ECO529: Financial and Monetary Economics

Semester: 

Spring

Offered: 

2019

Online-Live Course across 8 Universities
Syllabus

1. Introduction                                                                                     slides   zoom video
2. A Simple Macro-Finance Model in Continuous Time                  slides   zoom video
     Problem Set #0    Sannikov Handout: Stochastic Calculus Basics
     Problem Set #1    Merkel Review Session                                       slides   zoom video
3. Macro-Finance Model with Hetereogenous Agents                     slides   zoom video, Parts: (1), (2), (3)
     Problem Set #2    Merkel Handout: Differential Equations            
4. A Symmetric International Model with Runs/Sudden Stops       slides   zoom video
5. A Simple Money Model and Optimal Inflation                              slides   zoom video
6. Money Models with Aggregate and Idiosyncratic Risks             slides   zoom video
7. The I Theory of Money                                                                    slides   zoom video
...

The Great Recession led to a transformational rethinking of Monetary Economics. While prior to the Great Recession the key frictions were price stickiness and wage rigidities, the great recession highlighted the importance of financial frictions. Similarly, financial regulation shifted course. Whereas prior to the crisis the focus was on micro-prudential regulation, measuring the soundness and risks of individual banks in isolation, current thinking stresses the importance of macro-prudential regulation with its focus on spillover risks. Several new systemic risk measures were proposed. The course would also cover interaction between monetary policy and macro-prudential policy as well as spillover analysis and the implications for the international financial architecture. This course would (i) expose students to these new research trends and also (ii) contrasts it with the established New Keynesian framework.

In terms of economic methodology, the course would teach students new advanced tools, including formal modeling, economic dynamical systems in continuous time, strategic interactions, asymmetric information, and modern welfare analysis. The empirical component would range from model estimation, calibration to reduced form analysis. There is strong interest from many Ph.D. students, and expect that advanced undergraduate and possibly for Master students will also take this course.