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Chicago Exam Questions Suggested Reading Syllabus

Chicago. Monetary International Economics, readings and exam. Metzler, 1967

 

Lloyd Metzler provided a token Keynesian voice with a Harvard accent at post-WWII Chicago. Once the Cowles Commission moved to Yale, Metzler found himself vastly outnumbered. And yet he persisted.

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Syllabus and readings for Economics 370 in 1950.

Exam for Economics 370 in 1953.

All Economics in the Rear-view Mirror blog-posts with Lloyd Metzler content.

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Biographical Note

Lloyd Appleton Metzler was born on April 3, 1913 in Lost Springs, Kansas. He attended the University of Kansas, where he studied economics under John Ise and earned a Bachelor’s degree in 1935 and an MBA in 1938. Metzler then entered Harvard University. He served as an instructor and tutor at Harvard and completed a Ph.D. in economics in 1942. His dissertation, “Interregional Income Generation,” earned him the Wells Prize. That same year, Metzler was the recipient of a Guggenheim fellowship.

From Harvard, Metzler went on to Washington, D.C., where worked for the Office of Strategic Services and several economic policy and planning commissions between 1943 and 1946. Metzler joined the research staff of the Board of Governors of the Federal Reserve System in 1944. In 1946 he returned to academia when he accepted a teaching position at Yale University. He soon left Yale for the University of Chicago in 1947, where he remained for the rest of his career.

Dr. Metzler survived surgery for a brain tumor in 1952, and with the help of his wife Edith, managed to continue teaching and writing for the next twenty years. He served as Editor of the Journal of Political Economy from 1966 until his retirement in 1971. Metzler made numerous contributions to business cycle literature, macro-monetary theory, tariff theory, mathematical economics, and the field of international trade. The Metzler paradox, Laursen-Metzler effect, and Metzler matrix, all bear his name. He died on October 26, 1980.

Source: University of Chicago Library. Guide to the Lloyd A. Metzler Papers 1941-48. Note: the interesting archival papers containing the following material are found in the Economists’ Papers Archive at Duke University.

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ECONOMICS 370
MONETARY ASPECTS OF INTERNATIONAL TRADE
Major Topics and Reading List

