Monetary Policy [ECONM834]

Acquis d'apprentissage

The course aims to examine various theoretical and empirical topics on monetary policy, with the focus on both global and domestic (European) aspects of monetary policy conduct. The course will provide an overview of the different dimensions of monetary policy and central banks’ related tasks, and it aims to enhance the understanding of the interdependencies between monetary policy, financial system and the macroeconomy. In this context, the course will offer general, theoretical as well as practical insights into aspects related to the strategy as well as the implementation of monetary policy. In addition, we will address the issues of the global financial integration and its implications for the monetary policy conduct; the causes and consequences of the most recent financial crisis; challenges faced by the monetary authorities, and the resulting policy choices.

Contenu

The course consists of five chapters:

1. Monetary Theory. Introduction. Main concepts. Phillips curve, expectations and monetary policy.
2. Current practice of monetary policy conduct:
   • Monetary policy goals, strategies, instruments and procedures
   • Monetary policy transmission mechanism
3. Monetary policy in the times of the crisis.
   • Differences between conventional and unconventional monetary policies
   • The rationale behind alternative unconventional tools, and the associated costs and benefits; transmission mechanism of unconventional policy measures
   • Monetary policy and the “Great Recession”. Lessons from the crisis
   • Monetary policy response to COVID19 pandemic
   • Monetary policy and financial stability

4. Monetary policy analysis: overview of the modeling approaches
5. Credibility of monetary policy: analytical foundations and institutional aspects
   • Commitment versus discretion: optimal monetary policy
   • Benefits of commitment
   • Institutional aspects of monetary policy credibility

Description des exercices

As a practical application of the tools and concepts studied in class, students (working in groups) will be asked to conduct a monetary policy case study for the selected country. The objective of this exercise is to enhance understanding of the major concerns of monetary policy and the factors that determine how monetary policy is conducted by central banks in different national settings, depending on the institutional, economic and financial environment. This task should enable students to analyse and compare differences in the conduct of monetary policy in different countries in a rigorous manner, improve research and analytical skills.