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


  • 10.04.2019: Lecture slides, exercise sets, literature, and presentation guidelines are now readily available on ADAM.


LecturerDr. Florian Madison [contact]
DatesLecture and Exercises: May 3&4, May 10&11, and May 17&18 (entire day)
Exam: May 24
Seminar Presentations: June 7&8
GradingWritten Exam and Seminar Presentations
Course DirectoryLink


In this lecture, we will be asking what function liquidity fulfills in a modern economy. We will be looking at the kind of frictions that make money essential and consider the role of credit and financial intermediation. On this basis, we will discuss various micro- and macroeconomic aspects of monetary theory and monetary policy.


DateRoomTime/ Topic


S14 HG.3209:00-12:00: Introduction: Liquidity in Macroeconomics
14:00-16:00: Baseline Environment
16:00-18:00: Pure Credit Economies I


S14 HG.3209:00-12:00: Pure Credit Economies II
14:00-18:00: Exercises I


S3 HG.3709:00-12:00: Shi-Trejos-Wright: A Second Generation Monetary Model
14:00-18:00: Exercises II


S15 HG.3109:00-12:00: Lagos and Wright: A Third Generation Monetary Model I
14:00-18:00: Lagos and Wright: A Third Generation Monetary Model II


S14 HG.3209:00-12:00: Exercises III 
14:00-18:00: Monetary Policy, the Friedman Rule, and the Cost of Inflation I
18.05.S14 HG.3209:00-10:30: Monetary Policy, the Friedman Rule, and the Cost of Inflation II
10:30-12:00: Exercises IV
14:00-15:30: Exercises IV
15:30-18:00: Q&A / Presentation Assignment
24.05S15 HG.3114:15-15:45: Written Exam
S14 HG.32Presentations of individual papers (participation is mandatory)

 *preliminary and subject to changes.
Additional material:


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:

 The Lagos-Wright Model:

The BCW Model:

  • Berentsen, A., G. Camera, and C. Waller. "Money, Credit and Banking." Journal of Economic Theory, Vol. 135, No. 1, Pages 171-195.

Individual papers: to be announced.


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.