Econ 447: Advanced Monetary Policy and Theory II

Welcome to this web page! This class is taught by Christian Zimmermann. This class meets on Thursdays 3:30-6:30PM in room 311, Monteith Building.

Office hours for this class are Wednesdays 8-12 AM or by appointment.

Textbook

I will not formally use a textbook for this class.If you have Monetary Theory and Policy, by Carl Walsh, keep it.

We will cover a few chapter of the textbook, and rapidly divert from it.In particular, some recent working papers or articles will also be covered. They are mentioned below, whenever possible with a link to an online version. This list may change as we go along...

Schedule

The schedule is very tentative, as we will see how fast we progress.

  1. What is Money?

    Narayana Kocherlakota, 1998. "Money is Memory", Journal of Economic Theory.

  2. Stylized Facts about Money (rapid overview)

    Walsh, Chapter 1
    David Backus & Patrick Kehoe, 1992. "International Evidence of the Historical Properties of Business Cycles", American Economic Review
    Lawrence Christiano, Martin Eichenbaum, Charles Evans, 1998, "Monetary Policy Shocks: What Have We Learned and to What End?", NBER working paper.
    Riccardo Fiorito and Tryphon Kollintzas, 1994. "Stylized Facts of Business Cycles in the G7 from a Real Business Cycles Perspective", European Economic Review.
    Finn E. Kydland & Edward C. Prescott, 1990. "Business cycles: real facts and a monetary myth", Federal Reserve Bank of Minneapolis Quarterly Review, (Spr) pp. 3-18.
    George McCandless, Jr. & Warren E. Weber, 1995. "Some monetary facts", Federal Reserve Bank of Minneapolis Quarterly Review, (Sum) pp. 2-11.

  3. Introducing Money in a Macroeconomic Model

    1. Money-in-the-Utility Function

      Walsh, Chapter 2
      James M. Poterba & Julio J. Rotemberg, 1988. "Money in the Utility Function: An Empirical Implementation", NBER Reprints 1024 (also Working Paper 1796 ), National Bureau of Economic Research, Inc
      Robert E. Lucas, Jr., 1994. "On the welfare cost of inflation", Working Papers in Applied Economic Theory 94-07, Federal Reserve Bank of San Francisco (not available online, ask me for copy).
      Alvin L. Marty, 1999. "The welfare cost of inflation: a critique of Bailey and Lucas", Federal Reserve Bank of St. Louis Review, (Jan) pp. 41-46.

    2. Shopping Time (very fast)

      Walsh, Section 3.2

    3. Cash-in-Advance

      Walsh, Sections 3.3, 3.6
      Svensson, Lars E O, 1985. "Money and Asset Prices in a Cash-in-Advance Economy", Journal of Political Economy, Vol. 93 (5) pp. 919-44.
      Lucas, Robert E, Jr & Stokey, Nancy L, 1987. "Money and Interest in a Cash-in-Advance Economy", Econometrica, Vol. 55 (3) pp. 491-513.
      Cooley, Thomas F & Hansen, Gary D, 1989. "The Inflation Tax in a Real Business Cycle Model", American Economic Review, Vol. 79 (4) pp. 733-48.
      Cooley, Thomas F & Hansen, Gary D, 1991. "The Welfare Costs of Moderate Inflations", Journal of Money, Credit and Banking, Vol. 23 (3) pp. 483-503.

    4. Money Search with Fixed Prices

      Walsh, Section 3.4.2
      Kiyotaki, Nobuhiro & Wright, Randall, 1989. "On Money as a Medium of Exchange", Journal of Political Economy, Vol. 97 (4) pp. 927-54.
      Ritter, Joseph A, 1995. "The Transition from Barter to Fiat Money", American Economic Review, Vol. 85 (1) pp. 134-49.
      Howitt, Peter, and Robert Clower, 2000. "The Emergence of Economic Organization", Journal of Economic Behavior and Organization, Vol. 41 (1) pp. 55-84.

    5. Money Search with Flexible Prices

      Trejos, Alberto & Wright, Randall, 1995. "Search, Bargaining, Money, and Prices", Journal of Political Economy, Vol. 103 (1) pp. 118-41.

    6. Overlapping Generations

      McCandless, George & Wallace, Neil, 1991. "Introduction to Dynamic Macroeconomic Theory", Harvard University Press. Chapters 10, 11, 12.

  4. Limited Participation

    Walsh, Section 5.2.2
    Grossman, Sanford & Weiss, Laurence, 1983. "A Transactions-Based Model of the Monetary Transmission Mechanism", American Economic Review, Vol. 73 (5) pp. 871-80.
    Fernando Alvarez, Andrew Atkeson, and Patrick J. Kehoe, 2002. "Money, Interest Rates, and Exchange Rates with Endogenously Segmented Markets", Journal of Political Economy, Vol. 110 (1) pp. 73-112.
    Christiano, Lawrence J & Eichenbaum, Martin, 1992. "Liquidity Effects and the Monetary Transmission Mechanism", American Economic Review, Vol. 82 (2) pp. 346-53.
    Moran, Kevin, and Hendry, Scott, 2004. "Limited Participation and Costly Search in Financial Markets", Bank of Canada, mimeo.
    Filippo Occhino, 2001. "Monetary Policy Shocks in an Economy with Segmented Markets", Departmental Working Papers 200108, Rutgers University, Department of Economics.
    Williamson, Stephen, 2002. "Limited Participation, Private Money, and Credit in a Spatial Model of Money", University of Iowa, mimeo.
    David Andolfatto & Ed Nosal, 2003. "A Theory of Money and Banking", Economics Working Paper Archive at WUSTL, Macroeconomics, Number 0310003.

  5. Imperfect Competitition and Price Stickiness (maybe)

    Walsh, Section 5.3.2
    Cho, Jang-Ok & Cooley, Thomas F, 1995. "The Business Cycle with Nominal Contracts", Economic Theory, Vol. 6 (1) pp. 13-33.
    V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2000. "Sticky Price Models of the Business Cycle: Can the Contract Multiplier Solve the Persistence Problem?", Econometrica, Vol. 68 (5) pp. 1151-1180.

  6. The Credit Channel of Monetary Policy

    Walsh, Chapter 7
    Bernanke, Ben S & Gertler, Mark, 1995. "Inside the Black Box: The Credit Channel of Monetary Policy Transmission", Journal of Economic Perspectives, Vol. 9 (4) pp. 27-48.
    Cooley, Thomas & Quadrini, Vincenzo, 1999. "Monetary Policy and The Financial Decisions of Firms", mimeo, New York University.

  7. Monetary Policy and Time Inconsistency

    Walsh, Chapter 8
    Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans", Journal of Political Economy, Vol. 85 (3) pp. 473-91.
    Barro, Robert J & Gordon, David B, 1983. "A Positive Theory of Monetary Policy in a Natural Rate Model", Journal of Political Economy, Vol. 91 (4) pp. 589-610.

  8. Taylor Rules


    Taylor, John B., 1993. "Discretion versus Policy Rules in Practice". Carnegie-Rochester Conference Series on Public Policy, Vol. 39 pp. 195-214.

Grades...

There will be a mid-term and a final exam. Each will last a full class. I will also sprinkle a certain number of homeworks here and there, both to entice you to work without delay and to allow me to check we are on the right track. You will also be asked to write a short essay on a rather narrow topic and present it in class (for a half class, 1.5 hours). The formula will be:

A word about grades. When I grade, the average is usually around 60%. This allows me to reward better those who do well. Do not be too alarmed when you get a grade that is lower than those you get in other classes. But if it is really low, you should do something about it...

Suggested Essay Topics

The essay should be 8 pages long, plus a bibliography of at least 10 items. At least three must be articles (no more than two from the same journal), at least three must be unpublished working papers. A few suggestions: Past presentations of topics that cannot be chosen at this time included: To contact me: Phone: 6-3272, Email: christian.zimmermann@uconn.edu