Monetary Economics and Policy

It is not possible to register for the course 32ME-P-MEPO-01 if the student is concurrently registered for or has already completed the course G63E4201 (mutually exclusive courses).

During a review of study plans, the course G63E4201 can be substituted for the course 32ME-P-MEPO-01.

Garant předmětu:

Aliya Algozhina

Lecturer:

Aliya Algozhina

Tutor:

Aliya Algozhina

Supervisor:

Institute of Economic Studies

Synopsis:

This course provides basic concepts from monetary economics, emphasizing how monetary policy can affect the domestic economy. It consists of three major parts. The first part starts with the definition of money, its functions, and its measures in the form of monetary aggregates’ statistics compiled by central banks. It leads then to the inner workings of financial markets, particularly the interest rate dynamics of bonds and stocks. The second part focuses on the practical conduct of monetary policy: how money supply is created, what tools of monetary policy are used to affect the market interest rate, and how central banks can intervene in the foreign exchange market to regulate the exchange rate. The third part sheds light on the theoretical frameworks of money, aggregate demand-supply analysis based on the monetary policy curve, and channels through which the changes in policy interest rate transmit to the aggregate output and inflation in the economy. The special case of nonconventional monetary policy adopted during the global financial crisis 2007-2009 when countries reached their zero lower bound of interest rates is demonstrated too. The leading textbook is Mishkin (2022) listed with other optional readings below. There are lectures and exercise sessions, where different problem sets based on lecture materials are solved together in class. A guest speaker from the Czech National Bank will be invited for one lecture.

Requirements:

Midterm and non-cumulative final exams count for 40% each of grade. Individual or group ten-minute presentation of students (up to three people), on any subject of this course, counts for the next 20%. Students have a chance to earn additional points by active participation in answering questions or solving problems in class. Attendance at classes is expected to pass successfully the course.

Syllabus of lectures:

•Introduction: What are money and central banks?

Interest rate

•The meaning and behavior of interest rates

•The risk and term structure of interest rates

•The stock market, the theory of rational expectations, and the efficient market hypothesis

Conduct of monetary policy

•The money supply process

•Tools, instruments, targets, and goals of monetary policy

•The foreign exchange market, foreign exchange interventions, and exchange rate regimes

Monetary policy theory

•The quantity theory and the Keynesian theory of money, aggregate demand-aggregate supply analysis

•Inflation, responses of monetary policy to demand and supply shocks, and nonconventional monetary policy

•Transmission mechanisms of monetary policy

Syllabus of tutorials:

There are exercises and problem sets solved together in class on each topic of lectures.

Study Objective:

The goal is to help students understand the links between monetary policy and aggregate economy and strengthen their capacity to examine macroeconomic issues from a central banker's point of view.

Study materials:

Champ, B., Freeman, S., & Haslag, J. H. (2022). Modeling Monetary Economies. New York, NY: Cambridge University Press, 1-390.

De Grauwe, P. (2022). Economics of Monetary Union. New York, NY: Oxford University Press.

Mishkin, F. S. (2022). The Economics of Money, Banking, and Financial Markets. Harlow, England: Pearson Education, 1-718.

Warjiyo, P., & Juhro, S. M. (2019). Central Bank Policy: Theory and Practice. Bingley, England: Emerald Publishing.

Note:

Time-table for winter semester 2023/2024:

	06:00–08:0008:00–10:0010:00–12:0012:00–14:0014:00–16:0016:00–18:0018:00–20:0020:00–22:0022:00–24:00
Mon	roomDEJ:409 09:00–10:30 (lecture parallel1) Dejvice UčebnaroomDEJ:409 10:45–12:15 (parallel nr.101) Dejvice Učebna
Tue
Wed
Thu
Fri

Time-table for summer semester 2023/2024:

	06:00–08:0008:00–10:0010:00–12:0012:00–14:0014:00–16:0016:00–18:0018:00–20:0020:00–22:0022:00–24:00
Mon	roomDEJ:102 09:00–10:30 (lecture parallel1) Dejvice 102roomDEJ:102 10:45–12:15 (parallel nr.101) Dejvice 102
Tue
Wed
Thu
Fri

The course is a part of the following study plans:

• Process Management, prezenční - 22/23 (compulsory elective course)
• Financial management, AR 22/23, prezenční forma (compulsory course of the branch)
• Regional Studies, prezenční forma, AR 22/23 (compulsory elective course)
• Project management, prezenční forma, AR 2022/2023 (compulsory elective course)