeiting	192
8.5	Cash Use, Corruption, Taxes and Digital Currencies	194
	8.5.1 Cash Use and Corruption Across Countries	194
	8.5.2 Bitcoin, Chinese Yuan and the US Dollar	197
8.6	Projecting Impact of Note Ban	198
	8.6.1 Projections based on Quantity Theory	198
	8.6.2 Printing without Enough Planning	199
	8.6.3 Short Term Impact beyond Quantity Theory	200
8.7	Assessing Longer Term Impact	201
	8.7.1 A Simple Framework for Tax Projections	204
8.8	Varieties of Demonetization (Appendix I)	205
8.9	The Changing Promise on India's Rupee Notes (Appendix II)	207
	8.9.1 China's Slide away from Silver	209
8.10	Free Banking Versus Independent Central Banks	210
8.11	Tables and Background Information (Table 8.E Chronology of Events)	216

Financial Macroeconomics: A Policy Rate Approach (FMPRA, unpublished)

Chapter Numbers below correspond to those in MIFA book on lefthand of the Schematic. Chapters 13 and 14 are in draft form. Excerpts or full chapters below can be provided to individuals or publishers upon specific request

MIFA	Aug 2015 Prologue to Financial Macroeconomics: A Policy Rate Approach	Page #
CH. 8	Central Banks, Policy Rates And Bank Reserves
PART A	The Mechanics of Monetary Policy
8.1	Various Interest Rates	1
8.2	The Basics of Bond Pricing	4
8.3	The Policy Rate and Open market Operations	5
	8.3.1 The Mechanics and Economics of Open Market Operations	8
	8.3.2 A Description of Actual Open market Operations	11
8.4	The Policy Rates in India	13
Part B	Critiques of IS/LM
8.B.1	Basic Critique: FAQ's on IS/LM	15
8.B.2	Detailed Critique: Why IS/LM is Irrelevant and Wrong: An Explanation (To class, Feb 2015)	22
	Data Appendix: LAF, MMS and Key RBI Interest Rates and Ratios
CH. 9	Linking Inflation, Interest Rates And Output: The Monetarist Paradox
9.1	Introduction	1
9.2	The Classical Theory of Interest	2
9.3	Fisher Effect: Adding Inflation Expectations	4
	9.3.1 Behavioural versus Tautological Fisher Equation	5
9.4	The Policy Rate and the Keynesian Theory of Interest	6
9.5	The Policy Rate, the Fisher Equation and the EAPC	10
9.6	Empirical Evidence from the Volcker Deflation	14
9.7	Consequences of Pegging the Nominal Rate	15
	9.7.1 Can the Stance of Policy be Judged by Interest Rates? (Advanced)	16
9.8	The Monetarist Paradox with Nominal GDP Growth Added	19
9.9	India's Episode of Tail Chasing	20
9.10	Limited Monetarism versus the Quantity Theory	23
	9.10.1 Evidence on the Fisher effect versus the Quantity Theory	25
9.11	Origins of the Quantity Theory and Phillips Curve	30
	End of Chapter Questions	31
CH. 10	Central Bank Independence, Inflation Bias And The Monetarist Paradox
10.1	The Political Business Cycle Based upon the EAPC	1
10.2	Absence of Inflation Bias under the Gold Standard	3
10.3	The Political Business Cycle and Inflation Bias in India	4
10.4	Central Bank Independence to Control Inflation Bias	5
10.5	Cross Country Evidence on Inflation Bias and the Monetarist Paradox	7
10.6	The Changing Independence of the Reserve Bank of India	9
10.7	Suitable Appointment Rules for Central Bank Independence	11
	10.7.1 Suitable Appointment Rules for Central Bank (Update Sept 2020)	12
	APPENDICES
10.A	Correspondence with Friedman about Blinder-Solow Proofs and Monetarist Paradox	14
10.B	Summary of Critique (VM) of Blinder-Solow Proofs on Debt Stability	16
10.C	Origins of the Monetarist Paradox	17
10.D	Liquidity and the Economy (Excerpt from M. Friedman's Money Mischief, a cartoon and a poem)	18
CH. 11	The Loanable Funds Approach Versus Keynesian Multiplier
11.1	Introduction	1
11.2	The classical/loanable funds theory in a private closed economy	2
11.3	Keynes' Approach to Savings, Investment and the Rate of Interest	4
11.4	The Keynesian Multiplier and the Paradox of Thrift	5
11.5	A Loanable Funds Critique of Keynes' Paradox of Thrift	7
	11.5.1 Critique of the expanded IS/LM Model	8
11.6	Relevance of Keynes' Approach in Some Situations (Advanced)	10
