Monetary Economics and Aggregate Fluctuations

This information is for the 2022/23 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 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 completed Microeconomic Principles I (EC201) or Microeconomic Principles II (EC202) or Microeconomics II (EC2A1) or Microeconomics II (EC2A3), or equivalent.  Students must also have completed Macroeconomic Principles (EC210) or Macroeconomics II (EC2B1) or Macroeconomics II (EC2B3) or  Macro-Finance (FM201), or  equivalent. In exceptional cases and only with permission, students may be allowed to take EC321 if they also take macroeconomics 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), or else Elementary Statistical Theory I (ST109) in combination withEconometrics I (EC1C1), are strongly preferred. Introduction to Econometrics (EC220) or Principles of Econometrics (EC221) or Econometrics II (EC2C1) or Econometrics I (EC2C3) in combination with Econometrics II (EC2C4), or equivalent  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 9 hours of classes in the LT. 1 hour of classes in the ST.

There will be a reading week in Week 6 of LT (no lectures or classes that week).

This course is delivered through a combination of classes and lectures totalling a minimum of 50 hours across Michaelmas and Lent Terms.  

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 2021/22: 80

Average class size 2021/22: 13

Capped 2021/22: No

Lecture capture used 2021/22: Yes (MT & LT)

Value: One Unit

Guidelines for interpreting course guide information

Course selection videos

Some departments have produced short videos to introduce their courses. Please refer to the course selection videos index page for further information.

Personal development skills

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