The course aims to develop the student's ability to undertake research in monetary economics by studying a number of current issues both theoretical and applied. In the MT, we begin by studying money's role as a medium of exchange and the determination of the price level using money-in-the-utility-function and cash-in-advance models. We then look more carefully at the reasons for holding money by applying search theory. We also study money's role as a unit of account and the consequences of nominal rigidities such as sticky prices. We analyse the costs of inflation and optimal monetary policy, and we also look at unconventional monetary policies when a central bank is constrained by the interest-rate lower bound. Finally, we study firms' price-setting behaviour in more detail and its implications for the size of the real effects of monetary policy. In the LT, we discuss the role of inflation expectations and financial markets in constraining monetary policy, and the design of central banks and their instruments. We study the interaction between fiscal and monetary policy, as well as the specification of the central bank objectives.
Please note: Teaching Fellows (who are often MRes and PhD students) may teach on this course.
