Advanced Monetary Economics
- 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
- 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
- Lecture 1. Introduction. The concept of moneyThe 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 modelsMoney 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 ModelThe 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 modelsMonetary 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 policyThe 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 boundThe 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 uncertaintyThe 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 bankInformation 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 economyA 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 policyThe term structure of interest rates. Financial frictions in credit markets. The monetary policy effects on yield curve.
- AttendancePrevious 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.
- Short quizzes
- Mid-term written exam
- ExamAll 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 email@example.com 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”.
- Written exam
- 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
- 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