Modle page. Course syllabus, information, and all materials can be viewed and downloaded on the Sapienza e-learning site [link].

Disclaimer. Web page materials are not self-contained, do not always constitute original material, and contain some “cut and paste” pieces from various sources that might not always explicitly refer to (although I am trying to cite my sources as much as possible). Therefore, they are not intended to be used outside the course or distributed. Thank you for catching typos and mistakes.

Class Announcements

Course Outline

Empirical evidence

• Class 1 - Money Facts

• Class 2 - Money Neutrality

• Class 3 - The Return of Structural Econometric Models

• References for Class 1-3

Walsh, C. E. (2010), "Monetary theory and policy," MIT Press, Cambridge, 3rd ed: Chapter 1.

• Homework No 1 / Solution HW 1 (regressions with noise)

• Additional materials: Introduction to Matlab (slides); Handout on the VAR Approach; Exercise.

Modeling money in "models"

• Class 4 - Money in Search Models

• Reference for Class 4

Kiyotaki N. and R. Wright (1993), "A Search-Theoretic Approach to Monetary Economics," American Economic Review, Vol. 83, No. 1, pp. 63-77.

Gu C., H. Han, and R. Wright (2019), "New Monetarist Economics," Oxford Research Encyclopedia of Economics and Finance.

• Class 5 - OLG, Dynamic Efficiency, and Money

• Reference for Class 5

Paul A. Samuelson (1958), "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, Vol. 66, No. 6, pp. 467-482

• Homework No. 2 / Solution HW 2

The IS/LM model

• Class 6 - The Textbook Model
  Handout: The Great Depression Interpreted through the IS/LM Lens

• Class 7 - The Dynamic Version

• Original references

Hicks J., Mr. Keynes and the “Classic”: A Suggested Interpretation, Econometrica, 1937

Modigliani F., Liquidity Preference and the Theory of Interest and Money, Econometrica, 1944

• Homework No. 3 / Solution HW 3.1 (IS-LM). Type go_all to run / Solution HW 3.2 (IS-LM) to test the liquidity effect just type: corr(oo_.endo_simul(2,101:end)', oo_.endo_simul(4,101:end)') / Solution HW 3.3

Adding prices (Classical View)

• Class 8 - The Cagan Model
  Note that Phillip Cagan was a student of Milton Friedman, and the expectation scheme used in his work was based on adaptive expectations (differently from the slides). The RE version is due to Tom Sargent
  Class handout: The Cagan's model

• References for Class 8

Cagan, P., The Monetary Dynamics of Hyperinflation, in Milton Friedman (ed.), Studies in the Quantity Theory of Money, Chicago: University of Chicago Press, 1956

Sargent T. J., The Demand for Money during Hyperinflations under Rational Expectations: I, International Economic Review, 1977 (Sargent's codes: ML and Bayesian estimation of Cagan's model with RE)

• Class 9 - A Classical Monetary Model: Real Values

• Class 10 - A Classical Monetary Model: Nominal Values

• Class 11 - MIU and the Friedman rule

• References for Class 9 and 11

Gali, J., Monetary Policy, Inflation and the Business Cycle: An Introduction to the New Keynesian Framework, Princeton University Press, 2015, 2nd ed. Chapter 2

Additional material: Difference equations handout

• Reading

Romer D., Keynesian Macroeconomics without the LM Curve, Journal of Economic Perspectives, 2000

• Homework 4 [Help: in answering to (1.b), you can ignore Cagan's eq. (11) [just compute current expectations by using all values of past inflation]] / HW 4.1 Solution (Cagan) / HW 4.2 Solution (MIU)

Sticky prices (New Keynesian View)

• Class 12 - Monopolistic Competition GE Model

• Class 13 - New Keynesian Basic (Textbook) Model

• Class 14 - Taylor Rule and US Monetary Policy (1979-2005) (From the conquest of the American inflation to the Great Moderation)

• Class 15 - Running the New Keynesian model

• Dynare codes Replicate the figures from Gali's book (Chapter 3)

• Reference for Class 12 and 15

Gali, J., Monetary Policy, Inflation and the Business Cycle: An Introduction to the New Keynesian Framework, Princeton University Press, 2015, 2nd ed. Chapters 3 and 4

• Readings

Blanchard O. J. and N. Kiyotaki, Monopolistic Competition and the Effects of Aggregate Demand, American Economic Review, 77: 647-666, 1987

Bernanke B. S. / Blinder A. S. / McCallum B. T. [Panel Discussion], What Have We Learned Since October 1979?, Federal Reserve Bank of St. Louis Review, March/April 2005, 87(2, Part 2): 277-282

• Homework 5 / Solution HW 5

Welfare-based optimal monetary policy

• Class 16 - Welfare (real&nominal distortions)

• Class 17 - LQ discretion

• Class 18 - Commitment

• Details on computations, Handout on CGG (1999)

• References for Class 16-18

Gali, J., Monetary Policy, Inflation and the Business Cycle: An Introduction to the New Keynesian Framework, Princeton University Press, 2015, 2nd ed. Chapter 5

Clarida R., Galí J., and Gertler M. (1999), The Science of Monetary Policy, Journal of Economic Literature, 37: 1661-1707

ECB monetary policy

• Class 19 - The ECB's policy strategy

• References for Class 19

Benigno P., Canofari P., Di Bartolomeo G., Messori M., Theory, evidence, and risks of the ECB’s Asset Purchase Programme, prepared for the European Parliament’s Committee on Economic and Monetary Affairs (ECON) as an input to the Monetary Dialogue of 28 September 2020 between ECON and the President of the European Central Bank, 2020.

Rostagno, M., Altavilla, C., Carboni, G., Lemke, W., Motto, R., Guilhem, A. S., Yiangou, J., A tale of two decades: the ECB’s monetary policy at 20, ECB Working Paper No. 2346, 2020.

Neri, S., Siviero, S., The non-standard monetary policy measures of the ECB: Motivations, effectiveness and risks, Credit and Capital Markets, Credit and Capital Markets, 51: 513-560, 2020.

Links

• FRED data (St. Louis Fed)

• US yield curve (Treasury)

• US recessions (NBER)