Monetary Economics

• Credit value: 15 credits at Level 7
• Convenor: Professor Yunus Aksoy
• Prerequisites: an MSc-level course in macroeconomics and in quantitative techniques
• Assessment: an in-class assessment (10%) and final examination (90%)

In this module we provide an overview of the evolution of view among academics and central banks regarding monetary economics, macro finance and monetary policy in developed countries over the last decades, including the evolution of policy from money growth targeting in the 1970s to modern variants of inflation targeting.

Topics include: transformations of banking and credit markets; intersections of macroeconomics and finance including market perceptions of central bank policy; empirical support for models advanced to illustrate successes and failures of historical monetary policies; and proximate causes of, and central bank responses to, the credit crisis that began in mid-2007, the covid pandemic and the recent inflation.

Indicative syllabus

• Nominal frictions: New-Keynesian model
• Optimal policy: time consistency and discretion
• Credit cycles: Kiyotaki-Moore model
• Leverage, liquidity and the fragility of banks
• Determinants of credit risk spreads
• The term structure and anticipated policy
• Safe assets, money and non-standard monetary policy measures

By the end of this module, you should be familiar with:

• key issues in the design of contemporary monetary policy
• use of small analytical models to illustrate these issues
• empirical puzzles associated with competing descriptions of agent responses
• the policy transmission roles of expectations in financial markets.