Monetary Economics and Aggregate Fluctuations

This information is for the 2020/21 session.

Teacher responsible

Dr Kevin Sheedy 32L.1.09

Dr Saleem Bahaj 32L.4.14


This course is available on the MPA in International Development, MPA in Public Policy and Management, MPA in Public and Economic Policy, MPA in Public and Social Policy, MPA in Social Impact, MSc in Econometrics and Mathematical Economics, MSc in Economics and MSc in Economics (2 Year Programme). This course is available with permission as an outside option to students on other programmes where regulations permit.


Students must have completed Introductory Course in Mathematics and Statistics (EC400).

In exceptional circumstances, students may take this course without EC400 provided they meet the necessary requirements and have received approval from the course conveners (via a face to face meeting), the MSc Economics Programme Director and their own Programme Director. Contact the Department of Economics for more information ( regarding entry to this course.

Course content

The course aims to develop the student's ability to undertake research in macroeconomics 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 LT, we discuss empirical tools monetary economists use to assess the impact of policy on the economy. We also consider the different policies available to a central bank to control inflation, to prevent financial crises and to communicate with the public.


20 hours of lectures and 10 hours of seminars in the MT. 20 hours of lectures and 10 hours of seminars in the LT.

This year at least for MT, some or all of this teaching may have to be delivered through a combination of virtual webinars, online videos, and virtual classes.

Formative coursework

Two marked assignments per term.

Indicative reading

A reading list will be handed out by the lecturers at the beginning of their sessions.


Exam (50%, duration: 2 hours, reading time: 15 minutes) in the summer exam period.
Essay (50%, 6000 words) in the ST.

Important information in response to COVID-19

Please note that during 2020/21 academic year some variation to teaching and learning activities may be required to respond to changes in public health advice and/or to account for the situation of students in attendance on campus and those studying online during the early part of the academic year. For assessment, this may involve changes to mode of delivery and/or the format or weighting of assessments. Changes will only be made if required and students will be notified about any changes to teaching or assessment plans at the earliest opportunity.

Key facts

Department: Economics

Total students 2019/20: 35

Average class size 2019/20: 17

Controlled access 2019/20: Yes

Value: One Unit

Guidelines for interpreting course guide information