Prerequisites
Graduate standing or permission of the instructor. This is
one
of the field courses of the money/macro area in the economics graduate
program.
Suggested Textbooks
- None
There will only be assigned readings from journal articles, survey
papers
and working papers. Required readings are marked by a (*) and will be
available
either electronically (http://userwww.service.emory.edu/~skrause/E711/)
or in hard copy. At the discretion of the instructor, more papers may
be
added throughout the course.
Grading
| - Class participation | 30% |
| - Two paper critiques (15% each) | 30% |
| - 10-20 page paper + presentation | 40% |
| - Total | 100% |
An optional oral comprehensive exam will be administered on
the
last day of classes (Tuesday, December 9th). Should you choose to take
this exam, it will be worth 40% of your grade, while the other
assignments
will be worth 60% total.
Additional information
We will hold no class meetings on Tuesday, October 11th
(mid-semester break), Thursday, October 20th (conference
presentation), and Thursday, November 24th
(Thanksgiving
holiday). If, for some reason, we happen to miss any other session,
whether
or not we make up for it is at the discretion of the instructor, at a
time
to be mutually convened during class.
Course Schedule
I. Some Macroeconomic Facts and Introduction to Monetary Policy (September 6th – September 27th)
Topics:
1. Macro Facts, Money and Real Activity
2. Explaining Price Stickiness
3. Introduction to the Monetary Transmission Mechanism
Reading list:
(1a) Stock, James and Mark Watson, "Business Cycle Fluctuations in U.S. Macroeconomic Time Series", Handbook of Macroeconomics, Volume 1, edited by J. B. Taylor and M. Woodford, 1999, pp. 3-64. (*)
(1b) Romer, Christina, "Is the Stabilization of the Postwar Economy a Figment of the Data?", American Economic Review, June 1986, pp. 314-334.
(2a) Taylor, John B., "Aggregate Dynamics and Staggered Contracts", Journal of Political Economy, 88, 1980, pp. 1-23. (*)
(2b) Christiano, Lawrence J., Martin Eichenbaum and Charles L. Evans, "Sticky Price and Limited Participation Models of Money: A Comparison", European Economic Review, 41, 1997, pp. 1201-1249.
(2c) Lucas, Robert E., "Expectations and the Neutrality of Money", Journal of Economic Theory, 4, 1972, pp. 103-124. (not available for download)
(3a) Mishkin, Frederic, "Symposium on the Monetary Transmission Mechanisms", Journal of Economic Perspectives, Fall 1995, pp. 3-10. (*)
(3b) Meltzer, Allan, "Monetary,
Credit (and Other) Transmission Processes: A Monetary Perspective",
Journal of Economic Perspectives, Fall 1995, pp. 49-72. (*)
(3c) Mankiw, N. Gregory and Ricardo Reis, "Sticky
Information Vs. Sticky Prices: A Proposal to Replace the New Keynesian
Phillips Curve", mimeo, 2002.
II. The Credit View, the Lending View, Banks and the Great Depression (September 29th – October 13th)
Topics:
1. The Credit Channel
2. The Lending Channel
3. Banks
4. The Great Depression
Reading list:
(1a) Bernanke, Ben and Alan Blinder, "Credit, Money, and Aggregate Demand", American Economic Review, May 1988, pp. 435-439. (*)
(1b) Bernanke, Ben and Mark Gertler, "Inside the Black Box: The Credit Channel of Monetary Policy Transmission", Journal of Economic Perspectives, Fall 1995, pp. 27-48. (*)
(1c) Bernanke, Ben, "Credit in the Macroeconomy", Federal Reserve Bank of New York Quarterly Review, Spring 1993, pp. 50-70. (not available for download)
(2a) Bernanke, Ben and Mark Gertler, "Agency Costs, Net Worth, and Business Fluctuations", American Economic Review, March 1989, pp. 14-31. (*)
(2b) Cecchetti, Stephen G., "Distinguishing Theories of the Monetary Transmission Mechanism", Federal Reserve Bank of St. Louis Review, Spring 1993, pp. 50-70.
(3a) Kashyap, Anil and Jeremy Stein, "Monetary Policy and Bank Lending", Monetary Policy, edited by N. Gregory Mankiw, 1994, pp. 221-261. (*)
(3b) Kashyap, Anil, Raghuram Rajan and and Jeremy Stein, "Banks as Liquidity Providers: An Explanation for the Co-existence of Lending and Deposit Taking", NBER Working Paper No. 6962, 1999.
(3c) Fama, Eugene, "Banking in the Theory of Finance", Journal of Monetary Economics, January 1980, pp. 50-70.
(4a) Eichengreen, Barry, "Still Fettered After All These Years", NBER Working Paper No. 9276, 2002. (*)
(4b) Hamilton, James, "Monetary Factors in the Great Depression", Journal of Monetary Economics, March 1987, pp. 145-169. (not available for download)
(4c) Romer, Christina, "The
Nation in Depression", Journal of Economic Perspectives, Spring
1993,
pp. 19-39.
