Prof Richard Jackman 32L1.27 and Dr Kevin Sheedy 32L1.09

This course is available on the BSc in Business Mathematics and Statistics, BSc in Econometrics and Mathematical Economics, BSc in Economics, BSc in Economics and Economic History, BSc in Economics with Economic History, BSc in Government and Economics, BSc in Mathematics and Economics, BSc in Philosophy and Economics, BSc in Social Policy and Economics and BSc in Statistics with Finance. This course is available with permission as an outside option to students on other programmes where regulations permit and to General Course students.

Students should have completed Microeconomic Principles I (EC201) or Microeconomic Principles II (EC202) or equivalent and Macroeconomic Principles (EC210) or equivalent. Introduction to Econometrics (EC220) or Further Mathematical Methods (MA212) or equivalent are also strongly recommended. Students who have not taken either of these two courses are still welcome provided they can show other evidence of a strong quantitative background.

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.

15 hours of lectures and 7 hours of classes in the MT. 15 hours of lectures and 10 hours of classes in the LT. 2 hours of classes in the ST.

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.

Exam (100%, duration: 3 hours) in the main exam period.

The paper may include short questions and problems in addition to longer essays.