Objectives
The course focuses on the working of monetary economies and monetary policies by exploiting recent developments in analytical frameworks, starting from traditional approaches to DSGE, to deal eventually with models relating credit frictions to macroeconomic fluctuations.
Contents
PART (1): Some Facts and Some Traditional Models.
– Basic facts about money, macroeconomic activity and monetary policy: Walsh, Ch 1
– The Lucas’ (New) Classical Model: Romer, Ch 6 (Part A)
– Monopolistic Competition, Nominal & Real Rigidities: Blanchard & Fischer, Ch. 8, Sect. 8.1
– Identifying the impact of money shocks: some hints on VAR analysis: M. Enders, Sects. 5.5-5.8
– Time-Inconsistency as a theory of Inflation: Romer, Ch 10
– Exchange Rates & Overshoothing: the Dornbusch model: Blanchard & Fischer, Ch. 10, Sect. 10.4
PART (2): Microfounded dynamic models: Permanent Income Theory; Dynamic Stochastic General Equilibrium Models
– Consumption and Asset Pricing: Romer, Ch 7
– The standard New Keynesian DSGE Model: Walsh, Ch 8
– New ways to monetary policy: B. Friedman (2013), NBER wp #18960
PART (3): Some Good Models for Unhappy Times (the role of credit in macroeconomics)
– Problems with borrower-lender relationship. An example: Stiglitz & Weiss’ credit-rationing model: Walsh Ch 10
-Bank Runs: Diamond & Dybvig (1983, JPE); baby-version: D. Diamond (2007, Federal Reserve Bank of Richmond Quarterly Review); The Lender of Last Resort: some history: Mishkin & White (2014), NBER wp #20737.
– Credit, Money and Aggregate Demand: Bernanke & Blinder (1988, AER)
– Credit cycles and aggregate fluctuations: Kiyotaki & Moore (1997, JPE); Some evidence: Gieseke, Longstaff, Schaefer, Strebulev (2014, JFE)
– Fisher-Minsky debt-driven slumps: Eggertsson & Krugman (2012, QJE)
Teaching Methods
Lectures and class exercises
Verification of learning
Mid-term written test + Final written test
Texts
(1) C. Walsh (2010), Monetary Theory and Policy (3rd edition), MIT Press
(2) D. Romer (2005), Advanced Macroeconomics (3rd edition), McGraw-Hill
(3) W. Enders (1995), Applied Econometric Time Series: User’s Guide, Wiley
(4) O. Blanchard & S. Fischer (1989), Lectures on Macroeconomics, MIT Press