EC321      One Unit
Monetary Economics and Aggregate Fluctuations

This information is for the 2025/26 session.

Course Convenor

Availability

Requisites

Pre-requisites:

Before taking this course, students must have completed: (EC2A1 or EC2A3) and (EC2B1 or EC2B3 or FM201)

Additional requisites:

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 with Econometrics I (EC1C1), are strongly preferred.  Econometrics II (EC2C1) or Econometrics I (EC2C3) in combination with Econometrics II (EC2C4), or equivalent are desirable though not essential.

The course provides an introduction to monetary theory, to the effects of monetary variables on the macroeconomic system, the role of banks and of the central bank, and the conduct of monetary and financial policies. Subjects likely to be 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, unconventional monetary policies and macro-prudential policy.

1 hours of classes in the Spring Term.
15 hours of lectures and 9 hours of classes in the Winter Term.
15 hours of lectures and 10 hours of classes in the Autumn Term.

This course has a reading week in Week 6 of Winter Term.

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

This course is delivered through a combination of classes and lectures totalling a minimum of 50 hours across Autumm Term, Winter Term and Spring Term.  

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

The most useful textbooks 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: 180 Minutes, reading time: 15 minutes in the Spring exam period