Professor R Jackman, STC. S777 and Dr K Sheedy, STC. S682.

Optional for BSc Business Mathematics and Statistics, BSc Econometrics and Mathematical Economics, BSc Economics, BSc Economics and Economic History, BSc Economics with Economic History, BSc Government and Economics, BSc Mathematics and Economics, BSc Philosophy and Economics and BSc Social Policy and Economics.

Students should have completed Microeconomic Principles I or II (or equivalent) and Macroeconomic Principles (or equivalent).

The course provides an introduction to monetary theory, to the effects of monetary variables on the macroeconomic system, the role of the Central Bank and the conduct of monetary policy. Subjects covered include: The nature and function of money. Classical monetary theory, neutrality and inflation. Theories of the demand for money. The banking system, financial intermediation and the determinants of the money supply. The transmission mechanism of monetary policy, including theories of nominal rigidities and the Phillips curve. The term structure of interest rates. The theory and practice of monetary policy and the design of optimal policies. Monetary policy strategies, including inflation targeting and Taylor rules. Policymaking in an uncertain environment. The interaction between monetary and fiscal policy and the arguments for Central Bank independence. Quantitative easing and unconventional policy.

Lectures EC321: 30 MT and LT.

Classes EC321.A: 18 Sessional.

Students should expect to write two essays or exercises in both the MT and LT, to be handed into, and marked by, their class teacher.

The most useful text books are M Lewis & P Mizen, Monetary Economics, and C Goodhart, Money, Information and Uncertainty, 2nd edn. Other useful texts include K Bain & P Howells, Monetary Economics: Policy and its Theoretical Basis; B McCallum, Monetary Economics; D Laidler, The Demand for Money, 3rd edn; A Blinder, Central Banking in Theory and Practice.

A three-hour written examination in the ST. The paper may include short questions and problems in addition to longer essays.