ECO529: Financial and Monetary Economics





Online-Live Course across 8 Universities


1. Introduction                                                                                                 slides   zoom video

Real Models with Financial Frictions
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   video1, video2, video3
     Problem Set #2    Merkel Handout: Differential Equations               
                                 Merkel Review Session                                                  slides   video     
4. A Symmetric International Model with Runs/Sudden Stops            slides   zoom video

Monetary Models with Aggregate and Idiosyncratic Risk
5. A Simple Money Model                                                                            slides
      Optimal Inflation (Target) and                                                               video1 
      Fiscal Theory of the Price Level and Medium of Exchange              
      Problem Set #3    Merkel Review Session                                             slides   zoom video
6. Money versus Debt                                                                                   slides   zoom video
7. The I Theory of Money                                                                             slides   
zoom video
     Problem Set #4

8. Welfare and Optimal Policy                           (Yuliy Sannikov)            slides   video1, video2
     Problem Set #5

9. Long-run Risk and Shock Elasticities         (Lars Hansen)             slides    zoom video
      2 Sector Model with Frictions                                                         slides    zoom video
      Numerical Simulations                                                                    slides    zoom video  software



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 from a risk-centric viewpoint. 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.