Intermediate to advanced, research oriented course, focusing on current theoretical and empirical issues relating to money and monetary policy. The course is intended for those students who want to develop a greater understanding of monetary theory and monetary policy using macroeconomic models that contain the most recent developments in the field.
Part 1: 1. Welfare Cost of Business Cycles; 2. A Classical Monetary Model; 3. Monetary Policy Analysis with Dynamic Structural Statistical Models (VARs); 4. The Basic New Keynesian Model.
Part 2: 1. Optimal Monetary Policy in the basic New Keynesian model. 2.Monetary Policy Tradeoffs: Rules, Commitment and Discretion. 3. Empirical DSGE models for policy analysis. 4. Financial frictions in New Keynesian models: monetary transmission and issues of monetary policy conduct. 5. Other Topics (time permitting): extensions of the basic model - aspects of (optimal) monetary policy in economies with sticky wages and prices, open economies.
Take-home exercises - solution discussed in class
Take home assignments and presentations in class
The main reference handbooks will be Galí, J. (2008) Monetary Policy, Inflation and the Business Cycle : an introduction to the New Keynesian Framework, as well as Walsh, C. (2010) Monetary Theory and Policy, 3d edition, MIT Press. Journal articles will also be indicated as useful references in due time.