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DRPS : Course Catalogue : School of Economics : Economics

Undergraduate Course: Monetary Theory and Policy (ECNM10024)

Course Outline
SchoolSchool of Economics CollegeCollege of Arts, Humanities and Social Sciences
Credit level (Normal year taken)SCQF Level 10 (Year 4 Undergraduate) AvailabilityNot available to visiting students
SCQF Credits20 ECTS Credits10
SummaryMoney plays an essential role in modern economies, but this essential role is not well-captured in standard macro models, which typically tack money on in a more or less arbitrary ad hoc way to a barter model of a competitive economy. The early part of the course takes a closer look at the role of money and the problem of how to model it seriously and, in the process, raises more general issues about the nature of economic models and how to interpret them. All this might sound like an arid and highly abstract academic exercise, but it is not. The limitations of standard models of money have an important bearing on practical and topical policy issues, which are the focus of the latter part of the course. The treatment of policy will focus primarily on the monetary policy framework, which has been at the centre of recent policy discussions among academics and practitioners. We will consider aspects of: the interplay between monetary and fiscal policy; monetary policy games, credibility and reputation; central bank independence; and monetary policy operating procedures. The course essay and teamwork mini-project provide opportunities to broaden the topics covered in class and/or explore topics in greater depth. Visiting undergraduate students, interested in taking the course, should consult the course instructor. Much of the reading for the course is advanced, taken from journal articles and graduate level textbooks. The course is aimed at the serious student, who is willing to grapple with difficult material, that is the focus of ongoing research activity. The reward, for those who grapple, is insight into important issues in monetary economics, including recent and current research activity and policy debates.
Course description Topics covered may include:
1. General introduction; modelling money - some general issues
2. Three standard models of money: OLG, CIA, and MIU
3. Shopping time and search-theoretic models
4. Money, growth and super-neutrality
5. Anticipated inflation and welfare costs
6. Fiscal Policy, Seigniorage and Inflation
7. Monetary policy games
8. Central bank independence
9. Operating procedures - instruments & targets

The course is taught through a programme of lectures. Learning-by-doing, through groupwork and presentations, is an important ingredient of the course.
Entry Requirements (not applicable to Visiting Students)
Pre-requisites Students MUST have passed: Topics in Microeconomics (ECNM10070)
Prohibited Combinations Other requirements None
Course Delivery Information
Not being delivered
Learning Outcomes
On completion of this course, the student will be able to:
  1. A knowledge and understanding of fundamental problems in monetary theory (notably the difficulty of designing a tractable model of money which adequately captures its role as a medium of exchange and provides a sound basis for understanding the interrelations between money, inflation, growth and welfare) and more immediately practical issues relating to the design of the monetary policy framework (notably the interplay between monetary and fiscal policy; monetary policy games; central bank independence; and monetary policy operating procedures), associated mathematical techniques, and a deeper understanding of recent research activity in some more specialised areas.
  2. Research and investigative skills such as problem framing and solving and the ability to assemble and evaluate complex evidence and arguments.
  3. Communication skills in order to critique, create and communicate understanding and to collaborate with and relate to others.
  4. Personal effectiveness through task-management, time-management, teamwork and group interaction, dealing with uncertainty and adapting to new situations, personal and intellectual autonomy through independent learning.
  5. Practical/technical skills such as, modelling skills (abstraction, logic, succinctness), qualitative and quantitative analysis and general IT literacy.
Reading List
The main text, which provides a good coverage of most topics is:
C. Walsh Monetary Theory and Policy 3rd edition ( eBook)
[Most topics are also covered in the 2nd and 1st edition, and page references to all three editions are given in the reading list below. Note that only the 1st edition is available as an eBook].

The following books are also useful:
O. Blanchard and S. Fischer Lectures on Macroeconomics (eBook)
B. McCallum Monetary Economics
B. Friedman and F. Hahn Handbook of Monetary Economics (2 vols)
J. Taylor and M. Woodford Handbook of Macroeconomics vol. 1C
K. Hoover The New Classical Economics (out of print)

Further readings will be provided for each topic
Additional Information
Graduate Attributes and Skills See Learning Outcomes
Course organiserMr Stuart Sayer
Tel: (0131 6)50 3856
Course secretaryMrs Anna Domagala
Tel: (0131 6)51 5305
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