Money and Banking (MT)

Michaelmas Term:
The first half of the module covers contemporary monetary economics and its application to the conduct of monetary policy. As well as reviewing the relevant academic literature, the module deals with the experience of the main central banks, with a particular focus on the European Central Bank. The module first analyzes the nature of money and the long-run relation between money and prices and economic activity. It then examines a number of key issues in regard to contemporary monetary policy: monetary policy rules, the role of expectations and the transmission mechanism. For this purpose, the course presents the New Keynesian model which is now widely used for the purpose of analysing monetary policies. The course then looks at the monetary policy strategies of the major central banks as well as the operational framework by which they steer interest rates. The module concludes by looking at the conduct of monetary policy during the financial crisis, covering issues such as non-standard measures, the implications of the zero bound on nominal interest rates and the role of monetary policy in contributing to financial stability.