Monetary Economics and Policy

Relations:

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.

Course guarantor:

Lecturer:

Tutor:

Supervisor:

Institute of Economic Studies

Synopsis:

This course provides the main concepts of monetary economics, emphasizing how monetary policy can affect the domestic economy. It consists of three major parts. The first part starts with a definition of money, its functions, and its measures in a 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 a practical conduct of monetary policy. How money supply is created, what monetary policy tools 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 a monetary policy curve, and channels through which the changes in policy interest rate transmit to the aggregate output and inflation. Nonconventional monetary policy during the global financial crisis of 2007-2009 when countries reached their zero-lower bound of interest rates is demonstrated too. For the case of Czech monetary policy, a guest speaker from the Czech National Bank will be invited to give his/her presentation and answer any specific questions, which may interest students in practice.

Requirements:

Midterm and non-cumulative final exams count for 30% each of a grade. A team project counts for another 30% and includes two ten-minute presentations, worth 15% each. The rest 10% comes from weekly participation in answering questions and 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

Meaning and behavior of interest rates

Risk and term structures of interest rates

Stock market, the theory of rational expectations, and efficient market hypothesis

Conduct of monetary policy

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 the lectures. Presentations of the team projects take place during the exercise sessions as well. More details about the content of presentations and their evaluation will be posted in Moodle.

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. The primary focus is to enable students to translate theoretical concepts into real-world applications. To bridge a gap between theory and practice, students engage in an analysis of a country and its monetary policy throughout the semester in teams. As various topics are covered in class, students will research how those topics apply to a selected country and cooperate on presentations that showcase their findings to the class.

Study materials:

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

Lecture slides, problem sets, details for the team project presentations, signing-up sheets, and points of students will be posted in Moodle.

Official websites of central banks: https://www.bis.org/cbanks.htm?m=59.

International Monetary Fund: https://www.imf.org/en/Home.

Bank for International Settlements: https://www.bis.org/

Various economic magazines and news periodicals such as Finance and Development Magazine, Global Finance Magazine, the Economist, VoxEU columns, etc.

Note:

„Monetary policy will, as always, respond to the economy's twists and turns so as to promote, as best as we can in an uncertain economic environment, the employment and inflation goals.“ - Janet Yellen.

„Monetary policy is one of the most difficult topics in economics. But also, I believe, a topic of absolutely crucial importance for our prosperity.“ - Maxime Bernier.

Further information:

No time-table has been prepared for this course

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)