Winter 1967
Lloyd A. Metzler

  1. Mechanism of the Foreign Exchange Market
    1. P. T. Ellsworth, The International Economy, third edition, New York: Macmillan Company, 1964, Chapter 17.
    2. Alan R. Holmes and Francis Schott, The New York Foreign Exchange Market, New York: The Federal Reserve Bank of New York, 1965, Chapters 1-6.
    3. Frank A. Southard, Jr., Foreign Exchange Practice and Policy, New York: The McGraw-Hill Book Company, 1940.
    4. N. Crump, The ABC of the Foreign Exchanges, London: Macmillan and Company, Ltd., 1951.
    5. James E. Meade, Studies in the Theory of International Economic Policy, Vol. I, The Balance of Payments, London: Oxford University Press, 1951, Chapter 1.
  2. The Quantity of Money, the Rate of Interest, and the Price Level
    1. Sub-Committee on General Credit Control and Debt Management of the Joint Committee on the Economic Report, Hearings on the Question, What Should our Monetary and Debt Management Policy Be? 82ndCongress of the United States, 1952, pp. 688-7111, 691-698. (These pages include the testimony of Milton Friedman and Paul Samuelson.)
    2. James Tobin, “Monetary Policy and the Management of the Public Debt. The Patman Inquiry,” Review of Economics and Statistics, Vol. XXXV, No. 2, May 1953, pp. 118-127.
    3. Robert V. Roosa, “Interest Rates and the Central Bank” in Money, Trade and Economic Growth, in honor of John Henry Williams, New York: The Macmillan Company, 1951.
    4. Lloyd A. Metzler, “Wealth, Saving, and the Rate of Interest,” Journal of Political Economy, Vol. LIX, No. 2, April, 1951, pp. 93-116.
    5. Robert A. Mundell, “The Public Debt, Corporate Income Taxes, and the Rate of Interest,” Journal of Political Economy, Vol. LXVIII, No. 6, December 1960, pp. 622-626.
    6. George Horwich, “Real Assets and the Theory of Interest,” Journal of Political Economy, Vol. LXX, No. 2, April 1962, pp. 158-169.
    7. Don Patinkin, Money, Interest, and Prices, first edition, Evanston: Row, Peterson and Co., 1956, Part. II.
  3. The Role of Money in International Adjustment: Full Employment and Under-Employment
    1. J. M. Keynes, Treatise on Money, Vol. I, The Pure Theory of Money, London: Macmillan and Company, 1935, Chapter 21.
    2. Lloyd A. Metzler, “The Theory of International Trade,” From A Survey of Contemporary Economics, Howard S. Ellis, editor Homewood, Illinois: R. D. Irwin, Inc., 1948.
  4. Free Market Exchange Rates
    1. A. J. Brown, “The Foreign Exchanges” in Oxford Studies in the Price Mechanism, Edited by T. Wilson and P.W. S. Andrews, Oxford at the Clarendon Press, 1951, Chapters I (i) and II (ii).
    2. S. Alexander, “Effects of A Devaluation on a Trade Balance,” International Monetary Fund Staff Papers, Vol. II, No. 2, April 1952.
    3. Milton Friedman, “The Case for Flexible Exchange Rates,” in Essays in Positive Economics, Chicago, University of Chicago Press, 1953, pp. 157-203.
    4. Joan Robinson, Essays in the Theory of Employment, Oxford: Basil Blackwell, 1947, Part III, “The Foreign Exchanges.”
    5. Lloyd A. Metzler, “Exchange Rates and the International Monetary Fund,” in International Monetary Policies, Postwar Economic Studies No. 7, Washington, D.C.: Board of Governors of the Federal Reserve System, September, 1947.
    6. Rudolph R. Rhomberg, “A Model of the Canadian Economy under Fixed and Fluctuating Exchange Rates,” Journal of Political Economy, Vol. LXXII, No. 1, February 1964, pp. 1-31.
  5. Forward Exchange Rates
    1. Paul Einzig, The Theory of Forward Exchange, London: Macmillan and Co., Ltd., 1937.
    2. Paul Einzig, A Dynamic Theory of Forward Exchange, London, Macmillan and Co., New York, St. Martin’s Press, 1961.
    3. Alan R. Holmes and Francis Schott, The New York Foreign Exchange Market, New York: The Federal Reserve Bank of New York, 1965, Chapters 7-8.
    4. Paul Einzig, “Some Recent Development in Official Forward Exchange Operations,” Economic Journal, Vol. LXXIII, No. 290, June 1963, pp. 241-53.
    5. Paul Einzig, “Some Recent Changes in Forward Exchange Practices,” Economic Journal, Vol. LXX, No. 279, September, 1960, pp. 485-95.
  6. The Balance of Payments and the Concepts of Income
    1. R. F. Bennett, “Significance of International Transactions in National Income”, in Studies in Income and Wealth, Vol. VI, New York: National Bureau of Economic Research, 1943.
    2. U. S. Department of Commerce, Income and Output, 1958 supplement to the Survey of Current Business.
  7. The Theory of Income Transfers
    1. J. M. Keynes, “The Transfer Problem,” Economic Journal, XXXIX, No. 153, March 1929, pp. 1-7.
    2. B. Ohlin, “The Reparation Problem: A Discussion, I. Transfer Difficulties, Real and Imagined,” Economic Journal, Vol. XXXIX, No. 154, June 1929, pp. 172-78.
    3. J. M. Keynes, “The Reparation Problem: A Discussion. II. A Rejoinder” Economic Journal, Vol. XXXIX, no. 154, June 1929, pp. 179-82.
    4. J. Rueff, “Mr. Keynes’ Views on the Transfer Problem, Economic Journal, Vol. XXXIX, No. 155, September 1929, pp. 388-99.
    5. B. Ohlin, “Rejoinder to J. Rueff,” Economic Journal, Vol. XXXIX, No. 155, September 1929, pp. 400-4.
    6. J. M. Keynes, “Reply to J. Rueff,” Economic Journal, Vol. XXXIX, No. 155, September 1929, pp. 404-8.
    7. L. A. Metzler, “The Transfer Problem Re-considered,” Journal of Political Economy, Vol. L, No. 2, June 1942.
    8. H. G. Johnson, “The Transfer Problem and Exchange Stability,” Journal of Political Economy, Vol. LXIV, No. 3, June 1956, pp. 212-25.
  8. Postwar Monetary Conditions and the Position of the U.S. Dollar
    1. R. Hinshaw, Toward Currency Convertibility, Princeton University, Essays in International Finance, No. 31, 1958.
    2. R. Triffin, Europe and the Money Muddle, New Haven: Yale University Press, 1957.
    3. C. P. Kindleberger, The Dollar Shortage, Cambridge: Massachusetts [Institute of ] Technology Press, New York: John Wiley and Sons, Inc., 1950.
    4. R. Triffin, “The International Monetary Position of the United States,” in The Dollar in Crisis, S.E. Harris, editor, New York: Harcourt, Brace and World, Inc., 1961.
    5. P. T. Ellsworth, The International Economy, third edition, New York: The Macmillan Company, Part VI.
    6. H. B. Lary, Problems of the United States as World Trader and Banker, Princeton University Press for the National Bureau of Economic Research, 1963.
    7. Triffin, The Evolution of the International Monetary System: Historical Reappraisal and Future Perspectives, Princeton Studies in International Finance, No. 12, International Finance Section, Princeton University, 1964.
    8. International Financial Arrangements: The Problem of Choice, Report on the deliberations of an international study group of 32 economists, International Finance Section, Department of Economics, Princeton University 1964.
    9. New Approach to United States International Economic Policy. Hearing before the subcommittee on international exchange and payments of the joint economic committee, Eighty-ninth Congress of the United States, second session, September 9, 1966.
    10. Ministerial Statement of the Group of Ten and Annex Prepared by Deputies, Statement of M. Valery Giscard d’Estaing, Chairman of the group, August 10, 1964.
    11. American Enterprise Institute, International Payments Problems, a symposium sponsored by the American Enterprise Institute for Public Policy Research, Washington, D.C. 1966.

