Monetary Theory Policy

3 Credits · Level: Graduate, Undergraduate

Economics 5702 is a masters-level course in monetary theory and policy. It surveys the key theoretical and empirical literature in monetary economics as well as the practice of monetary policy. It considers the conduct of monetary policy and other aspects of central banking both in relatively normal circumstances – recognizing that what is considered “normal” evolves – and in crisis conditions. The course begins with an overview of the structure and functions of central banks and discussion of the principal relevant concepts and theories from macroeconomics and monetary economics. Next, measures of the monetary and reserve aggregates, their institutional and empirical characteristics, and their past and current roles in policymaking are discussed. The evolution of views of the optimal framework for the conduct of monetary policy is then considered. The focus next shifts to analytical models of money demand. Models pertinent to monetary policy implementation, an area of substantial change in the past twenty years, are then reviewed. The final segment of the course is devoted to recent monetary policy issues, including monetary policy formulation, communication, and implementation, based on the analytical tools developed earlier in the course. Particular attention is given to issues raised by the 2007-2010 Global Financial Crisis and the recent coronavirus crisis. Throughout, current U.S. and international monetary policy issues will be highlighted as significant developments occur.