• A
  • A
  • A
  • ABC
  • ABC
  • ABC
  • А
  • А
  • А
  • А
  • А
Regular version of the site
Master 2019/2020

Advanced Monetary Economics

Type: Elective course (Economics: Research Programme)
Area of studies: Economics
When: 1 year, 4 module
Mode of studies: Full time
Instructors: Olga Kuznetsova
Master’s programme: Academic Economics
Language: English
ECTS credits: 3

Course Syllabus


The course is devoted to the main issues in modern monetary economics. First, the course introduces the concept of money and describes the functioning of money market. The factors behind money demand and supply are studied through the set of comprehensive monetary models with a special interest in New Keynesian models. Then, the course proceeds to the links between money and the main economic variables such as output, inflation and unemployment both in closed and open economies. This allows addressing the core issue in monetary economics, which is the role of monetary policy. After the study of transmission monetary channels, we address the most pertinent problem, which is the optimal monetary policy design under uncertainty. Different concepts of uncertainty are analyzed with the special focus on the role of information policy of central banks. All topics discussed during the course will be illustrated with relevant practical examples. In the 4th module of 2019/2020 academic year all classes will be switched to online format via ZOOM.
Learning Objectives

Learning Objectives

  • to present the main current macroeconomic problems
  • describe the role of central banks in the economy
  • introduce the students to the standard analytical methodology that figures out the optimal monetary policy measures
Expected Learning Outcomes

Expected Learning Outcomes

  • understand the role of monetary policy for output, inflation and exchange rate determination, the difference between monetary policy regimes, the causes and features of financial crises in the modern economy, the opportunities and feasibilities of stabilization policy
  • be able to analyze financial and monetary data, apply the macroeconomic tools for the analysis of monetary sphere
  • be able to acquire the necessary skills to discuss different macroeconomic problems, the monetary authorities’ actions and decisions, the consequences of monetary policy changes for the economy
Course Contents

Course Contents

  • Lecture 1. Introduction. The concept of money
    The concept of money. Money demand. Money supply. Empirical evidence on the links between money, output, inflation and other economic variables. Monetary policy operating procedures. Monetary policy regimes.
  • Lecture 2. The classical monetary models
    Money neutrality in RBC models. Classical monetary models. Money in the utility function models. Cash-in-advance models. Comparison of the models’ predictions and the empirical evidence.
  • Lecture 3. The basic New Keynesian Model
    The main blocks of the model: representative household, firms, monetary policy rule. Monopolistic competition and price stickiness. Extensions with other possible nominal rigidities. The discussion of the New-Keynesian models: simplicity versus realism.
  • Lecture 4. Monetary policy design in New Keynesian models
    Monetary policy instruments. Money supply rules versus interest rate rules. The problem of determinacy. The overview of the practice of monetary policy among central banks in advanced economies.
  • Lecture 5. The optimal monetary policy
    The social welfare function in the New Keynesian model. Optimal policy rules. Policy tradeoffs: inflation-output tradeoff and stabilization bias. Time inconsistency of the optimal policy. Discretion versus commitment.
  • Lecture 6. Monetary policy at zero-lower bound
    The New-Keynesian model extension: ZLB constraint. The origins of liquidity traps. Effective lower bound. Conventional monetary policy at ZLB. Unconventional policies: forward guidance, quantitative and qualitative easing. The evidence of monetary policy effectiveness in advanced countries at ZLB.
  • Lecture 7. Monetary policy under uncertainty
    The types of uncertainty: additive uncertainty, multiplicative uncertainty, model uncertainty. Robust monetary policy. Attenuation effect. The role of information policy under uncertainty.
  • Lecture 8. Communication policy of a central bank
    Information as a policy tool. The overview of central banks communication. The optimal design of communication policy. Communication policy at ZLB and during financial crises.
  • Lecture 9. Monetary policy in an open economy
    A two-country New Keynesian model. A small open economy. The optimal exchange rate policy. Optimal monetary policy rules in an open economy. Currency unions.
  • Lecture 10. Financial markets and monetary policy
    The term structure of interest rates. Financial frictions in credit markets. The monetary policy effects on yield curve.
Assessment Elements

Assessment Elements

  • non-blocking Attendance
    Previous experience has shown that the average mark is usually higher for the students who actively participate in sessions. Lectures will be interactive with discussions between the lecturer and students. Questions and comments are welcome during the lectures.
  • non-blocking Short quizzes
  • non-blocking Mid-term written exam
  • non-blocking Exam
    All students will have from 12.00 on June 15th until 23.59 on June 15th to complete the take home written exam. Exam questions will be published at 12.00 on June 15th on the course page at Piazza.com. Please carefully read the instructions below. Failure to comply with any of the instructions below may result in our being unable to accept or grade your exam or initiating disciplinary actions. 1. This exam is “open book,” which means you are permitted to use any materials used in the course and/or cited in the lectures, your own notes from the course and the text books. You may NOT use Google or any other search engines for any reason. You are NOT allowed to submit questions to internet discussion groups. 2. The exam must be taken completely alone. Showing it or discussing it with anyone is forbidden, including (but not limited to) the other students in the course. 3. You may not consult with any other person regarding the exam. You may not check your exam answers with any person. You may not discuss any of the materials or concepts in the course with any other person during the exam time. 4. The exams answers should be sent to okuznetsova@hse.ru no later than 23.59 June, 15th. Absolutely no extensions will be made. 5. Email problems will not be accepted as an excuse for late submissions. It is your responsibility to make sure that your email works properly and that your submission is received on time. 6. The submission should consist of one document (either a computer document in pdf and word office format or scanned image). 7. Make an effort to make your submission clear and readable (especially if you write your solution by hand and then scan it). Severe readability issues may be penalized by grade. 8. Name your file as shown: StudentName_AdvMonEco_exam_Spring2020. 9. Put AdvMonEco_exam_Spring2020 in the subject line of the email. 10. Write by hand or tape the following phrase at the beginning of your exam solution “I, Name, confirm that I have read and understood the rules of the take-home exam”.
  • non-blocking Essay
  • non-blocking Written exam
Interim Assessment

Interim Assessment

  • Interim assessment (4 module)
    0.5 * Essay + 0.5 * Written exam


Recommended Core Bibliography

  • Jordi Galí. (2015). Monetary Policy, Inflation, and the Business Cycle: An Introduction to the New Keynesian Framework and Its Applications Second edition. Princeton University Press. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsrep&AN=edsrep.b.pup.pbooks.10495
  • Monetary theory and policy, Walsh C. E., 2003

Recommended Additional Bibliography

  • Woodford, M., & Friedman, B. M. (2011). Handbook of Monetary Economics. Amsterdam: North Holland. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsebk&AN=365565