Objectives
The course focuses on the working of monetary economies and monetary policies by exploiting recent analytical developments, such as the DSGE model, to deal eventually with frameworks relating credit frictions to macroeconomic fluctuations
Contents
PART (1): Some Facts and the DSGE Model.
– Basic facts about money, macroeconomic activity and monetary policy: Walsh, Ch 1
– Identifying the impact of money shocks: some hints on VAR analysis: M. Enders, Sects. 5.5-5.8
– The standard New Keynesian DSGE Model: Walsh, Ch 8
PART (2): Inflation, Interest Rates, Exchange Rates and Asset Pricing
– Time-Inconsistency as a theory of Inflation: Romer, Sect. 11.7
– The Term Structure of Interest Rates: Walsh, Ch 10.3
– Exchange Rates: the Dornbusch model: Blanchard & Fischer, Ch. 10, Sect. 10.4
– Consumption and Asset Pricing: Romer, Sect.8.5
PART (3): The Role of Credit in Macroeconomics
– Credit Rationing: the Stiglitz & Weiss’ model: Walsh Ch 10.6
– 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)
– New ways to monetary policy: B. Friedman (2013), NBER wp #18960.
Teaching Methods
Lectures and class exercises
Verification of learning
Mid-term written test + Final written test
Texts
(1) C. Walsh (2017), Monetary Theory and Policy (4th edition), MIT Press
(2) D. Romer (2012), Advanced Macroeconomics (4th 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