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Lloyd A. Metzler

ECONOMICS 370
Course Examination
Winter, 1967

Answer all questions.

  1. Define two concepts of income which arise when one country (A) makes an annual income transfer to another country (B) and indicate the significance of each concept.
  2. Use the concepts above to show why, in a two-country economy, a presumption exists that the transfer will be more difficult if both countries require imported raw materials to produce than if both are self-sufficient in production. Without going into technical details, indicate why the theory for self-sufficient economies is correct despite this presumption.
  3. (a) Derive the conditions of balance in a full-employment open economy for the following markets: (i) the market for goods and services; (ii) the market for newly-issued securities (iii) the market for foreign exchange.
    (b) Show that if the first two markets are in balance, the country has neither a surplus nor a deficit in its balance of payments.
    (c) Show that if there is an excess supply (or deflationary gap) in both new securities and goods and services the country necessarily has a deficit in its balance of payments. Discuss the market mechanism which may eliminate this deficit, assuming full employment and flexible prices.
  4. The table below gives interest rates for 3-months U.S. treasury bills adjusted to an annual basis, as well as the spot rate and the 3-month forward rate on Canadian currency, each rate being defined as the U.S. dollar price of the Canadian dollar:

 

Period 3-month U.S. bills 3-month forward rate Spot Rate
(1) .05 $1.0025 $1.0000
(2) .04 $0.9975 $1.0000
(3) .03 $0.9950 $1.0000
(4) .04 $0.9900 $1.0000
(5) .07 $2.0050 $2.0000

On the basis of this information you are asked to compute, for all periods, the interest rate for Canadian 3-months bills on the assumption that all data lie on the Interest Rate Parity line. Show your computations.

Source:  Duke University. David M. Rubenstein Rare Book and Manuscript Library. Economists’ Papers Archives. Lloyd Appleton Metzler Papers, Box 3, Folder “Econ 370- Course Exams”.

Source Image: Posting by Margie Metzler on the Metzler Family Tree at the genealogical website, ancestry.com.