93286 - Economics and Monetary Policy

Learning outcomes

The course aims to provide students with the basic tools to understand the role of monetary policy in market economies. Upon completion of the course, students are expected to: understand the most important theoretical models of monetary economics; recognize, analyze, and evaluate central banks' monetary policy decisions; and identify the effects of monetary policy measures on the economic system.

Course contents

The course aims to provide students with the basic tools to understand the role of monetary policy in the economy.

By the end of the course, students are expected to: - understand the most important theoretical models of monetary economics - analyze and evaluate the central bank's monetary policy decisions.

Contents

1. Money in Macroeconomic Systems 1a. Macroeconomic Topics. Monetary and Fiscal Policies in the IS-LM Model; Dichotomy and Neutrality of Money in the Neoclassical Model. 1b. Nature and Functions of Money. Legal and Fiduciary Money. Notes on Private Money and Cryptocurrencies. Wholesale Payments System. 1c. Expectations, Inflation, and Money Market Dynamics. Equilibrium with Adaptive Expectations and Perfect Foresight. Anticipated and Unanticipated Monetary Maneuvers. 1d. Demand for Money. Keynes's Money Demand. Liquidity Trap. Instability in Money and Financial Markets. Transactional money (Baumol-Tobin), precautionary money, and speculative money (Tobin). Friedman and the revisitation of quantity theory.

2. Money markets and the central bank

2a. Open market operations; bank reserves; standing facilities; interbank rates and policy rates.

2b. Term structure of interest rates. Monetary policies and short- and long-term interest rates.

2c. Monetary policy and imperfect asset substitutability (notes). Monetary policy and bank interest rates (notes). Transmission of monetary policy: interest rate channel and credit channel. Credit rationing.

2d. Objectives and operational strategies of the European Central Bank.

3. Monetary policies

3a. The theoretical framework. Rules vs. discretion. Equilibrium with rules; discretionary equilibrium. Inflation bias and output stabilization. Central bank independence.

3b. The 2007 financial crisis.

3c. The sovereign debt crisis in the Eurozone.

3d. Quantitative Easing and other unconventional monetary policy strategies.

3e. Current monetary policy choices.

Readings/Bibliography

There is no textbook.

The instructor will provide lecture notes during class.

Some topics are covered in:

S. Cesaratto, 2021, Six Lessons on Money, Diarkos.

P. Alessandrini, 2021, Economics and Politics of Money, il Mulino.

F.C. Bagliano and G. Marotta, Monetary Economy, il Mulino, latest edition.

Additional bibliographical and web reference suggestions will also be provided during class.

Teaching methods

Frontal lessons

Assessment methods

The exam is designed to assess the student's knowledge of the analytical tools presented during lectures and their ability to use these tools to understand and evaluate current monetary policy decisions.

Assessment is conducted through a mandatory written exam or two mandatory midterms.

Midterms will be administered according to the curriculum established by the School of Economics and Management. Grades for each exam are expressed in thirtieths.

Each exam lasts two hours. The exam consists of closed-ended and open-ended questions.

Each midterm counts for half of the overall grade.

The written exams will be graded according to the following criteria:

• Insufficient preparation and analytical ability: failed.

• Sufficient preparation and analytical ability, expressed in formally correct language: 18-22

• Adequate preparation, sufficient analytical ability, although not particularly detailed, expressed in correct language: 23-26.

• In-depth knowledge of the topics covered in the course, good analytical and critical thinking skills, and mastery of specific terminology: 27-29.

• Very thorough knowledge of the topics covered in the course, critical analysis and connection skills, and mastery of specific terminology: 30-30L.

During the exam, it is not permitted to use books, notes, or digital or electronic devices. Exam registration is mandatory.

Students must register through AlmaEsami according to the general rules of the School of Economics and Management; if you encounter difficulties registering, please consult the CESIA Help Desk.

Grades are published and recorded through Almaesami. Registration generally occurs four days after grades are published.

Requests to view the exam paper and any other issues should be addressed via email to the instructor.

A student who receives a positive grade (higher than 18/30) may refuse the grade once, providing written notification at least two days before the scheduled date for recording the written exam results.

Recording of the refused grade will be done according to the procedures established by the University.

Teaching tools

Slides, handouts, and articles from specialized journals and economic-financial publications may be provided.

Office hours

See the website of Antonello Eugenio Scorcu