Monetary Economics and Aggregate Fluctuations

This information is for the 2021/22 session.

Teacher responsible

Dr Kevin Sheedy 32L1.09

Professor Sir Charles Bean 32L 1.18


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 Philosophy, Politics and Economics and BSc in Politics and Economics. This course is available with permission as an outside option to students on other programmes where regulations permit and to General Course students.


Students must have already completed Microeconomic Principles I (EC201) or Microeconomic Principles II (EC202) or an equivalent intermediate course in microeconomics. Students must have already completed Macroeconomic Principles (EC210) or an equivalent intermediate course in macroeconomics; in exceptional cases and only with permission, students without this pre-requisite may be allowed to take EC321 if they also take EC210 concurrently. Students must have mathematics and statistics to at least the level of Quantitative Methods (MA107 and ST107), while Mathematical Methods (MA100) and Elementary Statistical Theory (ST102) are strongly preferred. Introduction to Econometrics (EC220) or Principles of Econometrics (EC221) are desirable though not essential.

Course content

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; Asset prices and the term structure of interest rates; Classical monetary theory, neutrality and inflation; Interest-rate feedback rules; The interaction between monetary and fiscal policy; Theories of the demand for money; The market for reserves; Financial markets and financial intermediaries; The transmission mechanism of monetary policy and theories of the Phillips curve; The optimal rate of inflation and optimal stabilisation policy; The positive theory of inflation and the case for central bank independence; Policymaking in an uncertain environment; The role of banks in the transmission  mechanism and the case for bank regulation; Financial crises and the role of the central bank as a lender of last resort; The 2007-8 financial crisis and unconventional monetary policies.


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

This course is delivered through a combination of classes and lectures totalling a minimum of 50 hours across Michaelmas and Lent Terms. This year, some or all of this teaching will be delivered through a combination of virtual classes, live streamed (recorded) lectures, and some flipped content delivered as short online videos.

Formative coursework

Students are required to submit two essays or exercises in the MT and the LT. Feedback is provided on these by the class teacher.  Students are expected to make positive contributions to class discussions.

Indicative reading

The most useful text books are M Lewis & P Mizen, Monetary Economics, and C Walsh, Monetary Theory and Policy 4th edn. Other useful texts include: C Goodhart, Money, Information and Uncertainty, 2nd edn; D Laidler, The Demand for Money, 4th edn; R Aliber and C Kindleberger, Manias, Panics and Crashes: A History of Financial Crises, 7th edn. The main source of assigned readings is, however, journal articles.


Exam (100%, duration: 3 hours, reading time: 15 minutes) in the summer exam period.

Key facts

Department: Economics

Total students 2020/21: 104

Average class size 2020/21: 18

Capped 2020/21: No

Value: One Unit

Guidelines for interpreting course guide information

Personal development skills

  • Self-management
  • Problem solving
  • Application of numeracy skills