	11.6.1 Limitations of full Multiplier Process When Consumption Drops	11
11.7	Short Run Keynesian Outcomes Within a Classical Model (Advanced)	12
	11.7.1 Labour Supply and Keynes' Rejection of Loanable Funds Theory	16
11.8	Labour Supply, Hysteresis versus Natural Rate	18
	11.8.1 America's Recent Low Unemployment and Inflation: A Credit Based Hypothesis	20
	APPENDICES
11.A	Supply and Demand for Loanable Funds: Dennis Robertson's Categorization	21
11.B	The Non-Econometrician's Lament (Robertson's poem)	22
CH. 12	Consumption, Savings, Investment, And Interest Rates
12.1	The Two Main Components of GDP	1
12.2	Determinants of Consumption: Alternative Theories	2
12.3	Components of Investment	6
12.4	Growth Contributions of Components of GDP for India 2009-10	8
12.5	Determinants of Investment	9
12.6	Impact of Interest Rates: The Transmission Mechanism of Monetary Policy	14
12.7	Interest Rates and Bank Loan Officers Survey for USA	16
12.8	Savings data and Issues for India	18
	12.9.1 Article: Money and Currencies: High rates hit home loans growth	21
	12.9.2 Article: SBI capex loan crash mirrors investment strike at India Inc	22
CH.13.A	Fiscal Policy, Taxes, Deficits And Debts (PART A)
13.A.1	Fiscal policy in U.K. in the 19th century	1
13.A.2	Fiscal policy: An Introductory libertarian perspective	4
13.A.3	Trends in tax rates and taxes in USA	4
13.A.4	Postwar US Fiscal Expansion	5
13.A.5	The Financing of Government Spending	6
13.A.6	Assessing the Economic Impact of Taxes	7
13.A.7	The Full Employment Budget Deficit	8
13.A.8	Components of U.S. Government Debt and Ownership of US Treasury Securities Table	12
13.A.9	Charts and Tables : Fiscal Policy, Deficit and Debt	13-19
13.A.10	Keynesian multiplier with taxes question	20
CH.13.B	Linking Short Rates, Long Rates & Output (PART B)
13B.1	Bringing in the Government Sector	1
13B.2	Government Expenditure and Types of Crowding Out	2
13B.3	Debt versus deficit as the Determinant of Interest Rates	4
13B.4	Interest rate Determination with Non-Tradable Debt	6
13B.5	The Vital Yield Curve GDP Nexus: Robust Evidence	7
13B.6	A Loanable funds approach to the Yield Curve GDP Nexus: Expanded Monetarist Paradox Model	8
	13.B.6.1 The Yield Curve During Postwar Recessions and the Volcker Disinflation
13B.7	Towards a more realistic Yield Curve based Approach	12
13.B.8	APPENDIX: Charts and Tables (Yield Curve, GDP, Bond Yields, Debt Ratios, Leading Indicators)	14-20
13.B.9	Yield Curve Model Sample Numerical Question	21
CH. 14	Fiscal Issues In India & Monetary Nexus
14.1	Linkages between Fiscal and Monetary Policy (FISCMONSCHEMATIC)	1
	14.1.1 Important Fiscal variables and Definitions	2
14.2	Fiscal Accounts Concepts & Data	3
14.2	Fiscal Accounts Concepts & Data	3
14.3	Fiscal Concepts, Trends & Outlook	4-11
14.4	Articles: Rewards of Profligacy (2000) & Don't Panic Over Delhi's Deficit (2007)	...
14.5	Simulation Results of Debt-GDP Outcomes (DRG Study 2000 Sec 1.4)	22-25
14.6	Debate with ex RBI Governor Economic Times Articles below	28-40
	Part 1 Some Unpleasant Monetary Arithmetic/ Print Bonds, Not Money
	Part 2 Should we Prefer Bonds or Money/ Why Gentlemen Still Prefer Bonds (VM/1995)
14.7	Small Savings Interest Rates and Taxes Article & Table	26-27
14.8	Summary Table: All Major Fiscal Ratios & Interest Rates for India	41
CH. 17	Postwar Evolution Of Monetary Policy
17.1	Introduction to Milton Friedman's Role of Monetary Policy 1967 Speech	1
17.2	What Monetary policy Can Do, Cannot Do & How it Should be Conducted	2
17.3	Evaluating Friedman's recommendations based on 1970s & 1980s	5
	TABLE: Monetary Policy Procedures Schematic	6
17.4	Sir Alan's Day of Judgment (VM) Critique of Greenspan, January 2003	7
17.5	The Taylor Rule (St Louis Fed Summary & VM handwritten note)	11
17.6	The Fed Could Have Sold Long Bonds on the Greenspan Taylor 2009 debate, unpublished	13
17.7	How (Direct) Inflation Targeting Evolved (VM article)	15
17.8	Current Federal Reserve Policy	16