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Books
There is not a prescribed text for the course.
The most complete book on monetary economics presently published is Walsh,
Carl. (2003) Monetary Theory and Policy. MIT Press. but the following are
also highly recommended books:
Gali Jordi (2008) Monetary Policy, Inflation,
and the Business Cycle Princeton University Press -- the best introduction to
New Keynesian models � we will follow this book quite closely, especially
chapters 2 to 5 � check material on Gali�s website
Woodford, Michael, 2003, Interest and Prices. Princeton University
Press -- difficult read, very analytical � 1st chapter
is required reading � again, have a look at Woodford�s website
Obstfeld, Maurice, Kenneth Rogoff, 1996,
Foundations of International Macroeconomics, MIT Press -- an open economy
focused presentation but probably the best macroeconomics book available at
the moment. Some open economy issues will be analyzed
following their presentation
History and Methodology
Lucas Jr, R.E., 1976, January. Econometric policy
evaluation: A critique. In Carnegie-Rochester conference series on
public policy (Vol. 1, pp. 19-46). North-Holland.
Dornbusch, R. and Edwards, S., 1990. Macroeconomic
populism. Journal of Development Economics, 32(2),
pp.247-277.
Taylor, J.B., 2007. Thirty‐Five Years of Model
Building for Monetary Policy Evaluation: Breakthroughs, Dark Ages, and a
Renaissance. Journal of Money, Credit and Banking, 39,
pp.193-201.
Bernanke 2004 The
Great Moderation Federal Reserve
Blanchard, O., Dell�Ariccia, G. and Mauro, P., 2010. Rethinking
macroeconomic policy. Journal of Money, Credit and Banking, 42,
pp.199-215.
Lectures and Readings
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Introducing Money
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Lecture 1 [pdf] Money
and the Economy : the evidence
Readings:
Carl Walsh -- Chapter 1
Sims, Christopher A. (1972):
"Money,
Income and Causality," American Economic Review 62: 540-552.
Romer, C.D., Romer, D.H., Goldfeld, S.M.
and Friedman, B.M., 1990. "New Evidence on the
Monetary Transmission Mechanism,"Brookings papers on economic activity,
1990(1), pp.149-213.
Christiano,
L.J., Eichenbaum, M. and Evans, C.L., 1999. Monetary
policy shocks: What have we learned and to what end?. Handbook of macroeconomics, 1,
pp.65-148.
Leeper,
Eric M., Christopher A. Sims, and Tao Zha (1996):
"What Does
Monetary Policy Do?" Brookings Papers on Economic Activity 2: 1-63
Nakamura E, Steinsson
J. Identification in macroeconomics. Journal of
Economic Perspectives. 2018 Aug;32(3):59-86.
Var
Analysis: an intuitive Introduction
Problem 1
Chris Sims Dataset
in excel use the dataset to replicate the results in Leeper,
Eric M., Christopher A. Sims, and Tao Zha (1996):
"What Does
Monetary Policy Do?" After replicating the analysis with US data,
try with South Africa data, collecting them from FRED (not all data will be
available for South Africa, do your best).
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New Keynesian Models � the
basics
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Lecture 2 [pdf]
The Cagan Model and Basic Classical Monetary
Models
Obstfeld and Rogoff Chapter 8
Walsh Chapters 2 and 3
Gali
Chapter 2
Lecture 3 [pdf]
Introduction to New Keynesian Models
Note: The Mathematics of
New Keynesian Models
Readings:
Gali:
chapters 3 and 4
Sbordone,
et all - Policy
Analysis Using DSGE Models: An Introduction
DSGE Modelling in Dynare
Reading � Dynare User Guide
Basic New-Keynesian
Model in Dynare
Stability of New
Keynesian Model: Note
Tutorial on Dynare
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New Keynesian Models and
Optimal Monetary Policy
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Lecture 4 [pdf]: Optimal
Monetary Policy
Readings:
Gali:
chapter 5
Clarida,
R., J. Gali, and M. Gertler
(1999), "The
Science of Monetary Policy: A New Keynesian Perspective"
Lecture 4.1 [pdf] Large Scale
DSGE Models for policy analysis
Readings
Smets
and Wouters (2003) An estimated DSGE model of the
euro area - Journal of the European Economic Association �
Papers and Dynare Programs
Professor Harald Uhlig
provides an implementation of the Smets and Wouters model which makes easy experimenting with the
calibration of the model Download here. This
exe-file, once executed, will install a program on your computer which
allows you to get impulse responses to various shocks in the Smets and Wouters (JEEA,
2003) model.
A Methodological Discussion:
Now that you have some idea of the working of this class of models
frequently used in policy analysis, it is worth thinking a bit
methodologically. Here are 4 contributions to start with.
Woodford M (2009) �Convergence in
Macroeconomics: Element of the New Synthesis� An overview of the
state of Macro and the elements of convergence and disagreements.
V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2009. New Keynesian Models: Not Yet Useful for Policy
Analysis � A critical assessment of the Smets and Wouters model from the point of view of the RBC
tradition
Wren-Lewis, S (2007)
�Are There
Dangers in the Microfoundations Consensus? A critical view
of the New Synthesis model from the point of view of the policy making
process.
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Credit, Asset Prices and Monetary Policy
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Lecture 5 [pdf]
Financial Market imperfection
and the Business Cycle
Readings:
Blanchard, O. J., and S.
Fischer. Lectures on
Macroeconomics. Cambridge , MA : MIT Press,
1989, pp. 478-488.
Stiglitz, J. E., & Weiss, A. (1981). Credit rationing in
markets with imperfect information. The American economic review, 71(3), 393-410.
Kiyotaki,
N., and J. Moore. (1997) "Credit Cycles."
Journal of Political Economy 105 : 211-248.
Bernanke, B., and M. Gertler (1989). "Agency Costs, Net
Worth, and Business Fluctuations."
Bernanke, B M. Gertler and S Gilchrist (2000) "The Financial
Accelerator in a Quantitative Business Cycle Framework", in Taylor
and Woodford, Handbook of Macroeconomics, North
Holland
Dynare
Program for Bernenke and Gertler
Model
Implementation of Kiyotaki and Moore Model in Dynare
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Fiscal Policy
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Lecture 6 [pdf]
Fiscal Policy in Modern Macroeconomics
Sargent and Wallace (1981) �Unpleasant
Monetarist Arithmetic��
Woodford, Michael (1995) "Fiscal Requirements
for Price Stability"
Leeper,
Eric M. (1991) "Equilibria
Under 'Active' and 'Passive' Monetary and Fiscal Policies"
Leeper,
Eric M (2010) �Monetary
Science, Fiscal Alchemy�
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