95864 - MONETARY ECONOMICS: THEORY OF MONEY AND LIQUIDITY

Learning outcomes

Monetary policy has the ability to shape all economic interactions in a way that no other policy does. However, the recent experience of the Great Recession has raised questions in monetary policy surrounding the limits to this power. At the same time, the development of financial markets and institutions have questioned the definition of “money” and inspired new methods and policies to address these challenges. Within the area of contemporary monetary economics and monetary policy, students will learn the transmission mechanism of monetary policy in a market based economy, the role played by market liquidity and sovereign debt, the policy tools of quantitative and qualitative easing, and will acquire a deep understanding of the policy issues in the Euro Area.

Course contents

Monetary aggregates and the Money multiplier

Behind the Scenes

• Money creation in the modern economy
• Banks and Liquidity Creation

  The Monetary Transmission Mechanism, and the role of risk:

• Theory
• The “broken transmission mechanism”: Evidence from

  the great financial crisis

  the sovereign debt crisis

  Financial Deepening:

• Households’ money: bank debt
• Cash pools’ money: sovereign debt and triple A securities
• Nowadays interbank/money market: Repo Market
• Government debt securities as “quasi money”: Theory and evidence

  Central Banks’ Policies

• From inflation targeting to (full) employment targeting
• Nowadays intermediate target: financial markets’ stability

Focus:

- From Quantity Easing to Qualitative Easing: Japan, USA, ECB

-The Euro Area Dilemma: Monetary Dominance versus Fiscal Dominance

Readings/Bibliography

All the material is on the "Virtual Learning” platform.

There are 10 sections providing the material for the 10 lectures. In each section you find a file "Instruction" that provides a guideline of the material in that section.

Lectures are meant to be interactive, please read the material of the section before the lecture.

Teaching methods

Lectures in class, discussion of financial events

Assessment methods

The final score results from:

• Homeworks during the course (50% ) ,

• A written term paper, either theoretical or empirical, on a topic connected to the course and agreed with the lecturer (50%)

Homeworks are problems and open questions on the issues analyzed in the course, the relevant material being provided in the virtual-learning platform. There is a specific section, "assignments", where students will find the homework to be worked out and uploaded within a specified deadline. Each homework is rated and the mark with comments will be communicated to students via the platform. The average of homework marks will contribute to the final mark with weight 50%. At the end of the course the written term paper will also be uploaded on the platform within 5 weeks from the end of the course's lectures.

The term paper can possibly be the basis for the final exam's thesis

Teaching tools

Slides, PC

Websites of financial press -- Financial Times, Bloomberg, The Economist

"Virtual Learning” platform: 10 sections providing the material for the 10 lectures. Each section contains a file "Instruction" that provides a guideline of the material in that section.

Lectures are meant to be interactive, please read the material of the section before the lecture.

Office hours

See the website of Gabriella Chiesa