75754 - Monetary and financial economics

Course Unit Page


This teaching activity contributes to the achievement of the Sustainable Development Goals of the UN 2030 Agenda.

Quality education

Academic Year 2019/2020

Learning outcomes

At the end of the course, student understands deeply the basic models and concepts of financial and monetary economics: the principles of risk management and risk allocation; portfolio theory and asset pricing; the concepts of market liquidity, illiquidity risk and the links between funding liquidity and market liquidity. Within the area of monetary economics and monetary policy, student learns 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.

Course contents

The course is structured in two parts.

Part 1: The Economics of Financial Markets

  • Intertemporal resource allocation, Risk allocation

  • Principles of Risk management

  • Portfolio theory and Capital Asset Pricing Model (CAPM)

  • Fixed Income:

  • Interest rates and returns

  • Maturity and volatility of bond returns

  • interest rate risk - duration

  • Risk and Term structure of interest rates

Part 2 : Monetary economics in economies with financial markets

  • Central bank balance sheet: static balance sheet, intertemporal balance sheet

  • Seignorage : modelling seignorage and limits to Seignorage (Laffer curve)

  • Monetary policy at work:

  • Instruments

  • Intermediate targets

  • Final targets

  • The mechanism of monetary policy transmission

  • The role of asset market liquidity in the functioning of the transmission mechanism : Empirical evidence

  • Asset market liquidity and monetary policy:

  • Quantitative easing

  • Qualitative easing

  • Evidence: Central bank balance sheets ante and post crises

  • Focus on the Eurosystem


Mishkin, F.S., K. Matthews, and M.Giuliodori,The Economics of Money, Banking, and Financial Markets - European Edition, Pearson Education Limited 2013

S. Benninga, Financial Modeling Uses EXCEL, The MIT Press

Teaching methods

Lectures in class, discussion of financial events

Assessment methods

Written exam

Teaching tools

Slides, PC, Websites of financial press and of Central Banks

Office hours

See the website of Gabriella Chiesa