III. Empirical Issues (October 18th – October 27th)
Topics:
1. Does Monetary Policy Matter?
2. The Lucas Critique to Econometric Policy Evaluation
3. Application to Vector Autoregressions: Monetary Policy Shocks
Reading list:
(1a) Romer, Christina and David Romer, "Does Monetary Policy Matter? A New Test in the Spirit of Friedman and Schwartz", NBER Macroeconomic Annual, Vol. 4, 1989, pp 121-170. (*)
(2a) Scarth, William, "Macroeconomics: An Introduction to Advanced Methods", Harcourt Brace Jovanovich Inc., Orlando, Florida, 1988, Chapter 5, pp. 65-75. (*) (not available for download)
(2b) Lucas, Robert, "Econometric Policy Evaluation: A Critique", Carnegie-Rochester Conference Series on Public Policy, 1976, vol 1, pp. 19-46. (not available for download)
(3a) Christiano, Lawrence J., Martin Eichenbaum and Charles L. Evans, "Monetary Policy Shocks: What Have we Learned and to What End?" Handbook of Macroeconomics, Volume 1, edited by J. B. Taylor and M. Woodford, 1999, pp. 65-148. (*)
(3b) Sims, Christopher, "Interpreting
the Macroeconomic Time Series Facts", European Economic Review, 36,
1992, pp. 975-1000. Comment
by Martin Eichenbaum.
IV. Optimal Monetary Policy (November 1st – November 15th)
Topics:
1. Monetary Policy Rules
2. Inflation Targeting
3. Central Bank Preferences
4. The Inflation-Output Variability Frontier
5. Optimal Interest Rate Rules
Reading list:
(1a) Taylor, John. B., "Alternative Views of the Monetary Transmission Mechanism: What Difference Do They Make for Monetary Policy?", Oxford Review of Economic Policy, 16 (4), 2000, pp. 60-73. (*)
(1b) Taylor, John B., "Discretion Versus Policy Rules in Practice", Carnegie-Rochester Conference Series on Public Policy, 39, 1993, pp. 195-214.
(2a) Rudebusch, Glenn D. and Lars E. O. Svensson, "Policy Rules for Inflation Targeting", Monetary Policy Rules, edited by J. B. Taylor, University of Chicago Press, Chicago, 1999, pp. 203-246. (*)
(2b) Svensson, Lars E. O., "Inflation Targeting as a Monetary Policy Rule", Journal of Monetary Economics, 43, 1999, pp. 607-654.
(3a) Favero, Carlo and Ricardo Rovelli, "Modeling and Identifying Central Bank Preferences", Temi di Ricerca-Ente per gli studi monetari, bancari e finanziari Luigi Einaudi, No.19, July 2000. (*)
(3b) Dennis, Richard, "The Policy Preferences of the US Federal Reserve", Working Paper No. 01-08, Federal Reserve Bank of San Francisco, 2003.
(4a) Cecchetti, Stephen G., Alfonso Flores-Lagunes and Stefan Krause, "Has Monetary Policy Become More Efficient? A Cross-Country Analysis", The Economic Journal, 2006. (*)
(4b) Fuhrer, Jeffrey, "Inflation/Output Variance Trade-Offs and Optimal Monetary Policy", Journal of Money, Credit and Banking, 29 (2), 1997, pp. 214-234.
(5a) Cecchetti, Stephen G., "Making Monetary Policy: Objectives and Rules", Oxford Review of Economic Policy, 16 (4), 2000, pp. 43-59. (*)
(5b) Giannoni, Marc and Michael Woodford, "Optimal
Interest Rate Rules: I. General Theory", NBER Working Paper No.
9419,
2003.
V. Student Presentations (November 17th – November 22nd)
Topics:
TBD
VI. Central Bank Structure and Other Contemporary Issues (December 1st - December 8th)
Topics:
1. Independence, Transparency, Accountability and Credibility of
Central
Banks
2. Current State of Monetary Policy, Technological
Change and the Reduction in Output Volatility
Reading list:
(1a) Cecchetti, Stephen and Stefan Krause, "Central Bank Structure, Policy Efficiency, and Macroeconomic Performance: Exploring Empirical Relationships", Economic Review of the Federal Reserve Bank of St. Louis, 79, July/August 2002, pp. 47-60. (*)
(1b) Chortareas, Georgios, David Stasavage and Gabriel Sterne, "Does it Pay to be Transparent? International Evidence from Central Banks", Economic Review of the Federal Reserve Bank of St. Louis, 79, July/August 2002, pp. 99-118.
(1c) Cukierman, Alex, "Central Bank Independence and Monetary Control", The Economic Journal, 104, 1994, pp. 1437-1448.
(2a) Galí, Jordi, "On the Role of Technology Shock as a Source of Business Cycles: Some New Evidence", Journal of the European Economic Association, vol. 2, issue 2-3 (Papers and Proceedings), 372-380, 2004. (*)
(2b) Herrero, Ana María and Elena Pesavento, "The Decline In US Output Volatility: Structural Changes in Inventories or Sales?", Journal of Business and Economic Statistics, 2005.
(2c) Kahn, James, Margaret M. McConnell and Gabriel Pérez-Quirós, "The Reduced Volatility of the U.S. Economy: Policy or Progress?", mimeo, Federal Reserve Bank of New York, 2001.