Monetary Theory (10645-01, Master, 6 KP, block week)

Announcements

Overview

Lecturer	Dr. Florian Madison [contact]
Dates	Lecture: March 16 - 21, 2020 (see details below) Exam: TBA Seminar: May 29 - 30, 2020
Grading	Written Exam and Seminar Presentation
Slides	ADAM
Course Directory	Link

Outline

In this course, we study the role of liquidity in modern economies through the lens of New Monetarist Economists. Located at the intersection between theoretical microeconomics and macroeconomics, the main objective is to understand exchange under frictions such as spatial separation, limited commitment, anonymity, and imperfect record-keeping, and to analyze how institutions including money, assets, credit, and financial intermediaries allow to facilitate this process. By rigorously incorporating microfoundations, the developed frameworks allow to study individually rational behavior, and to show how a medium of exchange can be welfare improving by enabling trades that, given the aforementioned frictions, would not be feasible otherwise. Once established, we will discuss various policy recommendations.

Schedule

Date	Room	Time/ Topic
16.03.	S16 HG.39	08:15-10:00: Introduction: Liquidity in Macroeconomics 10:00-12:00: Baseline Environment 14:00-16:00: Pure Credit Economies I
17.03.	S16 HG.39	10:15-12:00: Pure Credit Economies II 14:00-18:00: Exercises I
18.03.	S16 HG.39	10:15-12:00: Shi-Trejos-Wright: A Second Generation Monetary Model 14:00-18:00: Exercises II
19.03.	S13 HG.35	12:15-20:00: Lagos and Wright: A Third Generation Monetary Model
20.03.	S3 HG.37	08:15-11:00: Exercises III 11:00-14:00: Monetary Policy, the Friedman Rule, and the Cost of Inflation I
21.03.	S14 HG.32	10:15-12:00: Monetary Policy, the Friedman Rule, and the Cost of Inflation II 12:15-14:00: Exercises IV
TBA	TBA	TBA: Written Exam
29.05	S3 HG.37	Presentations of individual papers (participation is mandatory)
30.05	S14 HG.32	Presentations of individual papers (participation is mandatory)

*preliminary and subject to changes.

Presentations

In the seminar, students will present a paper at the research frontier of monetary theory. The final grade is a weighted average of exam and presentation. Participation is mandatory for the entire seminar.

Literature

The lecture is based on the book "Money, Payments, and Liquidity" (2nd ed, MIT Press) by Guillaume Rocheteau from the University of California-Irvine and Ed Nosal from the Federal Reserve Bank of Chicago.

Stephen Williamson and Randall Wright discuss the foundations of New Monetarist Economics in two articles worth reading:

An impeccable overview over the whole field was recently published by Ricardo Lagos, Guillaume Rocheteau, and Randall Wright in the Journal of Economic Literature: